Korean Entrepreneurs: Lee Jae-Bum of KakaoTalk

KakaoTalk has been South Korea’s biggest smart phone app success story. KakaoTalk has already 18 million users worldwide as of July 2011. KakaoTalk is top download in the App Store and the most successful social network service across iPhone and Android platforms in Korea. Number of users is estimated 20 million by the end of this year. KakaoTalk’s success continues outside of Korea as well. KakaoTalk has approximately 1 million users overseas and this figure continues to grow by ten thousands users per day. KakaoTalk now handles over 300 million messages per day. The success led Google to choose KakaoTalk as one of top developers in the Android Market. Yahoo! and Skype are chosen neither top apps nor top developers yet. Mr. Lee Jae-Bum, CEO of KakaoTalk, is in charge of creating this remarkable product and fan-ship.

Jae-Bum has envisioned himself as a future owner of enterprise from his college days. He majored in industrial engineering at Seoul National University, which is the nation’s top university in Korea. He heard so many great stories about his alums at school becoming successful venture entrepreneurs. So, he also took his own venture by establishing an Internet company right after college with hope that he could join those successful entrepreneurs shoulder to shoulder. One day, his professor made introduction to Jae-Bum to work with Mr. Kim Bum-Soo, one of SNU alums and a very successful venture entrepreneur who founded Hangame, a leading online game company. Hangame was eventually merged with the NHN, a top Internet property in Korea with gross annual revenue over $1 billion. Jae-Bum’s challenge to dare to start a venture business from scratch somehow proved himself to Bum-Soo and other board members. So, Jae-Bum landed his job at KakaoTalk (previously known as IWI Lab) and he was eventually promoted to lead the business while Bum-Soo sat on the board as chairman.

Jae-Bum’s early work with KakaoTalk was not that brilliant. Few pet projects such as memo aggregation or personal ranking chart combined with social network features were in production but never really took off. There were already global power brands such as Facebook or Twitter dominant in the SNS market. In a popular business strategy term, web based SNS was already in the “red ocean” and competition was high. So, Jae-Bum turned his attention to the app market. The advent of smart phone and rapid growth in European and North American markets inspired him. Jae-Bum had expected that Korea would follow such a big wave of smart phone penetration soon. So, Jae-Bum made a decision to develop mass appealing smart phone app like a messenger for smart phone. Sending short message is not too expensive but mass market loves KakaoTalk that allows users to send short messages back and forth for free. Now, users on KakaoTalk can send messages as well as photos and other attachments like other popular PC-based messenger like MSN or Gtalk. Jae-Bum’s prediction for surging smart phone market really hits the bull’s eye. iPhone was finally introduced in Korea in late 2009 through Korea Telecom and SK Telecom quickly fired back with Android phones from Samsung, HTC, etc. App market has rapidly grown, too, as demand for smart phone usage has grown. KakaoTalk has become de facto messenger tool for smart phone users in Korea.

Jae-Bum has made few interesting points on his success that could be note-worthy to those folks who build their products in the smart phone universe. First, Jae-Bum emphasizes on “venture mind.” Without it, KakaoTalk wouldn’t be materialized. He values highly of those people with hearts for innovative ideas than lucrative business model. For instance, up until last year, the company didn’t turn any revenue from KakaoTalk. Team tried to design a more stable product and service first. Generating revenue was always second in the row just like Facebook did during its early days. Revenue-demanding culture often misses out this point even if that is what venture is all about. Second, KakaoTalk is also unusual in the sense that it has created a horizontal organization. Unlike other Korean companies, where top-down management is sort of cultural norm, Jae-Bum encourages active communication and debate among peers in order to keep the organization away from unnecessary bureaucracy. As an example, Jae-Bum has made office policy calling peers by their initials or nickname. In Korea’s typical office setting, it is not common practice. Though, this policy really helps and makes people to get friendly to each other even if there is 10~20 years of age gap between peers. Third, the company has done reorganization of internal team almost 40 times since its inception. It has contributed to KakaoTalk’s unhindered communication among different parts of the company and the team to collaborate. It has also made the company can better understand and react to fast-changing market needs and reflect them into the product development faster.

