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Contents• Claimer and Disclaimer• Key Elements for Entrepreneurs• Culture and Entrepreneurship • Taiwan Entrepreneur per Bevan Wu• The Glorious Past 1980-2000• Present – The Crunch and Taiwan VC in 2006• Future and Challenges to Taiwan
Entrepreneurs
Claim & Disclaim
• The views and comments in this presentation are all Bevan Wu’s personal
• They do not represent the view or opinion of ITRI (Industrial Technology Research Institute of Taiwan), ITRI-International (San Jose) and Stanford US-Asia Technology Management Center
Three Key Elements for A Successful Entrepreneur
Funding
Culture/Geographic Location
Timing
Culture and Entrepreneurship
NA EU Asia-Pacific
Risk taking Strong R/DInnovative Prod/Mkt’g
Creative R/DConsortiums
Entrepreneur
Fast, Agile
High Rollers?
A Closer Look
NA EU Asia-Pacific
The Others
Korea
The Other Asia-Pacific
countries
Taiwan
China
Brussels
UK
F
G
Japan
Risk - Creating New Mkt
Risk Averse –Expanding Existing Mkt
Agile-Speed to the Market
Evolutionary-High Quality
Taiwan Entrepreneurs and Its Global Status per Bevan Wu
TW
USA
EU
Japan
Taiwan Entrepreneur per Bevan Wu• A person rather be a head of a chicken than a tail of an
ox (Taiwan colloquial) but they are not necessarily like Bill Gates, Steve Jobs
• One who is always ready to catch opportunities around him and realizes his dream
• One who has mentality like Viet Cong and did graduate study in West Point
• Very adaptive in importing technology, ideas and finance from anywhere in the world
• A kamikaze pilot who completed 100+ landing• Comfortable in Taiwan business culture – If there is a
policy/regulation there always will be a solution
An Example: How Come Taiwan LCD Industry Rose So Fast – Asked VDMA Germany
• In 2001 I was asked by German VDMA to make a presentation in Semicon-Europa on the subject of “How come Taiwan moved so fast in the LCD Business?”
• After given many academic answers as well as statistics I came to one simple conclusion
• That is Taiwan’s Entrepreneurship Spirit
The Glorious Past 1986 –2000 • Government Initiated VC programs to stimulate Taiwan High Tech
industry growth –Combine Gov $ with Buz $• Expatriates back to Taiwan as Entrepreneurs
– Ex AT&T Club 150+– Ex IBM Club 100+ and they started Hsinchu Science and
Technology Park (HSTP) infrastructures– They contributed close to 90% of the start-ups in HSTP
• Staged VC activities -1985, 1991,1998 Created more than 130 start ups
– 26 S/C, 14 OptoE, 55+IT/Comm/Networks,38 BioTech…• THE REST IS HISTORY – UMC, TSMC, Acer, AUO…..• Even ITRI started its own VC - Industrial Technology Investment
Corporation (ITIC) in 1979 (Retain 5%-10% option right to invest)
Taiwan Mechanism for Encouraging Entrepreneurship
IPR Protection
R &DProject
Ideas R&D
Incubator Centers- ITRI
and other 30+
VC
Start ups
Government Fund
Techno-logy
Service network
Expansion
Mezzanine IPO
Capital
Company Law• Stock option• Warrant
Trade Mkt for non-IPO
stocks
Source: Council for Economic Planning and Development, Taiwan
SBIR
Local Companies
(71%)
Local Individuals
(21%)
Foreign Companies
(7.3%)
Others
(1% <)
Where does the Venture Capital come from ?— Funding Source of Taiwan VCs ( FY 2000)
•Hi-tech industry 9.79%
•Traditional industry 33.03%
•Investment Institution 12.61%
•Insurance companies 8.66%
•banks 5.4%
•government 1.73%
•others
0.2 0.2 0.8 0.6 1.54 1.93 3.651.64 1.2 1.81 1.13
4.016.76
17.17
30.3 30.5
23.65
0.2 0.4 1.2 1.8 3.34 5.278.92 10.56 11.76 13.57 14.7
18.71
25.47
42.64
72.94
103.44
127.09
0
20
40
60
80
100
120
140
Year
B $
NTD
Annual Total Acc. Total
2000199519001985
Capital Formation of Taiwan VC industry(1984-2000)
New Venture Funds Founded per Year(1984-2000)
0
10
20
30
40
50
Year
No.
of V
C
0
50
100
150
200
250
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17
Acc
. N
o.
No. of VC Acc. No.
