Editorial: Taiwan plans reforms and funds

It remains to be seen whether the latest crop of funding and support will amount to a greater harvest for entrepreneurs and their investors.

“Startups are the fruits of innovation,” according to Taiwan’s government, but are a crop requiring plenty of regulatory and financial support judging by a host of announcements covering crowdfunding, new venture capital funds and entrepreneur visas from the island in the past month month.

Duh Tyzz-jiun, Taiwan’s National Development Council Minister, in an interview with newswire Bloomberg provided the above quote as part of a series of initiative including plans by the Taiwan government and venture capital funds to jointly raise more than NT$22.2bn to investing in Taiwan and Silicon Valley, California-based startups, according to a National Development Council statement.

Duh said: “We cannot compete with China on volume or mass production. We want to move the investment upstream.”

In January, Taiwan’s National Development Council said it would invest $83m in four venture capital firms as part of its HeadStart Taiwan Project: $15m in 500 Startups, $12m to AppWorks, $20m to Translink Capital III, and $30m in a joint venture fund run by the Battelle Memorial Institute’s 360ip and Taiwan’s Industrial Technology Investment Corporation.

The Taiwan Venture Capital Association said its members had $1.3bn to invest out of $4.78bn of assets under management, compared to a total $7.76bn in 2000.

Duh said Taiwan would allow crowdfunding for entrepreneurs trying to start companies to help industries, including textiles and technology, affected by lower-cost production in China.

The online crowdfunding platforms will allow the public from May to buy stakes in small firms under regulation by Taiwan’s Financial Supervisory Commission (FSC). The FSC said in a webcast viewed by Bloomberg that only companies with NT$30m ($954,000) or less will be allowed to sign up.

Taiwan also plans to issue from the second quarter a special resident visa for foreign entrepreneurs involved in startups, according to Deputy National Development Minister Kao Shien-quey.

The National Development Council proposal would require an amendment to the Regulations Governing Visiting, Residency, and Permanent Residency of Aliens to let people apply for a one-year resident visa if they have yet to set up a business in Taiwan but have raised at least NT$2m from venture capitalists. The current regulations call for visa applicants to invest at least NT$6m.

The businesses that achieve “substantial results” during the one-year period can apply for a two-year extension and for permanent residency after five years, Kao said.

Startups that have established operations in Taiwan and made investments of NT$1m could also apply for the proposed visa for up to three individuals, the deputy minister added.

Taiwan’s cabinet also approved a plan to allow startups in certain sectors to hire foreign professionals without two years of work experience or a university diploma required under existing laws.

The new visa program is expected to cover Hong Kong and Macau residents, both special administrative regions of the People's Republic of China, but Chinese nationals will be excluded, Kao said. Communist-led China and democratically-governed Taiwan (formally called Republic of China) have been ruled separately since 1949, and China still claims the island as its territory.

In the past week, Taiwan’s Ministry of Economic Affairs (MOEA) has confirmed that while venture capital companies are open to Chinese backing, such investment may not have control over the companies. All Chinese investment must be reviewed by the MOEA's Investment Commission.

The statement followed China-based e-commerce firm Alibaba Group’s decision to set up a NT10bn not-for-profit VC fund in Taiwan.

Chang Ming-pin, executive secretary of MOEA’s Investment Commission, said the rule was set up in part to address a concern that Alibaba might use venture capital to steal away Taiwan's human talent. Taiwanese nationals or non-Chinese foreign nationals must head the venture capital companies, Chang said.

After the MOEA statement, Lei Jun, founder and CEO of China-based smartphone manufacturer Xiaomi, said Taiwan should loosen the regulations faced by Chinese investors.

Chinese app developer Cheetah Mobile, a spin-off company from Xiaomi, is planning a NT$100m fund for Taiwanese startups using the mobile internet.

Lei said markets across the Taiwan Strait are tied to each other and the market environment for startups would be improved if Chinese funding issues could be resolved.

Alongside Cheetah and Alibaba’s venture funds, local Taiwanese companies have also been developing corporate venturing units.

Chip company MediaTek set up a $300m Ventures unit directly from its balance sheet to invest in strategic startups, while MasterLink Securities, a Taiwan-based brokerage, was authorised by Chinese authorities to set up a venture capital firm in Tianjin to become the first enter the venture capital business in China's market.

In August last year, computer maker Acer established a NT1bn venture capital fund.

The island’s technology companies have previously made similar plans. In 2005, chip company TSMC set up a $75m fund through VentureTech Alliance Management, while in 2010, Hon Hai Precision Industry Company, which makes Apple devices through its Foxconn subsidiary, both set up a $15m fund, Burrage Capital Healthcare Offshore Fund II, and signed memorandum of understandings (MOUs) with three US venture capital firms, NEA, Onset, and DCM, plus 12 of their portfolio companies to build strategic ties. However, little activity by either TSMC or Hon Hai has been public since these announcements.

It remains to be seen, therefore, whether the latest crop of funding and support will amount to a greater harvest for entrepreneurs and their investors.

See more from this Government Report: Taiwan, officially the Republic of China


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