[Venture Biz 1] Some act like scams

[Venture Biz 2] Moral crisis
[Venture Biz 3] Living together, or collapsing together?

'With the incident of illegal lending to an upstart, there is a controversy over the morality and qualification of entrepreneurs of venture companies. So far, the crisis of venture firms has been attributed to their technological capability and financial vulnerability. For this reason, many expected that it can be solved through mergers and acquisitions among them based on technology and capital. However, with the illegal lending case of Korea Digital Line president Chung Hyun-Joon, it is pointed out that there needs to be a change in venture entrepreneur`s way of thinking.'

Early this year, a semiconductor equipment manufacturer announced that its sales target for this year was 60 billion won and that it will obtain the world's leading technology. Currently, however, the company's sales stand at only 2.4 billion won. The plans for business and technology development of most venture companies in Korea are as rosy as this company¡¯s. Recently, KRG, a domestic IT survey firm, filed a report based on a survey of 130 leading IT firms from 1998 through June this year. The report on IT firms' reliability includes a survey against 334 analysts and securities experts of the nation's 23 securities firms.

- Venture startups tend to exaggerate their sales projections.

According to the report, Gold Bank announced in early 1998 that it would achieve sales of 8 billion won. Yet its actual sales turnover of the year was 1.25 billion won. Also, the company estimated its sales for 1999 would be around 50 billion won, but the figure stood at 11.42 billion won. Apex, a semiconductor equipment manufacturing firm, suggested that its sales for 1998 would reach 30 billion won, but the company's actual sales for the year were 6.27 billion won. Last year, the company set a sales goal of 60 billion won, nearly twice its previous year's sales goal. However, its sales declined to 2.8 billion won.

- False reports on overseas business are another problem.

Cybertech Holdings announced in March that it would set up a joint venture with Germany's Data Protect and offer wireless e-commerce certification service. However, it withdrew the plan in just two months, saying that the company had reviewed the plan because the market situation had changed. Bit Computer announced in May 1999 that it would establish a joint venture Doctor Bit in Silicon Valley of the United States to launch an overseas operation. The plan, however, was canceled due to a problem related to its American partner. Last April, YTC Telecom announced that it would conclude a contract for the export of 100,000 units of Myphone Office. However, it hasn't been realized, as the company failed to obtain the approval of the import country.

- Also, the venture companies' reliability seems very poor.

Shinkwang Electric Communications announced last March that it would get a supply of ISDN terminals from INT Telecom and Digitel, but it suddenly canceled its business plan on grounds that ISDN lacks in feasibility. Last year, Interpark announced an ambitious plan to develop SCM solution for logistics structure and that it would apply the system to distribution of books and music tapes and CDs. However, the company canceled the plan, saying that it has changed its business strategy.

Kim Kwang-Hyun kkh@donga.com