This year Korea’s National Assembly has passed a stimulus bill that allows crowdfunding in Korea. Crowdfunding was illegal until this year so we need to ask ourselves. Is this good for Korea? Now Korean entrepreneurs can ask for small investments in return for perks. Before they had to use their own money or look for crowdfunding platforms abroad. Here are the Pro’s and Con’s for making Crowdfunding legal in Korea.
– Korean entrepreneurs do not have to give away any equity in their startup business or intellectual property rights.
– Startups can take full advantage of their investors social media reach to help get the word out about their new project and reach new investors in Korea and also new customers.
– New investors can be used as validation for the startups target market which then can be used to bring in angel investors and venture capitalists for future investments.
– Opens the door for small businesses to raise initial capital which will mean a continued rise in small startups.
– Korean startups need to spend a lot of time and money creating an appealing project package to show to investors which will hinder their development in the early stages.
– Korean Startups need to pay taxes on any pledges which are not considered donations. Which will mean startups in Korea will not make much profit during the funding rounds. All the profits will end up going to investors as part of a rewards package which is very common in crowdfunding.
–As seen in China. Their will be a higher risk for Korean startups to have their ideas stolen. Especially if it is not proprietary. Patents and trademarks are very expensive in Korea and very hard to enforce.
– There will be a lot of shame and embarrassment if you fail. South Koreans hold themselves to a higher standard and have a lot of pride in their work. If they fail raising money on a crowdfunding platform, the shame will linger with them.
-Korean companies face difficulties trying to crowdfund on western platforms. Reasons could be language barriers, time zone differences, and different social media platforms.
In the end this recent development in Korea is a legislative milestone for future Korean startups considering crowdfunding. Beyond Korea, it may also provide startups in Asia with another avenue for attracting revenue to fuel project development, as well as for initial customer acquisition. In the end crowdfunding can only help to boost the Korean startup industry overall and allow Korean startups to expand outside of the Korean market.