EDITORIAL: ‘Silicon Taiwan’ needs venture capital

In the heart of Silicon Valley, there is a 9 km stretch of suburban road from which billions of US dollars flow every year. Countless eager start-up founders are knocking door-to-door in hopes that their passion will be contagious enough to convince one of dozens of high street venture capitalists to inject their dream with an influx of money, sending them on their way to becoming the next elusive unicorn Start.

Sand Hill Road has been integral to Silicon Valley’s continued success as a global innovation hub. Venture capitalists are willing to invest in even the wildest ideas in case they see returns over 100 times their initial investment.

Without these investors, the best a founder can hope for is government or corporate funding. Although generous, neither is likely to bet on a long shot, demanding near-immediate returns that could stifle a fledgling business.

Taiwan has immense latent innovation potential. The World Economic Forum’s Global Competitiveness Report in 2018 and 2019 ranked Taiwan first in Asia and fourth in the world in terms of “innovation capacity”, and the value of its link in the manufacturing supply chain. is well understood.

All the ingredients seem to come together, yet Taiwan has few unicorns to its credit. Recognizing this potential, the National Development Council (NDC) stepped in in 2018 with what it calls the Action Plan for Improving Taiwan’s Startup Ecosystem. The plan was successful in increasing volumes and reducing barriers to financing, but the returns were minimal compared to the efforts made. Obviously, something is still missing.

While higher volumes are good, where the money is coming from is also important. Globally in 2019, venture capital funding was four times greater than corporate funding, most of which was in the United States. That year alone, there were 142 new unicorns worldwide, including 78 in the United States.

However, in Taiwan, the ratio is reversed. From 2015 to 2020, 56% of all seed funding deals came from companies, compared to just 42% from local venture capitalists, according to council data. This probably means that “riskier” companies do not receive funding.

Taiwan should play for its advantages. It now lays more claim to the title of “silicon” than any valley in California, a state that derives most of its success from the software industry. With its hardware dominance, Taiwan could carve out a place as the world’s premier design and manufacturing hub. The trend appears to be in this direction, with the vast majority of deals and funding going to health tech from 2015 to 2020, followed by electronics and energy.

Taiwanese venture capitalists should also heed the lesson offered by Sand Hill Road and go where the talent is. Hsinchu is home to the country’s best in semiconductor and other highly competitive industries, many of whom must have ideas for promising start-ups. Having venture capitalists readily available is good for busy company founders and sends a message that their ideas are valued and valuable. Anyone with a pitch could easily bounce back to potential investors without taking time off from their demanding day job.

Given Taiwan’s potential, it’s a shame that funding isn’t as smooth as it could be. Those who can afford it would be wise to recognize the latent unicorns around them and invest heavily in venture capital firms to lure them out of hiding.

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