"Fewer Companies Are Born, More Are Disappearing" Startup Companies Decline for Fourth Consecutive Year

[Financial News] Last year, the number of startup companies decreased for the fourth consecutive year. In contrast, the number of extinguished companies reached its highest level in 13 years. This trend is attributed to a slump in the real estate market, which led to more business closures and fewer new businesses being established. Additionally, shrinking domestic demand resulted in a decline in sectors such as Accommodation and Food Service Activities.
A startup company refers to a business that has begun new economic activity and has either sales revenue or regular employees. An extinguished company is one that has ceased economic activity for more than a year.
According to the '2024 Enterprise Birth and Death Administrative Statistics' released by Statistics Korea on the 23rd, the number of active companies with sales revenue or regular employees was 7.642 million, up by 103,000 (1.4%) from the previous year. Of these, startup companies numbered 922,000, a decrease of 33,000 (-3.5%) compared to the previous year. This figure is the lowest since 2018 (927,000) in the past six years. In contrast, extinguished companies totaled 791,000 in 2023, an increase of 40,000 (5.3%) year-on-year. The number of extinguished companies was the highest since statistics began in 2011.
Notably, the number of startup companies has declined for four consecutive years. After an increase of 63,000 in 2020, the numbers fell by 35,000 in 2021, 36,000 in 2022, 42,000 in 2023, and 33,000 in 2024, continuing a downward trend.
By industry, there was an increase in Education Services (2,000 companies, up 6.2%), but significant decreases were seen in self-employment sectors such as real estate business (-16,000 companies, -8.8%) and Accommodation and Food Service Activities (-14,000 companies, -9.0%).
The number of extinguished companies increased for the second consecutive year, rising by 15,000 in 2022 and 40,000 in 2023. In 2023, the highest numbers of extinguished companies were in Wholesale and Retail Trade (210,000), real estate business (150,200), and Accommodation and Food Service Activities (135,000).
Compared to the previous year, the number of extinguished companies in real estate business decreased by 3,000 (-2.1%), but increased in Wholesale and Retail Trade (up 17,000, 8.8%) and Transportation and Storage Industry (up 12,000, 26.6%).
With the startup rate among active companies declining and the extinction rate rising, analysts say that economic dynamism is weakening.
The startup rate was 12.1%, down 0.6 percentage points from the previous year, marking the lowest level since statistics began. In contrast, the extinction rate rose by 0.3 percentage points to 10.5%.
An official from the Ministry of Economy and Finance stated, "Typically, when economic dynamism is high, both the startup rate and extinction rate rise together. However, when the startup rate falls and the extinction rate rises, it can be interpreted as a sign of declining economic vitality."
Meanwhile, the number of small startup companies with one or two employees is decreasing, and youth entrepreneurship is also faltering.
As the number of startup companies declines, the 'aging phenomenon,' where only older companies remain, is intensifying.
By company size, one-person startup companies totaled 840,000, a decrease of 29,000 (-3.4%) from the previous year.
Startup companies with two or more employees also decreased by 82,000 (-4.7%).
By age of the representative, the largest numbers were in their 40s (239,000), followed by those in their 50s (223,000), and those in their 30s (197,000).
Startups founded by those under 30 dropped sharply by 11.8% compared to the previous year.
junjun@fnnews.com Choi Yong-jun Reporter