Red Herring spoke to David (Hyesung) Shin, the CEO and co-founder of wadiz, the largest crowdfunding platform in Korea.
What is the story of the founding of the company in 2012?
wadiz is the largest crowdfunding platform in Korea since 2012. I have worked at KDB Bank and Dongbu securities for over 8 years of experience in the financial industry. I thought that the current financial system was not able to support those who need funding such as start-up or early stage companies. I began to look for things that could be changed through the connection while paying attention to the SNS revolution, and I learned about crowdfunding while searching for keywords such as direct finance. At that time, the term ‘Crowdfunding’ itself was also unfamiliar, so there were many things to consider. wadiz has been creating an unprecedented market by defining a new pattern of behavior ‘Funding’, just not buying or investing.
So, in the early days, wadiz created the Crowd Research Institute, published reports and books, focused on studying the industry itself, and collecting initial data. This was the foundation for creating the equity-based crowdfunding system in the future.
How big a demand was there for crowdfunding back then?
Already, as platforms such as Kickstarter and Indiegogo have grown significantly overseas, crowdfunding was just initiating to start in Korea at the time, and it began to be introduced in a new way of financing. Several platforms began to emerge, including wadiz, and since its inception in 2012, wadiz has offered reward-based crowdfunding since 2013. After then, wadiz acquired the first license for online small investment intermediary as equity-based crowdfunding became legalized by the Financial Services Commission in 2016, providing both reward and equity crowdfunding. For better understanding, I want to identify the term of wadiz. In wadiz, Individual or companies who open the project is called ‘maker’ and crowd who participate in the funding project is called ‘supporter/investor’
How has that demand changed over time?
When the beta service was first launched in 2013, there were about 10 projects that were opened a month. I think this is a natural result because it was unfamiliar in Korea to raise money through crowdfunding.
With the appearance of several successful cases, crowdfunding has begun to be spotlighted as a new means of financing.
Initially, it started by helping neighbors in need or donating to social campaigns, and then expanded to help film producers and creators, and has since developed into pre-ordering new products for companies. Currently, 1000 new projects are opened in wadiz every month.
Recently, we achieved that the total amount of funding is about 400 billion won. Half of them, 200 billion won, were achieved this year. The number of visitors to the platform has exceeded 10 million per month. In addition, we acquired 3 million members.
There are many reasons why wadiz has grown rapidly, but most of all, it uses wadiz’s ‘Original Content’ as its competitiveness. It’s as if OTT, such as Netflix and Disney Plus, has their own exclusive content. wadiz’s screening guidelines include a regulation that allows only new products or services that have not yet been released on other platforms or commerce. In other words, it has the meaning of ‘Exclusive’ that can only be found in wadiz. As a result, it became known as the “New product launch platform” to unveil new projects, and the number of makers visiting wadiz increased as well.
How has the company coped with the rapid growth?
wadiz has grown more than 200 percent every year over the past five years, and not only the amount of transactions but also the size of its employees has increased rapidly. As a result, we specify the MVP with our mission, vision, and principles so that they can be shared with employees and applied to actual work. In particular, wadiz is a company with a very clear corporate culture and philosophy. When a new employee joins the company, he/she helps soft landing through a ‘wadiz journey map’ that supports new members for on-boarding, and every month, all employees gather in the office lounge to look back on their monthly performance and share the impact we created. It seems like a town hall meeting. (Of course, now we’re moving to non-face-to-face video conferences due to COVID-19 and communicating more casually through YouTube Live.)
Personally, one of my favorite cultures of wadiz is “Compliment Relay,” which is a culture in which the person who gets praised every month points to the next person and continues the relay. If selected, it takes pictures on the wall of the “Culture Center,” the wadiz lounge, and turns them into posters to display them for anyone to see like the Hall of Fame.
From the point of operating the service, we also needed a change in the way we handled it. Due to the characteristic of crowdfunding, there can be defects in the product or issues such as delayed delivery. In response, wadiz introduced the world’s first ‘refund’ policy to strengthen its responsibility as a leading company. wadiz does not use the expression “refund” because it is not commerce, but communicates “Returning fund policy,” and users can directly apply for the return of the fund if there is a defect or if they do not receive the product on the promised delivery date. Since the implementation of the policy, less than 1% of the funds have been returned so far, which is very small in overall terms. In addition, various policies and services such as “Intellectual Property Rights Protection Policy,” “Transparency Report” and “Maker Trust Index” are launched and implemented this year for creating a startup ecosystem in Korea. In particular, in April, we set up our first offline space ‘Gonggan wadiz’ to connect online and offline and strengthen communication between makers and supporters to overcome online limitations while providing new experiences to customers. It is already one of the most popular places in Seongsu-dong, Seoul.
How important is crowdfunding to the Korean startup community?
wadiz has so far provided opportunities to challenge those who are making new attempts, such as more than 20,000 start-ups and entrepreneurs. In Korea, start-ups are also active, and there are increasing cases of verifying customer responses in the market before full-scale production by utilizing crowdfunding. As a result, crowdfunding is becoming more and more widely used, from individuals to small and medium-sized companies(SMEs) based on the advantages of product-market fit(PMF), promotion, feedback, and expanding distribution channels. Start-ups basically need money and time, and I think they can save both through crowdfunding, which greatly contributes to the creation of a startup ecosystem in Korea. In terms of figures, about 200 billion won has been collected this year alone, with cumulative funding amount(transactions) exceeding 400 billion won. In particular, companies that succeeded in funding wadiz alone attracted follow-up investments through VC exceeding 160 billion won. It means that wadiz plays an important role in the Korean startup investment market.
What are the major challenges the company has faced?
This year, wadiz has focused on strengthening its services and policies to protect both makers and supporters using wadiz. In the first half of the year, We also achieved the desired results by launching new businesses such as ‘Finding startups’(Online IR service) and ‘Gonggan wadiz’(Offline shop). Starting next year, the company plans to focus more on diversifying profits and achieving BEP by focusing on new businesses. To this end, it is planning to expand its new business and make attempts at the next stage. In the case of reward-based crowdfunding, it is separating service of distribution and funding, and planning new services such as subscription-based crowdfunding and after-funding. In the case of equity-based crowdfunding, it is expanding from existing intermediary models to direct investment models and strengthening impact investments such as social ventures through ‘wadiz partners’.
What are the company’s goals for the next 18 months?
wadiz is set to do very important things for the next 18 months. By 2021, it will be the 10th year since its establishment, and it is planning an IPO in 2022 and is preparing to invest in pre-IPO accordingly. This investment of pre-IPO or Series D round is being considered not only at local VC but also abroad VC and has meetings with major investors. It is expected to be the last investment ahead of its IPO and plans to prepare for IR overseas in earnest. It also plans to focus on diversifying profits from new business models such as after-funding and subscription-based crowdfunding. Most of all, I hope that wadiz will become a beloved company that provides loved services to its members beyond a good company that provides good services. I want to create a culture that supports new adventures or challenges by the existence of wadiz. Going one step further, we will continue to strive to become a platform that can solve problems caused by new challenges.