This is a guest post by Eric Kim, Co-Founder and Managing Partner of Goodwater Capital. Eric has been a key early-stage investor and board member of South Korea’s major star unicorn companies, including Kakao, Coupang and Toss. He has also led investments in Musical.ly (Tik Tok), Danggeun Market, EverlyWell, Spoon Radio, Simple Health, MoMo and Xendit. Based in Silicon Valley, Goodwater Capital has invested in over 12 countries and is now one of the largest consumer internet investing platforms in the world. Eric shares lessons learned from Coupang and Goodwater’s full research report on Coupang can be found on its website.
Lesson #1: Don’t underestimate South Korea.
Since making my first investment in South Korea in 2011, I have been amazed by the growth of its startup ecosystem. On a global basis, South Korea is a leader in terms of innovation and technology. And yet, the market opportunity continues to be overlooked by Korean entrepreneurs who too quickly expand abroad and global investors who think South Korea isn’t a large enough market to warrant foreign investment. At $130 Billion, South Korea is one of the largest ecommerce markets in the world and its $1.6 Trillion GDP makes it the 12th largest economy in the world. The market opportunity is gigantic. In addition, South Korea is one of the densest countries in the world if you look at the ratio of people to land mass. As a key data point, the top 10 cities in South Korea mirror the size of the top 10 cities in the United States. These urban centers allows Korean companies, such as Coupang, to create unique delivery models and customer-centric solutions. Though competition can be fierce, the scale, density and wireless infrastructure of South Korea make it a great place for entrepreneurs to innovate and investors to deploy capital.
Lesson #2: Create a Flywheel
The best companies, like Coupang, are those that get better with scale and have a self-reinforcing virtuous cycle. Coupang’s flywheel was very hard to build at first. It took a while to get going, but after obtaining momentum, the flywheel has spun faster and faster with scale. In other words, as Coupang grows, it actually grows faster at greater scale. This is the opposite of traditional businesses that tend to slow down as they get bigger. Coupang continues to make key strategic bets in customer experience which is the beginning of Coupang’s flywheel. As more and more customers learned about Coupang’s superior customer experience, they spend more and more on the platform. With the benefits of scale, Coupang achieves efficiencies on its expenditures which leads to more profits. With more profits, Coupang can provide better selection and better prices to its customers. Thus, the virtuous cycle continues as Coupang scales. At Goodwater, we encourage every entrepreneur we work with to ask themselves, “what is the flywheel that I want to create and what are the underlying key components of that flywheel that will enable us to beat any competitor?” The great thing about an integrated flywheel is that improving any component of the flywheel makes the overall flywheel better.
Lesson #3: Be Bold and Set Stretch Goals
To serve its 14.8 million customers, Coupang employs the largest direct delivery fleet in South Korea with over 15,000 drivers. It has built over 100 fulfillment centers in 30 cities around the country that span over 25 million square feet. During the course of 11 years, Coupang has achieved much more than its early critics ever expected and a recent survey Goodwater ran showed that 62% of respondents preferred Coupang as their primary online shopping platform. How was this achieved? Alongside great execution of a strategically crafted flywheel, a key ingredient to Coupang’s success has been bold goal setting. As venture capitalists, our primary job is to serve entrepreneurs that have bold visions and are seeking to change the world. Not ever startup succeeds, but every successful startup I know had a bold vision when they started. Be Bold. Set high long-term goals that will be hard to achieve, but are very much worth it. There is no guarantee of success, but the opportunity to maximize your impact will energize you and your team.
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