On November 13, members from Taiwan’s tech community gathered at the HP Horizons Startups Summit to discuss Taiwan’s startup ecosystem with HP executives and VCs from abroad.
The conference marked a concerted effort on behalf of all parties to engage in an earnest dialogue concerning the island’s startup scene, addressing challenges as directly and constructively as possible.
Discussions of Taiwan and its startup potential tend to be rife with unnecessary sentiment. As with many parts of Asia, parties are quick to point to the usual obstacles – lack of domestic internet-minded VCs, lack of government support, societal issues, etc. Yet Taiwan has also inherited two complicating factors.
First, its hardware legacy has been both a blessing and a curse, providing plenty of technical know-how, though little of the nimble, quick-footed instincts that startups are known for. Second, the island’s existential crisis can lead some to be unduly bearish toward its economic future.
Here’s an abbreviated transcript of the panel discussion:
Tyrone Lee (moderator and Taipei-based analyst at VC firm Artis Ventures): Let’s go around and get some introductions from everyone here.
TK Chen: My first startup was a P2P lending platform, which was a total failure, because according to bank laws, I cannot do the online P2P lending thing without violating the law. Then we decided to pivot to a totally different project, which was a social shopping list. It’s a mimic of Pinterest in Taiwan. Then we soon found out that copying from what was out there doesn’t really work in a place like Taiwan, because the way that people buy things and use the internet here is totally different from elsewhere. So then we started SweetShot, which is a photo app that helps people hide photos of their secret love affairs [laughter].
Jamie Lin: I’m founding partner at AppWorks Ventures here in Taiwan. We were one of the first accelerators in Asia, and if you count the overall number of startups that have graduated from our program, we’re probably the biggest outside of the US. We started in 2010 and have graduated over 150 startups, with a focus on consumer and mobile internet. The reason why we started it was because I lived in the US for six years before moving back to Taiwan. I realized that, as everyone was saying at the time, “software was eating the world,” but all Taiwan knew how to do was hardware, so I decided that I wanted to move back to Taiwan to do something about it. Later on, in the middle of last year, we were lucky enough to raise an $11 million dollar US fund to invest in our startups.
James Hill: I run business development at Cubie, which is a chat application that’s a bit like Line but better [laughter]. I’m originally from London, and i’ve been living in Taiwan for eight years. Before I worked at Cubie I worked at the Institute for Information Industry, which is a semi-autonomous NGO that was working on startups in Taiwan. There, I saw the potential in the Taiwanese ecosystem and I saw places where I could be of help. So I also do Startup Weekend and Startup Digest in Taiwan.
Allan Huong: I’ve been in Taiwan for the better part of half of my life [editor’s note: he’s in his twenties], I graduated from here, and I worked in the tech sector in Hsinchu for two years, and I also did two startups in my spare time. My first startups was a Threadless-model company where we crowdsourced designs for T-shirts. That failed, and then I did Drimmit, which was a social bucket list for dreams and things you want to do before you die. And that failed, and so I decided I needed a change, so I went to Draper University, a six-week program for learning entrepreneurship, and it was there where we came up for the idea with Loopd, which is a wearable device that lets you manage contact information in a conference and trade show setting. We’ve now been funded for a pre-seed investment by a firm in Silicon Valley.
Lee: There’s been a fair amount of suggestions about what the Taiwanese government can do to help the startup environment. Can you talk about your experiences dealing with fixed stock price rules, business incorporation, and rules for foreign labor in the technology sector?
Chen: I think my experience might be a little lucky, because around the beginning of last year Andrew Hyde, the founder of Startup Weekend, and Volker Heistermann started a program specifically for in Taiwanese startups. At the time we were lucky enough to be one of the accepted teams. So we didn’t really experience too much problems in having foreign investors come here. At the same time, I’ve heard that there are there are still a lot of regulations for foreign investors to invest in local startups. So we’ve decided to start another company in Delaware, so that the money can flow into the Delaware company, and our Taiwan company is 100 percent owned by the Delaware company. That’s the way we can avoid the regulations and really make investments happen.
Lin: As for business incorporation, it’s actually relatively easy to incorporate your company here. If you have about $3000 in capital, you can incorporate in Taiwan. It takes around three to seven days to do so, and you can run the process yourself or you can hire an accountant at the amazingly cheap rate of $200.
Hill: I’ll talk about hiring foreigners, since that’s something I can speak about well. The way that the government and immigration agencies look at talent is very qualification-based, just like the domestic education system. Do you have an MBA from a university they’ve heard of? Do you have two years related work experience? It’s the sort of thing that throws up barriers to hiring the best. So I think a lot of companies here have a lot of problems hiring the best. I’m of course not saying that foreign talent is the best. But to give an example, Cubie wasn’t able to hire me in the beginning because the company didn’t meet the requirements that the government had set. I’ve also met entrepreneurs here that are foreign and want to hire local people, but they’re capped because they don’t meet have a certain amount of money in the bank.
Huong: Our company is a Delaware incorporated company. I didn’t deal with incorporation for my first company here, I just know that it was a pretty complicated process. I do have experience being a foreign employee, however, and that was actually quite difficult to do. For me, I had just graduated from college and didn’t have a Master’s or the two years of work experience that the government requires. They also have a salary requirement too – unless the companies are willing to pay top-dollar they can’t hire you. And those are some areas for potential change, as I have a lot of friends that graduated from college and they’re pretty much getting kicked out of Taiwan because they can’t find a job here.