1985 1990 1995 2000
46
31
38
28
14
6
Source: 2000 Taiwan Venture Capital Industry Annual Report
7
Start from 1984
96 97 98 99
The inception of incubator
(1996)
Geographic Distribution of VC Firms in Taiwan
164 VCs
Taipei city
7 VCs in
Taipei County
1 VC in Taoyan
4 VCs in
Hsinchu city
5 VCs in
Kaoshung city
1 VCs in
Kaoshung county
Over 96% VC funds and over 50% incubators are located in northern Taiwan
45.81%
21.16% 23.87%7.98%1.18
%
45.32%
21.94%7.93% 23.84%
ExpansionStartup
MezzanineSeed Turnaround
Taiwan VC Portfolio Analysis by investment stages
By Project No.
( Total 6343)
By Dollars
(~$4 B)
Earnings of Taiwan Venture Funds
0.12
-0.66
-1.47-1.23
0.26 0.28-0.03
0.66 0.670.2
2.04
3.81
3.28
6.33 6.52
2.43 2.51
-2
-1
0
1
2
3
4
5
6
7
Year
EPS
95 2000
Average (The Earliest Ten VCs)
Average (Total)94 96 97 98 99
Then Comes the Crunch 2000-• The Internet bubble (2000-2001)• Cancellation of tax incentives (amidst Taiwan’s
culture revolution)• The rise of China caused unofficially funding
moves-Taiwan economic growth Dropped-off • Both Taiwan and USA have had interesting
presidents during this period• VCs became conservative – few seed funding,
asking for purchasing orders, move to traditional industry…sounds familiar?
Taiwan People and Capital Go West• From coastal provinces to northwest interior China there
are Taiwan business people there• In Great Shanghai Area there are 400,000 Taiwan
business people• In SMIC there are alleged 150+ TSMC alumni• Actual Taiwan investment in China is difficult to obtain
unofficial estimation is between $100B to $150B but the official Taiwan government approved China investment is far less than that
• Go west may be one of the reasons for the downsizing of Taiwan VC locally
Taiwan Direct Foreign Investment (FDI) (including China)
Taiwan Investment in China
Taiwan Investment in China as share of Total Taiwan FDI ﹪
Taiwan Investment in China as share of China Contracted FDI ﹪
1993 4.83 3.17 65.61 8.13
1994 2.58 0.96 37.31 2.23
1995 2.45 1.09 44.61 2.27
1996 3.39 1.23 36.21 2.24
1997 7.23 4.33 59.96 6.73
1998 5.33 2.03 38.17 3.47
1999 4.52 1.25 27.71 2.38
2000 7.68 2.61 33.93 4.39
2001 7.18 2.78 38.80 5.61
2002 10.09 6.72 66.61 12.22
2003 11.67 7.70 65.99 13.71
2004 4.81 3.39 70.42 -
Taiwan Investment in China
Source: Cross-Strait Economic Statistics Monthly
No of VC
New VC Growth Rate
Taiwan VC History 1998 - 2006
$ in M
~1,000
~500
0
~500
New Capital Infusion Rate of Increase
Taiwan VC Capital History 1998 - 2006
Taiwan VC Investments -2006
Electronics
Traditional Mfg
Semiconductor
OptoelectronicsBiotechnology
IT
Precision Machinery
Future Challenges to Taiwan Entrepreneurs
• Globalization and China’s economic power force Taiwan entrepreneurs to play a new ball game with one hand tied behind their back – political ideology and economic reality across the Taiwan strait
• Two shores 3 places – people in Taiwan, HongKong and China basically think alike but behave differently
• Transformation from a culture of importing technology, engineering and manufacturing to knowledge rich creative culture is not easy
• Multi-disciplinary team approach is required for system oriented product development – it is not Taiwan’s strong suit
• The rich stops at the third generation made the life of Taiwan entrepreneurs even more difficult
Example:Wii Almost• A TW Group worked on a 3D Mouse which is a
Wii wand in principle • It reached the pilot production stage• Was focused toward PC mouse replacement
market but not toward game applications• Being in TW they were not privy to the 20+ S/W
people company in the Silicon Valley who made Wii possible for Nintando
• Showed weakness of multi-disciplinary team cooperation and system product development capabilities
The Future is Bright if….• Wise political leadership to maintain
peaceful Taiwan strait status quo focusing on R/D and economic development
• Capitalize Taiwan’s window of opportunity (next 3-5 years) its advantages in high tech areas and its globalization experience complimentary with China market potential
• Import talents from all over the world (incl. China) to rejuvenate Taiwan’s talent pool
The Win-Win Combination
NA
EU
Asia-Pacific
Taiwan
