Tech worker turns hobby into a start-up nearing unicorn status

Sohee Kim

BLOOMBERG – In his spare time, Gary Kim enjoyed trading used gadgets on an online bulletin board for employees of the South Korean messaging-app operator Kakao Corp.

Then he and a colleague realised it could become a money-making business. In 2015, with cash they got from selling Kakao stock options, they – and a former Naver Corp engineer – launched a venue for selling second-hand goods online that’s now called Karrot.

It was initially only for people in South Korea’s Silicon Valley, the Pangyo Techno Valley outside Seoul, and has retained that localised approach even as it expanded throughout the country and beyond. Users who verify their location trade mostly face to face with others within a radius that’s usually about six kilometres, in what’s known as a nearby marketplace.

Danggeun Market Inc, the start-up behind Karrot, is planning to raise as much as KRW100 billion (USD90 million) in financing next summer, potentially pushing its valuation to about USD1 billion, Kim said. It has – so far – been boosted by the pandemic, he said.

“We are hoping to become a unicorn,” Kim, 42, said in an interview in Seoul.

If it succeeds, Karrot would join a growing list of South Korean technology start-ups valued at more than USD1 billion that serve the country’s deep and tech-savvy market. CB Insights, which provides analysis of private companies, has 11 Korean start-ups on its latest global unicorn list.

Co-founder and co-chief executive officer of Danggeun Market Gary Kim at the company’s office in Seoul.
PHOTOS: BLOOMBERG
The Danggeun Market app

As well as buying and selling second-hand goods ranging from headphones to luxury yachts, Karrot users can share community information – on everything from job openings to lost-and-found items and housing listings – and trade with local businesses that advertise on the app.

“It’s an online gathering place for the local community,” said Kim, who serves as the company’s co-chief executive officer alongside Paul Kim, the other former Kakao employee who’s one of the co-founders. “If neighbours are gathered at a certain place, everyone wants to join.”

Karrot is now South Korea’s largest second-hand marketplace and second-biggest company in the country’s e-commerce industry after Coupang Corp, according to data-analysis company MobileIndex.

Joyce Yi, a 52-year-old English teacher, said she’s traded more than 20 items through the app since March, including a coffee-maker, books and an air-conditioner. “When I moved to Seoul from Los Angeles, I didn’t know anything about my new place and how to use the parcel delivery system – then I heard my friend bought a Louis Vuitton bag for USD200 through Karrot,” she said. “Karrot is my first choice for shopping. It has cheaper and diverse options and I don’t need to go far to check out items.”

Although the Seoul-based start-up is reporting losses, it’s generating tens of millions of dollars in annual revenue mainly from local advertisements, according to Kim. Monthly active users more than doubled to 12 million in October compared to January, while sales quadrupled in October from a year earlier, he said.

Until now, the COVID-19 pandemic has helped the business, with users more actively selling through the app while spending more time at home, Kim said. The virus has had less impact in South Korea than in the United States (US) or European countries.

“It’s a plus,” Kim said at the company’s headquarters in the Gangnam district of the capital. “Thankfully, our users don’t think there’s a risk of trading in person as everyone wears masks.”

But if the coronavirus has been a boost, it’s also a threat, according to Jay Choi, a senior associate at SoftBank Ventures Asia, which has invested in Karrot. New infections have risen to record levels in the country this month, raising the prospect of tougher social-distancing measures.

“The COVID-19 pandemic poses risks and gives opportunity at the same time,” Choi said. “There was a concern that in-person trading may not survive if a city is locked down.”

Karrot is aiming to become as popular as Kakao Talk, the country’s largest messaging app, Kim said. Kakao Talk has about 36 million monthly active users, according to MobileIndex.

The company has no immediate plans to go public, but it will ultimately do so, Kim said. For now, it can stay afloat using funds from long-term investors who believe in its vision, he said.

Karrot has raised a total of KRW48.1 billion from investors including SoftBank Ventures Asia, Altos Ventures, Kakao Ventures and Goodwater Capital.

Karrot will increase the number of employees to 300 in 2021 from 100 this year as it seeks to become the first Korean app that’s successful in both the US and western Europe, Kim said. The company’s overseas expansion strategy is to enter cities with dense populations of environmentally conscious people who want to reuse old goods, he said. It prefers places where there isn’t a dominant market player. So far, Karrot is available in 42 areas of the United Kingdom (UK) and two cities in Canada, while the company is currently operating beta services in Manhattan and New Jersey.

“Our ultimate goal is to make a global local community service platform like Facebook,” Kim said.

Meanwhile, as his start-up expands overseas, Kim continues his hobby of online trading in Seoul, now using his own firm’s app. Recently, he bought a table for his daughter and an electric piano for half the usual price.

“I go out by myself to trade used stuff,” he said. “Nobody recognises that I’m the head of the company.”