Are We Really ‘Helping’ Taiwan’s Startups?

In recent years, there has been no shortage of Taiwanese Americans who want to help Taiwan by jump-starting Taiwan’s economy and building up Taiwan’s startup ecosystem. In addition, there is no shortage of people who believe that they can help, too.

Since there’s strong interest in the topic, it would be fitting to propose a guideline for people who want to meaningfully and positively impact the startup ecosystem in Taiwan.

Before we delve into the fine-grained, there are a couple of things to keep in mind about the attitude towards this whole initiative:

1) It’s important to be cognizant of what you know and don’t know, as well as what you can or can’t do. The reason for this is that in passionately wanting to help (especially in a non-profit), people often overestimate what they are capable of, and in their efforts end up creating more obstacles instead of helping;

2) There are different forms of mentorship for startups: the first one is advice on the process of entrepreneurship, which honestly should only be handled by people who have tangible success (this is the key: success) in either starting (and exiting) companies, or successfully funding (and exiting) startup investments. The second one is advice on industrial verticals, and this should be provided by executives and seasoned professionals in each specific sector (e.g. finance, restaurant logistics, attire retail, etc) with deep expertise in specific roles (e.g. marketing, design, branding, product management, engineering management, etc).

3) In fact, the people now proposing “new ideas” are probably not the first ones to think of the very ideas they want to implement. Prior knowledge, and prior art related to each industrial vertical should be well understood before anyone jumps into the idea without understanding the context thoroughly.

It’s important to set these expectations, because starting up is not for everyone, and the same goes for advising startups – not everyone is equipped to advise startups. It’s natural that meaningful advice and feedback don’t come easily, and it is very important that we don’t lie to ourselves about that. It is better to say to a new startup “good luck” and back off, than to pose as someone who knows how to help and waste entrepreneurs’ time.

With that said, there are a couple of facts that you may want to be aware of before you begin hatching a plan to help Taiwanese entrepreneurs:

• As with every other country in the world, Taiwan is not the US. One common mistake that we Taiwanese Americans make when thinking about how to help Taiwan is to think about the needs of Taiwanese entrepreneurs from the angle of an American. The truth is that given Taiwan’s market size, it is unlikely that Taiwan will produce many growth-on-steroids B2C unprofitable startups like the US, or China did. A lot of models such as Instagram, WhatsApp, or even Uber, Airbnb will not work in Taiwan simply because the market size won’t be able to sustain growth before a significant bottleneck. By extolling the B2C unicorn story, we may be misleading Taiwanese entrepreneurs as to what is likely, or what is even possible.
• Contrary to popular belief, Taiwanese entrepreneurs actually do not lack funding opportunities. In fact, Taiwan’s venture capital circle has hundreds of millions of dollars committed, but with nowhere to go. Taiwan is also home to many wealthy potential angel investors. There is no shortage of capital in Taiwan, the real problem is there are very few good startups to invest in.
• As of a corollary to the previous point, Taiwan’s startup circle actually has a over-funding problem, at almost every stage. In venture rounds, quite a few startups raised more than US$10 million in their series A, only to find out that their dominance in the Taiwanese market could not even recoup the investments. This is an obvious case of over-investment. Prior to venture rounds, many startups receive government grants and competition winnings in the range of $30k to $50k USD, which is enough to pay for at least two full-time employees in many cases. As a result, it is very common for young startups in Taiwan to rely on competition winnings and grants to operate, as opposed to relying on generating real revenue.
• Taiwan’s startup circle is young. Not just the ecosystem, but its participants as well. This is actually a rather big hurdle, as it indicates that very few older Taiwanese with ample work experience are willing to start companies, and this often ends in low-quality outcomes. On the contrary, more than half of the entrepreneurs in the US are over the age of 35, and the success rate of older entrepreneurs are significantly higher than younger ones.
• As a corollary to the previous point, Taiwan’s startup circle has produced very few B2B startups, since this type of startups generally require deeper industry experience and network.
• When judging Taiwan’s current startup successes, it is important to control for socio-economic status. It is a common pitfall for outsides to judge Taiwan’s relatively successful startups and attempt to generalize the success. Without naming them directly, most of Taiwan’s leading startups are started by 1) the privileged who grew up having access to resources outside of Taiwan (for example, the ability to pay for a private university in the US); 2) individuals from financially and politically well-connected families; or 3) those who have personal connections to Taiwan’s many “old money” conglomerates. The intention of articulating this fact is not to discredit the success, but to remind us that we cannot create a sustainable startup ecosystem when we subconsciously limit our observations to only those in the top 1% of the pyramid. Our studies of the ecosystem should focus on the resource access, growth and opportunities for the common Taiwanese entrepreneurs.
• Lastly, also contrary to popular belief, outsourcing software engineering to Taiwan is actually not a great idea, nor is it an economical one. Taiwan’s software industry has been in a slump since the dotcom bubble, for close to two decades now. Our cloud infrastructure and our SaaS offerings trail not just behind the US but we are also at least a decade behind China. This has deeper implications about Taiwan’s management talent; the larger the industry gap, the fewer experienced managers we have to manage large industrial operations. With that said, most experienced software industry managers come from dotcom era companies, which are still entrenched in the idea of “shipping software” as opposed to deploying continuously updated cloud services. We also lack interdisciplinary talent necessary to drive fields like artificial intelligence, robotics, fintech, and others. In short, we are offering software foundry services, which have become so commonplace in developing countries, that Taiwan’s wages are high in comparison, making Taiwan extremely uncompetitive in this market.

