Why it matters. Korea is a global tech manufacturing powerhouse, yet it struggles to spin homegrown academic research into new companies—a gap that shapes who builds the next generation of AI and chip firms.
Background. South Korea's economy is dominated by large family-controlled conglomerates known as chaebol, such as Samsung and Hyundai, which crowd out independent startups. The Bank of Korea is the country's central bank, and its policy reports carry significant weight in shaping government economic strategy. The 'valley of death' is a common venture-capital term for the gap between early funding and sustainable revenue.
What to watch next. Watch whether Seoul adopts the central bank's proposals—IP-backed lending, public procurement for startups, and new investor exit routes—into concrete legislation.
Strong research, weak scale-up
South Korea’s central bank warned this week that startups born from university research are failing to survive the early commercialization phase known as the “valley of death,” leaving promising homegrown technology unused even as the country produces world-class patents. The Bank of Korea published the findings in a June 4 report on building a “growth ladder” for academic entrepreneurship.
The report opens with a striking contrast. Many of America’s most valuable companies trace their roots to universities: Google (now part of holding company Alphabet) was started by Larry Page during his doctoral studies at Stanford, while the chipmaker Broadcom grew out of work by Henry Samueli, a former engineering professor at the University of California, Los Angeles, and one of his students. Both are now worth more than $2 trillion. By the Bank of Korea’s count, five of the ten most valuable U.S. firms have ties to universities. In Korea, by contrast, none of the country’s 30 largest listed companies began as a university spin-off.
The numbers behind the gap
The shortfall is not for lack of activity or talent. The report notes real strengths:
- University startups in Korea tripled from 987 in 2011 to 2,887 in 2024.
- Their five-year survival rate of 74% far exceeds the OECD average of 45.4%.
- Eight Korean universities rank among the world’s top 50 for international patent applications.
- Per 100 billion won (about $73 million) of research spending, Korean universities register roughly 25 times as many patents as their U.S. counterparts.
The problem lies in turning that research into business. Korea’s technology transfer rate—the share of academic inventions licensed out for commercial use—sits at about 26%, well below 40.9% in the United States and 61% in the United Kingdom. Even firms that do commercialize tend to slip into operating losses by their fifth year.
The Bank of Korea attributes this to a funding drought. Young firms with no track record and few tangible assets fare poorly under traditional bank lending, and struggle to attract investment at the crucial scale-up stage. The squeeze is harshest for “deep tech” ventures, where proving and commercializing a technology can take years before any revenue arrives.
What the central bank recommends
To help these companies cross the valley of death, the report proposes several policy fixes:
- Let firms borrow against their intellectual property as collateral and repay investors in step with sales.
- Use public procurement so startups can secure a first customer and early revenue.
- Encourage matching with private investors.
- Offer a “technology acquisition” tax incentive for investors who buy a startup’s technology.
- Develop exit markets beyond initial public offerings so investors can recover their money.
The central bank framed the shift bluntly: future policy must move “beyond getting more people to start companies” toward “sustaining a growth ladder after founding,” ensuring a smoother flow of capital at the scale-up stage.
