More bucks for Bang: Netmarble founder urges South Korea to support start-ups

NC

08/05/2017 24:00

* Bang urges new govt to revive start-up momentum 
    * Top billionaire with no chaebol connection 
    * High-school dropout, founded Netmarble after two failures 
    * Tencent investment in Netmarble has quadrupled to $2 bln 
 
    By Joyce Lee 
    SEOUL, May 8 (Reuters) - When mobile gaming firm Netmarble 
Games  251270.KS  debuts on Friday, its founder Bang Jun-hyuk 
will be the only billionaire in South Korea's top-10 wealthiest 
stock holders with no ties to the chaebol, the mainly 
family-owned industrial conglomerates that dominate Asia's 
fourth-largest economy. 
    Bang's is a rare Korean rags-to-riches story, and the 
high-school dropout with two business failures on his resume 
wants the state to revive support for start-up companies and 
nurture a new crop of businesses as an alternative to the 
economy's dependence on the industrial might of groups including 
Samsung and Hyundai. 
    Leading candidates in the run-up to Tuesday's presidential 
election have pledged to reform the powerful chaebol. 
    "If you look at start-ups these days, they're predominantly 
about fried chicken delivery, which is worrying," Netmarble's 
founder and chairman told Reuters. "We need start-ups that will 
serve as a conduit for new business areas for our future." 
    Bang, 48, owns 24.5 percent of Netmarble, which priced its 
$2.3 billion initial public offering at the top of the range. 
That would make him worth around $2.9 billion and rank him sixth 
in South Korea's richest stock holders, according to data 
provider FnGuide. 
    Bang is part of a generation of South Korean technology 
entrepreneurs that founded start-ups from the late 1990s when 
state investment helped create one of the world's most wired 
nations. Non-chaebol companies founded around then include 
internet portal Naver  035420.KS  and game developer NCSOFT 
 036570.KS . 
    "When people of my generation founded start-ups, it wasn't 
because we were talented, but because the ground was prepared," 
Bang said. 
    "The government had a very clear vision of growing Korea 
into an IT superpower and sowed the seeds of a good start-up 
ecosystem. We got new infrastructure, state-driven venture 
capital and rules like exceptions to mandatory military service, 
which drove talent into start-ups." 
    "It's regrettable such support has become fainter in the 
last few years." 
     
    DROPOUT TO SUCCESS 
    Born into a relatively poor family, Bang dropped out of high 
school and unsuccessfully founded two start-ups, one of which 
was an online movie streaming business similar to Netflix 
 NFLX.O . 
    "Looking back, there were many new businesses like movie 
streaming where Korea was ahead of others, and they were spun 
out of high-speed internet and other infrastructure we had," he 
said. "But it was very difficult to succeed as there were not 
many people who were betting on such future businesses at the 
time." 
    "When you fail twice, there's nothing left. You've hit 
bottom not only economically, but mentally... You start 
thinking, am I stupid? Is this all I am?" 
    With just $90,000 in seed money from acquaintances, Bang 
founded Netmarble in 2000 with eight employees. The firm is now 
worth 13.3 trillion won ($11.8 billion) and its 3,000 employees 
generate 1.5 trillion won in annual sales. 
    Netmarble aims to be among the world's top five games 
companies by 2020, with 5 trillion won in annual revenue, partly 
through acquisitions.  urn:newsml:reuters.com:*:nL4N1F8399 
    Even this start-up, though, struggled to break through. 
    Netmarble was the country's first to distribute other firms' 
computer games and offer free-to-play games. In 2004, Bang sold 
a majority stake to conglomerate CJ Group, and stepped down from 
operations in 2006 due to health issues. 
    Five years later, CJ asked him to come back as the company 
was floundering with a series of 19 failed games - 11 flops and 
eight that never made it to the market - and an operating loss 
of 2.1 billion won. 
     
    SMARTPHONE VISION 
    Bang had already been preparing a mobile games start-up 
before the call. He had seen how many phone manufacturers were 
shifting production lines to smartphones, which then accounted 
for only a tenth of the mobile market, and he saw the 
smartphone's potential as a hand-held computing device. 
    Long-time employees at Netmarble were sceptical when Bang 
told them the company would move into mobile games and hit 1 
trillion won in revenue within five years. At the time, 
Netmarble had annual sales of around 200 billion won. 
    "We looked at each other, mystified," said Park Sei-jin, the 
company's public relation's chief. "One trillion won sounded 
very remote." 
    Such were the doubts that no one volunteered for the new 
mobile games division, so Bang had to appoint one of his 
personal staff to the team. Bang spent much of his time 
convincing computer game developers to switch to mobile games. 
    By 2013, Netmarble had its first hit game, "Everybody 
ChaChaCha", and soon had a growing list of multiplayer mobile 
hit games, drawing several investment offers. 
    Bang said he declined these as he wanted to wait and 
ultimately have Tencent Holdings  0700.HK  as a partner. 
    "Tencent is No. 1 in China... If we're going to do business 
in the large China market, I thought it would be good to have a 
partner who's strong in China. Almost all strong companies in 
China offered, but we chose Tencent," he said. 
    Following Netmarble's IPO, Tencent's $500 million investment 
in 2014 is now worth around $2 billion. 
    ($1 = 1,127.5900 won) 
 
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 (Editing by Miyoung Kim and Ian Geoghegan) 
 ((jungyoon.lee@thomsonreuters.com; +82 2 3704 5609; Reuters 
Messaging: jungyoon.lee.thomsonreuters.com@reuters.net)) 
 
Keywords: NETMARBLE IPO/FOUNDER