KakaoTalk plans to elevate its popular app to the next level becoming ‘social-hub’ for smart phone users. Commerce, culture, music, and game contents are likely to be added to its main property soon. Similar to Facebook, it is likely to embrace different services and contents and want to be total service platform for smart phone users. Few market observers estimate KakaoTalk will make $15~$20m in revenue this year. KakaoTalk’s revenue model is fairly weak as yet because it only makes money from mobile gift card sales from strategic partnership with Korea Telecom. Though, KakaoTalk already has huge user base and other revenue model should be easily deployed. With its recent angel funding of $4.5 million from those top tech entrepreneurs in Korea such as Mr. Kim Taek-Jin of NCSoft and Park Sung-Chan of Danal would add key components to accelerate its product development and sales growth. KakaoTalk has its own challenges such as Apple’s strict in-app purchase policy biting back large proportion of its revenue. KakaoTalk also faces battle with top mobile telecommunication companies in Korea because KakaoTalk seems to eat up potential revenue stream from short message (or SMS) that telecom companies could have earned if there was no such thing like KakaoTalk. KakaoTalk has successfully finished its baby steps to build a profound communication platform on the wave of smart phone. We look forward to seeing how Jae-Bum would turn this business to become a global franchise in the near future.

(This article was developed with Steve J. Min, a staff writer.)

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Non-government sponsored VC forum in Korea

I’m briefly attending private VC forum at Westin Chosun today, that is organized by theBell. It’s good that non-gov sponsored event like this. It has much more intimate climate for investors to discuss current issues in Korean VC market. Topics that are covered here include SPAC as an alternative exit route and Korean version of claw-back term and its pro-and-con’s. Bonchun Koo at LB Investment nicely covered quite critical issue on claw-back. Good work!

Posted with WordPress for BlackBerry.

Return of angels

This is another observation on recent angels and seed investment in Korea. Some of quite successful entrepreneurs has returned to the scene by setting up a new venture investment vehicle. As it has been short on early stage money in Korea, we’d like to welcome “return of angels.”

There are few notable entrepreneurs who successfully built a company and made meaningful exits in mid 2000s. Now, they are actively looking for a next big thing. Interestingly, many of them were in online game industry but are now widening their interests to more diversified interactive media space or even more traditional off-line business.

To name a few, Mr. Kim Bumsoo, a founder of Hangame (No. 1 online game portal acquired by NHN, the largest internet business in Korea), is working on his venture studio called IWILAB. Mr. Bang JunHyuk, a founder of NetMarble (acquired by CJ Group, largest entertainment conglomerate in Korea), also works on his private investment office holding a dozen of business portfolio by actively adding a value as a major shareholder. Mr. Chang Byung-Gyu, a co-founder of Neowiz (publicly traded and EA holds a chunk of shares) and Chut-noon (aka First Snow acquired by NHN), is currently turning his angel investment platform called BonnAngels to a venture capital vehicle.

It’s quite meaningful to see them to return to this early stage scene. Still there is controversy whether asset management style VC firm can really add value or entrepreneur-backed operational VC firm may do better. I’d say that it really depends on what stage a startup company raises capital for.

Though, it’s great to see them to return because not that many VC firms in Korea actively invested into idea stage companies and supplied capital to crop out of a business plan to become a real business. In fact, there are more policy money flowing into growth and mid market buyout market in Korea this year. However. when you think about there is a huge shortage in your seed and early stage pipeline, in 2-3 years, there wouldn’t be that many fundable businesses and competition would be brutal.

Like I spoke with one of BonnAngels partners yesterday, this is a great year for those entrepreneurs and early stage investors in Korea who know what to do and secure seed capital. If you have a compelling plan and passion to build a company that can change entire game rules of industry, please, come out and talk to us.

Long time no post!

It’s been over a year since I made the last post. Whoever in my RSS feed or update route, I’d like to say hello for all. Nowadays, people move along to a more portable media platform such as Twitter or Me2day (for those in Korea.) I still have nostalgic attachment to this somewhat lengthy but more thoughtful blog type media. Though, my posting has become more portable as I start doing this on my smart phone.

Anyhow, it’s been a quiet period for this blog as I’ve been on the road to raise a new venture capital partnership. US regulations require fund managers to keep things as quiet as possible when they raise a new private equity vehicle because even a small market perspective from fund principal could be interpreted as a pitch to sell a new product. I’ve been on the road over a year and learned many interesting lessons from people that I’ve met throughout the globe.

As I always want to turn this blog to a space where I can freely share idea and create a platform supporting tech venture and entrepreneurship, I’m hoping some of recent experiences and interviews that I’ve conducted to be shared here.

Door is widely open to both audience and participants here. So anyone who finds writing or journalism his/her destiny and whoever wants to contribute to this Noble Ambition blog, please, feel free to drop me a line. I can probably arrange a rewarding experience or term for you if we find a good fit! Ok. I’d better get going now as it’s time to move onto my next schedule.