X-Factor Inc. founder Chang Byung-gyu explains why South Korea is going global

X-Factor Inc. founder Chang Byung-gyu explains why South Korea is going global

For the X-Factor Inc. founder Chang Byung-gyu, his firm debut this week marks a key milestone in the game development's 14 year history. It also exemplifies how South Korean startups are increasingly playing a key role in the economy of $1.6 trillion, both domestic and overseas, by driving growth in Southeast Korea.

The PUBG: Battlegrounds maker raised $3.8 billion in its initial public offering, pulling off the largest debut of the country in over a decade. Despite dropping nearly a fifth since its listing, the $17.4 billion company is one of a growing number of entrepreneurs, including the likes of Coupang Inc. and Kakao Corp. that are taking on sprawling family-owned conglomerates that have long dominated Korea's economy known as chaebols.

In an exclusive interview, 48-year-old Chang told South Korean startups that are more aggressive than the ones he backs, expanding overseas. In order for nascent firms to succeed internationally, the government and capital markets need to work together to overhaul a chaebol-focused regulatory and legal framework, he added.

What is the driving force behind the development of Korean gaming and startup industries?

Chang Byung-gyu: First, there was investment in IT infrastructure. South Korea is the second country on the planet to put together the internet and the government increased the penetration of broadband in the 1990 s. The rapid spread of smartphones and 3 - 4 - G infrastructure is also a part of the IT infrastructure investment.

Second, there were government initiated entrepreneurship policies. Since the Kim Dae-jung Administration in late '90s, startups and funding policies emerged under the name of'ventures' and the direction of policies has not regressed through several governments. From the policy drive, untapped internet companies such as Neowiz, Naver Corp. Nexon Co. and Naver Corp. were born.

KAIST, where I graduated, is where most first-generation Internet founders met and it is also an educational institution where the government invests intensively in science and technology. It has become the base for the development of games and startup industries.

What is the challenge and limitation to overcome?

One of the recent macro trends is that many companies are starting to go beyond Korea to challenge the global market. Naver and Nexon emigrated on the domestic market, but Naver achieved success with Line Corp. and Nexon in China with online games. Krafton also became successful globally with the PUBG: Battlegrounds.

It has become a big trend for startups and tech companies to start or grow their business by targeting the global market. For example, a startup called Nearthlab, which BonAngels has invested in, uses drones to repair wind turbines. The company has signed many contracts with international companies who make and service wind power generators, and it is growing at the global market from the beginning. Hyperconnect succeeds in the Middle East market.

But it is still not easy for Korean companies to expand globally. One of the main reasons for the lack of experience in global cooperation is that there is a lack of real world experience. The U.S has a lot of experience, but Korean companies often don't have such human resources, systems, or culture to collaborate when entering foreign markets.

Another challenge is that Korea still has a social system centered on the chaebol. The capital markets and legal system of Korea are centered on chaebols and designed to regulate chaebols. Particularly from the Korean perspective, the capital market and regulations are too United States. Startups and tech companies are going global and the legal system has to change now. This is a problem that both government and capital markets should address together. Overcoming these points will lead to greater growth.

Earlier this year, you announced that you were giving away some stock to employees. The capital market of Korea is not as developed as in the U.S. one of the problems with stock options in Korea is that when they are converted into stock you have to pay tax immediately, while in Korea you can pay tax after you cash in the stock. Stock options need to be improved from a capital market perspective.

Although there are several options such as stock options, restricted stock units and employee stock ownership plans, there are not many ways for a new company to offer compensation if we take taxes into account. I decided that giving away stock would be the best way to make it.

Increasingly, wealth and growth are shifting away from CHEEbols for gaming and entertainment sectors. Is this trend negative?

Chaebol-led growth and wealth centered on high-end manufacturing industries such as semiconductors, petrochemicals, steel and shipbuilding are still very important to Korea. Despite these objections, growth and wealth from internet, gaming and entertainment companies can be described as the fourth industrial revolution. It is inspiring that non-manufacturing businesses can direct target the global market and both should coexist and develop in a balanced way.

The entry of Korea into the ranks of developed nations means that business and growth models for developing countries no longer work. The world needs a smooth industrial transition to high-tech manufacturing, healthcare, biotechnology, and global services. We need a smooth transition to modern technology?

You are one of many billionaire startup founders investing in international startups and how much their company makes? We are in an era of inequality and I believe that giving can be a way to combat the wealth gap. Just as doing business is about making money and realizing your beliefs and vision, donating is about spending money and realizing your beliefs and visions. The donation to the KAIST was carried out with a clear sense of purpose to increase the chance of accidental success, and the Software Academy Jungle has also a purpose in training software engineers. I am ready to spend my money to realize my vision and beliefs going forward.

What kind of role would you like to pursue in the company or society? At the company level, I will do my best as a facilitator so that Krafton, led by Chief Executive Kim Chang-hanChang-han can continue to grow. Of course, I can also take the lead. If necessary. On the social level, my short-term plan is to foster software engineers through Software Academy Jungle, but it is too small to be considered a social role. I want to try more things in the long term, but haven't made a concrete decision yet.