(This originally appeared on TechNode, the #1 English source for news and information on China’s rapidly changing tech industry.)

Taiwan has had a head start in its economic transformation and building a strong hardware sector over the mainland, gaining the moniker “Asian Tiger” in the process. So it is surprising that it hasn’t caught onto the internet sector boom as some of its neighbors in Asia have. It’s got all the right ingredients: a strong technical foundation, a highly educated workforce and a penchant for creativity as seen in some of the top entrepreneurs the island has helped nurture, Dr. Kai Fu Lee and Steven Chen of Youtube. So what’s missing and how can the Asian Tiger catch up?

Crouching Tiger, Hidden Dragon

Along with the three other “Asian Tigers”—Hong Kong, Singapore, and South Korea—Taiwan saw accelerated economic growth from the late 60s until the early 2000s. Its investment in manufacturing helped to create a world-leading semiconductor and hardware industry. TSMC, which is the world’s largest dedicated semiconductor foundry, Foxconn, Acer, Asus, and HTC are some successful enterprises to have been born out of the boom.

Image: CW

With this strong technical foundation, a highly educated workforce and successful entrepreneurs such as Dr. Kai Fu Lee and Youtube’s Steven Chen, it is surprising to see that Taiwan’s startup ecosystem still lags behind its neighbors in the region.

“I’m not saying unicorns are the most important thing, but looking at some of the other countries, [despite] Singapore being tiny in terms of population and geography, they managed to produce three unicorns [Garena, Lazada, and GrabTaxi],” Taiwan Startup Stadium VP of Operations and Startup Development Jeffrey Ling told TechNode. Taiwan Startup Stadium or TSS is a government-funded initiative that coaches Taiwanese startups on going global.

“Taiwan has one [unicorn]. It’s called Tutor ABCwhich was 13 years in the making,” Jeffrey told TechNode. Launched in 2004, Tutor ABC is an online English learning service from TutorGroup.

Early Success Stories

Tutor ABC was part of the wave of early internet successes in Taiwan to come after the dot com bubble crash, though mostly in the e-commerce vertical.

Serial entrepreneur Steven Ho founded e-commerce platforms Bid.com.tw, which was sold to eBay in 2002 and Monday Tech, which was acquired by Yahoo in 2008. Ho, a serial entrepreneur and investor, also founded 91app, a service that helps vendors to set up online e-commerce stores, and NineYi Capital to invest in other e-commerce startups.

Image: Shu-Yu Chou

The Kuo brothers are another pair of entrepreneurs who have made it big in e-commerce. Their first company was bought by Groupon in 2010 and became the now defunct Groupon Taiwan. The brothers have since gone on to found nine more e-commerce platforms. Four of which are doing particularly well, including Fresh Market (formerly Haoyu Net).

However, insufficient seed funding and venture capital in Taiwan mean that startups rarely moved beyond series A and this hindered many from scaling up and maturing.

Show Me the Money

In the 2016 Taiwan Startup Ecosystem survey compiled by BusinessNext, fund raising was cited as the most significant challenge faced by nearly half of all entrepreneurs surveyed while only 13.8% had received venture capital funding.

“After the dot com bubble crash in 2000, [it was] low key in Taiwan from the VC investment perspective. There were very few VCs focused on investing in internet-related startups,” AppWorks Ventures Associate Jessica Liu told TechNode. AppWorks VC funds and its accelerator program was one of the earliest established in Taiwan and has now grown into the largest accelerator network in Asia with more than 320 startups and 720 founders amongst its current members and alumni.

Looking to help Taiwanese startups to gain funding and grow, Jamie Lin, a National Taiwan University and NYU Stern-educated entrepreneur returned to Taiwan to start AppWorks in 2009.

According to Taiwan Venture Capital Association (in Chinese), 2002 to 2005 saw a peak in investments in startups and new businesses. Following the global financial crisis in 2008, investments only started to grow again from 2011. In 2015, investments received by new businesses and startups were around $421 million as reported by the National Development Council. A small amount, but still a big jump from 2014’s $130 million.

Adding to the growing pool of investment is government funding, the Taiwan Silicon Valley Tech Fund looks to fundraise and invest $300 million into local startups between 2015 and 2017, of which $180 million is expected to have been raised from the private sector. The more recently announced Asia Silicon Valley Development Plan aims to promote innovation specifically in the IoT sector and stimulate the local startup ecosystem.

What’s Next

Apart from the relatively small amount of venture capital available to entrepreneurs in Taiwan, other factors that have slowed the growth of the internet industry are the small-market mentality of entrepreneurs, the difficulty of attracting talent, and strict government regulations.

“The biggest problem we see among entrepreneurs here in Taiwan is the lack of this global mindset,” Jeffrey Ling from TSS told TechNode.

“A lot of startups, they don’t draw the bigger picture so investors won’t be able to know if you can go bigger or not.” He went on to explain that TSS helps startups to understand investor’s perspective and what they are looking for. “If you don’t even dare to want it bad enough, I’m not sure if I want to put my money in you, ” Jeffrey explained.

Additional Reading

♦ Stars of the Asian Century
♦ Don't Underestimate Small Startups
♦ Invest in Employees, Beat the Recession

Original content can be found at the website of TechNode.

♦ Taiwan Turnaround: An Asian Tiger catching up in the internet sector

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