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Can you tell a bit more about the startup scene in Seoul? In my experience Korean web companies are very focused on the local market or they make computer games (but don't hire international people).

You are right. Its highly local but the scene is changing slowly as the local market is fairly saturated.

I'm currently in Seoul. Do you have any pointers to things happening here?

Check the local listings in Bundang and Gangnam as the startup scene is very concentrated in those areas

Is it difficult to get residency permits for foriegners? what is the cost of living like in Korea in general? How is transportation?

Its not very difficult for foreigners as the government is slowly encouraging the startup scene.

Transportation is very good and cabs are very cheap ($3.00 min). Housing is pretty expensive where the concept of rent is thrown out. You pay the owner $200K and forget paying rent for 2 years. After 2 years you get your $200K back.