Taiwan – Too Small for Real Start-Ups?

Although only a few hours flight from Beijing, Taiwan has a very different start-up environment.  With a population of 23 million, Taiwan has often been labelled too small to have a start-up business that makes an impact on the world stage. Interestingly though, is the fact that there are many Taiwanese entrepreneurs who have been educated outside Taiwan and made it hugely successful. Some key examples are Dr. Kai Fu Lee, CEO of Innovation Works, Steven Chen Co-Founder of Youtube and Tony Hsieh, CEO of Zappos. This suggests that if you want to make it big, get out of Taiwan – the market is too small.

My friend in Taiwan (who is from America) made some interesting observations about the Taiwanese start-up market and its trends. Taiwan has a long history of being a big electronics OEM manufacturer to the world. Brands such as Asus, Acer, HTC and BenQ all originate from Taiwan. The dominance of these established technology companies in Taiwan has lead to roughly 75% of the population working in the technology industry. Young people graduating from college usually take the safe path and join these large companies. Often large technology companies in Taiwan have small divisions dedicated to start-up like projects, where employees can test their ideas. If these divisions do well, the people who worked on the project can expect big cash out bonus, equivalent of exiting a start-up company. I heard of one case where one division was given a bonus equivalent to 10 years pay, for making successful tablets.  So why wouldn’t you take the safe option? It makes sense right? People can be entrepreneurial within a big company and still earn a steady pay check from a secure job in a big company. Another possible reason for younger people to steer away from the more risky entrepreneurial path is Taiwan’s National Service policy whereby all men who are 18 must join the army for 2 years. This means that many men by the time they are 23-24 years old, don’t have professional work experience, leading them to play it safer and get a normal job.

But it seems there are signs of life in the start-up and tech scene in Taiwan. Wretch.cc, a Taiwanese blog community was acquired by Yahoo! in 2007. KKBox, a music streaming site is hugely popular and Facebook is quickly gaining traction. This has given rise to social media marketing services in Taiwan such as Mr.6 (previously covered). Atlastpost, founded by the Kuo brothers in 2007, originally a LBS blog service later transformed into a group buying site and consequentially acquired by Groupon for a rumoured US$1.5m to become Groupon Taiwan.

The investment environment is also picking up. appWorks Ventures, founded in 2009 is a internet and mobile application VC fund. Its business model is similar to Y-Combinator in the US and Innovation Works in China. Their purpose is to invest in Chinese Internet industry, to enhance Taiwan’s competitiveness internationally. Good on them! Entrepreneurs, especially in Taiwan so it seems, need this support and activity.

So despite the obvious challenges Taiwan faces in the start-up environment, namely the small market, it is developing. With more young people willing to experiment with ideas and investors willing to back the, Taiwan with its strong experience in technology will be an interesting country to watch over the next few years.

Please comment if you have any experience or opinions on being an entrepreneur or investor in Taiwan or have any insights into new exciting start-ups in Taiwan.