These startups chose to build their tech teams in Taiwan. Should you?

Rui Ma is the greater China venture partner for the global seed fund and accelerator 500 Startups. Follow her on Twitter: @ruima.

500 Startups now has a portfolio of nine Taiwanese companies, as well as a handful of existing non-Taiwanese portfolio companies with Taipei subsidiaries or branches, and more than a few in the pipeline. I spoke with both our portfolio and non-500 companies to get a sense of why a foreign startup might choose to base their tech development team in Taiwan, and their candid views on the pros and cons, both expected and unexpected, behind such a decision.

Full disclosure: the Taiwanese government, through an affiliated fund, is a major investor in my employer, 500 Startups, and I have been going regularly (read: nearly monthly) to Taiwan to scout for awesome startups for the past three years.

Cost as primary consideration

For those unfamiliar with the island’s economy, Taiwan’s wages have stagnated for more than a decade, and the average monthly salary for new university graduates is only NT$25,600 (roughly US$830 at today’s exchange rates, or about US$10,000 annualized). For the companies I spoke to that chose to base their engineering teams in Taiwan, cost was often the top consideration for such a decision.

Rui Ma (in black and white T-shirt) in Taipei.

To put some numbers out there, I reached out to Norman Chang of PCI Executive Search who told me that hardware engineers at the junior level (one to three years) are getting roughly NT$580,000 to NT$860,000 (US$19,000 to US$28,000) in annual cash compensation, although some highly profitable firms are paying those with advanced degrees up to US$65,000, but that’s at the very high end and certainly not the norm. Bernard Chan of Alpha Camp, a developer bootcamp for aspiring programmers, told me that current annual cash compensation (excluding stock options and other benefits) for those with less than two years experience ranged from NT$560,000 to NT$840,000 (US$18,000 to US$27,000) in Taiwanese startups.  A far cry, certainly, from the six-figure salaries currently being thrown around Silicon Valley these days, and indeed on average looks to be one-third or less of what Valley prices are.

But what about Taiwan versus neighboring mainland China? Aside from the fact that China is no longer particularly cheap (according to recent statistics, about half at the junior level are quickly ramping up to be on par with Silicon Valley levels at a dozen years or so of experience), it is also very competitive, whereas Taiwan’s job market is significantly less overheated. Although I do not have detailed data on turnover rates, it certainly feels that anecdotally, my founders managing teams in Taiwan worry far less about the stability of their teams than those operating primarily in mainland China.

The good: easy living and quality talent

For John Fan and his co-founders at PicCollage (disclosure: a 500 Startups company), Taipei was a clear winner versus other cities in Asia due to its decades-long leadership in technology, whereas places like Hong Kong, Singapore, and Shanghai have other major industries such as finance competing for choice talent. As John explains, the “soul” of a city matters, and Taiwan has enough tech in its blood that it’s “possible to find great engineers who are eager to learn and want to work on cool projects.” See this oft-cited Paul Graham essay for more evidence. Of course, it also helps that Taipei is known to be one of the most livable places in Asia, recently voted by CNN readers to be the best place for food, it also has great infrastructure, an excellent education system, and one of the lowest crime rates in the world.

Of the companies I spoke with, none seemed to find it difficult to manage their teams, although all mentioned that the typical Taiwanese engineer was not as outspoken or self-motivated as their Silicon Valley peers. To solve this, PicCollage focused more on hiring for cultural fit, and created special employee training to boost creativity and to encourage them to be more vocal. Additionally, most Taiwanese developers seemed to have a sufficiently good grasp of English so that work communications proceeded smoothly, although most companies I spoke with did have someone who had some degree of Mandarin Chinese fluency in its core engineering team to facilitate the process.

The not-so-good: different approach to programming