Lin: That was the situation three to five years ago. In the past two years the government has worked really hard to change those laws and make sure that companies can get the talent they want, and that the incorporation system is getting streamlined.
Leer: How do you encourage startups and organizations to take risks in what’s traditionally viewed as a risk-averse society?
Lin: All the entrepreneurs that come to me are among the biggest risk takers in Taiwan. So in our community I’m actually on the opposite side. I find myself having to teach them how to take risks intelligently. For first-time entrepreneurs, they often think of ideas that are a bit too ‘out there.’ And if you try ideas that are too ‘out there,’ you’re setting yourself up to run out of both money and your own faith. So I often find myself encouraging people in my organization to experiment, talk to people, and get data as early as possible rather than take big risks immediately.
Hill: Our company has only ten people, and we’ve always had a very democratic way of talking about product development and marketing. Sometimes, when I sense there’s resistance to a risky idea I’ve proposed, I’ll just say, “If something bad happens, I’ll take responsibility for it.” For example, I had an idea where we could use the names of famous celebrities and reach out to our users on April Fool’s Day, and there was concern that the celebrities might get angry. And I said, “If they get angry, that’s great! And if we get sued, that’s even better!” And it paid off in the end. So I know where our team’s limits are in terms of what’s an acceptable risk and what’s not.
Huong: I believe that Taiwan is a risk-averse society, and it’s very hard to change that. I think it does all come down to culture and education. But I think a proven model of entrepreneurship is to be able to keep a full-time job and also do something on the side – which is surprisingly difficult to do in Taiwan. And I think that anyone who’s worked in the tech sector here knows that you work 12-hour days, with no time to do anything else. So all the startups here that don’t make it into AppWorks or similar programs have to rely on self-funding or some other form of funding. Their time is limited, and it’s hard to work on a startup when your boss is telling you ‘Don’t do anything else besides my work.’
Moderator: If you had one thing to say to investors, what would it be?
Lin: A lot of foreign investors don’t realize that Taiwan probably has one of the world’s most investor-friendly IPO markets. So we don’t have those IPO windows. Every year we have a steady 20-50 companies that get to launch an IPO. And when internet companies are small-cap, if you go IPO in the US no equity analysts or traders will follow you. You also can’t afford to go IPO in the US if you’re a small-cap internet company. Whereas in Taiwan, your small cap is our big cap. So if you’re a small cap in the US, you can come to Taiwan for your IPO and you’re gonna be followed by equity analysts and have trading volume. And a lot of US-based mutual funds invest in Taiwan’s IPO market. So if you have small or mid-cap internet companies that can’t afford to go IPO in the US or are having trouble getting acquired, come to Taiwan and make an IPO here, it’s a super friendly market and it will provide great liquidity to your portfolio.
Huong: As an entrepreneur, I think a VC should let the community know more about what they’re thinking about. I’ve gone to a lot of these events, and I think it’s important for VCs and local investors to be vocal about what they want. It’s one thing to say that it’s important to take risks, but it also helps to let startups know what your interests as a VC are, and how Taiwan startups can align their projects to meet the interests of the VCs.
Chen: I think that Taiwan has its advantages, especially with talent. Software and hardware talent are both excellent, and they are cheap! So there’s a very good talent pool here. The only drawback here is that we don’t know how to do storytelling. We don’t know how to do marketing, or how to make our products more appealing to investors. Everyone knows that every year the Institute for Information Industry will take a team of local startups to Silicon Valley to have a demo show. Is anybody there? Maybe one or two investors. So Taiwan startups are under the radar for investors. I think it’s because we don’t understand marketing. But give us some time.
Moderator: If you had NTD 5 billion, how would you kickstart the investing ecosystem in Taiwan?
Huong: Definitely through education. Coming out of the education system, I developed a hand gesture-based recognition system for controlling different types of systems. It worked pretty well. But afterwards, I was like, “Okay, what now?” I didn’t have any direction with regard to how to turn this into a product, or how to commercialize, or how to design for manufacturing, or things like that. So I think when you really want to kickstart the community, you’ll have to educate these engineers into turning their college theses into actual products.
Hill: I’d actually drop a ton of money on building a geographical cluster where startups and digital media could reside. A physical cluster where people can bump into each other at cafes would be something I’d encourage.
Lin: I think that to fix this problem, it will take way more than money. Over the past few years, the government has spent God-knows how much money into fixing the system, and it never works. When we talk about Silicon Valley, we never talk about how much money they have, we talk about the people and the coaches. The VC money is there because there are people and there is a culture. So if I had NTD 5 billion, I’d invest that into fix the college system. I think that right now we’re not educating people that have the right tools and the right mindset to be the next generation leaders of a global economy. I don’t think that money is the solution to this problem.
Chen: I’m working on Foxconn’s internal startup ecosystem by building a co-working space and an accelerator program. There are a lot of people that don’t know how to make the first step for starting up because they feel such uncertainty. So just by providing education and workshops, and a salary to make them feel safe, we can help our talent step out and try building a startup.
(Image via Flickr user fish_at_taipei)
(Editing by Terence Lee)