These are the challenges facing the Taiwanese startup ecosystem, as well as misconceptions that hinder our ability to actually help. Given these problems, how can we, especially as Taiwanese Americans trying to work in Taiwan’s interest, help?

• First, we need to be honest with ourselves about our fitness to mentor people. If you have never started companies with an exit or a numerically-manifested success, and you are not an experienced investor, honestly you’re better off not getting involved as a mentor. It sounds harsh, but you’re not in the position to be giving advice on entrepreneurship.
• With that said, if you have deep expertise in something (e.g. marketing, sales, design, engineering, product, etc) and have ample large market or international business experience, you can still contribute a great deal by simply sharing that knowledge, or to train talent in Taiwan.
• Now, it is important to help Taiwan create more demand for sophisticated talent that you may be helping to train. The most important thing you can do is by bringing business opportunities that employ these talent back to Taiwan. Unfortunately, this will not be solved within Taiwan itself. You need to be able to conduct business outside of Taiwan yourself, and opt to relocate the business. Yes, it is a very difficult problem, since moving to Taiwan usually means you won’t find the talent that you need, and it takes time (maybe even decades) to bridge the talent gap.
• As an addendum to the previous point, In the past Taiwan’s economy was dominated by manufacturing, OEM and low-end service industries. In other words, Taiwan is generally not great at branding, marketing, product or sales. One huge challenge is to be able to attract executives in these critical areas to join Taiwanese businesses. Yes, this is a circular dependency: without business revenue you can’t afford talent, and without talent you won’t create businesses with good revenue. The cycle is not easy to break, but this is a real and crucial hurdle to overcome for Taiwan to advance itself going forward.
• Lastly, please learn to consolidate and to collaborate, don’t let your ego and vanity get the best of you. Taiwan is a small country, we need to consolidate resources to create strong networks and pipelines for business, we don’t need a confederation of mentors and speakers that compete against each other for media exposure at the expense of our ecosystem’s future.

At the end of the day, the problem is not as simple as “let’s just get more people to invest in Taiwanese startups”, or “let’s tell the world about Taiwanese startups.” If it were that simple, someone working professionally within Taiwan would have already solved these problems.

Taiwan, since the dawn of its industrial economy, has never been cut off from international capital. The fact that foreign investors have not shown renewed interest in Taiwan’s offering of new companies tells us that the problem is not just exposure to opportunities, but that there are deeper economic and production factors that need to be improved before the investment opportunities in Taiwanese startups become attractive on their own. After all, it’s a market economy, if people have seen the offering and aren’t buying, then we need to up our game.

This process will require experience, patience and hard work.