June 2, 2021
5 min

Naver and Kakao are fighting in North America.

When I arrived in South Korea in late 2019, the two companies that really stood out were Naver and Kakao; two technology companies growing very fast.

Korea’s economy has long been dominated by conglomerates like Samsung, Hyundai and LG, but in 2020, Naver and Kakao broke into the top 20 biggest in the country (by market capitalisation). It was a significant moment, particularly for aspiring entrepreneurs.

input-img
Market Capitalisation: The size of the circles is a function of the market capitalisation of companies as of Nov 2020

The breakthrough of Naver and Kakao raised questions: why were Naver and Kakao doing well? Where did they want to be in 5 years? Were they already investing overseas?

Tech backs tech

As we built our algorithms to find investment data on start-ups, it became clear that Naver and Kakao were investing heavily in start-ups, backing entrepreneurs to be ambitious. Here’s an example showcasing investments by Naver and Kakao in the cosmetics industry and related technologies, compared to a Korean cosmetics conglomerate.

input-img
Chord diagram: Proportion of invested amount from companies on the left into industries on the right

The diagram shows the proportion of start-up investments of these three groups relative to each other. Naver and Kakao’s investments in start-ups relative to Amore Pacific is materially higher. This diagram tells a powerful story about technology companies' vision of the future compared to more traditional players; technology companies are backing other technology companies to play a significant role in the future of every industry. This data, which is available on our search engine, is for investments in South Korea only, but Naver and Kakao are also very active outside of South Korea.

Going global

The idea that Naver and Kakao are only local companies is outdated; they are already global. Naver, for example, owns Line, the leading messaging app in Japan. This week alone, both companies made international start-up investments:

- Naver acquired Wattpad for US$ 600 Mn: Toronto-based Wattpad is a website and app for user-generated content, used by over 90 million people.

- Kakao acquired Radish for US$ 440 Mn: Similar to Wattpad, Radish is a content platform; LA-based with a strong foothold in North America.

With these acquisitions, Kakao and Naver are building platforms to generate content relevant for a global audience.

What was driven by Naver and Kakao a year and a half ago is now a groundswell of over 15,000 start-ups. With Coupang’s IPO and more and more Korean technology start-ups breaking through the glass ceiling of traditionally conglomerate-dominated industries, South Korea is at a tipping point.

We think innovation in Asia is not about the fact it is based in Asia. It’s that innovation in Asia is happening faster and on a bigger scale than anywhere else. It cannot be ignored.

We’ve updated the website today. So if you fancy a look at the kind of innovation I’m seeing around me every day, please check it out.

input-img

Thanks as ever for reading and, if you like what you see, please consider sharing!

Best,

Jordan