Taiwan’s First Unicorn Startup Is Almost Here?

Paolo Lising-02Columnist: Paolo Lising  
Paolo's Beyonder Story

As the government and the private sector continue to pour in support to Taiwan’s growing startup community, the island may have already conceived its first unicorn. However, there are still some nurturing and push that are needed to finally give it a birth. It also needs an environment that will keep it growing until we see its horn.

Taiwan government has already laid out a comprehensive plan to accelerate innovation and entrepreneurship with its three core strategies: Deregulation, Global Fund Attraction, and Cluster Building. Specifically, HeadStart Taiwan Project aims to make Taiwan “a regional innovation and entrepreneurship center”, with the goal of adding new momentum to the growth of the economy. Taiwan is banking on its key advantages: high-quality human capital; excellent hardware/manufacturing support; free and open environment; foreigner-friendly with very livable cities; and tradition of entrepreneurship. These policies are also matched with government funding support for startups – from the coffers of the national government and even from city of Taipei where bulk of startups are located.

On the private sector side, Taiwan is also gaining a lot of attention from Venture Capitals especially from overseas. This is a result of easing tax rates for investments. Big names are also drawing attention to Taiwan startups, such as Jack Ma of Alibaba, Skype’ Geoffrey Prentice, and tech giant Intel who showed intent in providing funds.


Who are the unicorns?


Unicorns are companies whose valuation exceeds USD1Billion. The term unicorn is coined by TechCrunch because what they had achieved seemed very difficult, rare, and relatively unstudied. Historically, when a startup reaches USD1 Billion valuation, VCs are able to get returns from their ownership of that startup. Here are some statistics about unicorns obtained from TechCrunch:

  • Eight unicorns were born per year but very little of them (0.14%) are venture backed. Some of these unicorns are called “paper unicorns” that means their valuations are high but they are not liquid yet.
  • 72% of the unicorns (based on value) are consumer-oriented companies or those startups whose primary customer is a consumer. These companies raised significantly higher private capital compared to enterprise-oriented unicorns companies.
  • E-commerce related startups have higher value but they have low capital efficiency. Software as a Service (SaaS) is also growing and Internet of Things (IoT) is also emerging.
  • Educated (coming from top schools), experienced 30-something years old, have built more success while the likes of Mark Zuckerberg who built Facebook in his 20s, are minority.
  • San Francisco is the epicenter of these unicorns and immigrants are playing huge role in founding and value creation of these successful startups.

Based on these key statistics, we can tell that Taiwan is in the right direction for conceiving its first unicorn. First, it was able to successfully link the island to the mecca of startups a.k.a. Silicon Valley. We’ve already seen consumer-oriented businesses that are gaining attention such as EZTable (a restaurant reservation), and Gogoro (environment-friendly scooter). The startup founders are young and highly educated as many studied abroad even for their master’s degree.


Where are Taiwan’s unicorns?


Taiwan’s first unicorn is almost here. However, there is a limbo that this animal is going through. For example, it takes 7 years for some of the paper unicorns to be liquid, based on the same report by TechCrunch. With this, the bigger question is how does Taiwan ensure that these unicorns survive even before they are born. My two cents are below:


Solid Collaboration Between Foreigners and Taiwanese founders

While there is a host of events that gathers startup founders of both Taiwanese and foreigners, there seem to be a shortage of real collaboration between the two groups. I can trace it personally from difference in culture. Foreigners are always on the look for Taiwanese co-founders but Taiwanese tend to find another Taiwanese. As mentioned in the above statistics, this partnership is key ingredient for building a unicorn. For example, a startup could have Taiwan talent (which is abundant) with foreign perspective or vice versa.


More funding (yes, more please)

This is a struggle for many foreigners as well as locals. It could be because there is not much out-of-the-box idea brewing in Taiwan. It could also be VCs mindset. They look for confidence in the founders (team composition) and they have stringent requirement for income projection. The first point could be resolved by having more collaboration. The second point is where the government could come in, by providing more funds with lesser expectations (as desperate as it sounds). Take for example the case of YikYak which was founded in 2013. This startup about gossiping raised $400 million and its idea was only presented on a napkin. This type of funding is called pre-seed investing, where its basis is on the technical abilities of the team and the solid concept or structure to bring the startup together.


Slight change in culture, look beyond the island

This is both the case for Taiwanese and Foreign founders. There is a tendency for founders here to address Taiwan market when it is very small to get that USD1 Billion valuation. The country is a good ground to start an idea and founders should think of how to replicate the concept in other markets. I call it concept because idea has less structure while concept has a backbone, (hence my startup name Million Dollar Concepts).


Listen to the VCs but remember your startup is your baby

VCs will always have one thing to look at and that is the viability of your product. That means, answering the questions – where is the money and how much returns are you giving them. They will give you pieces of advice. Please take note of them and be open-minded. However, this is your startup and only you know how things will work (if you’re doing your assignment) eventually. As mentioned above, among the unicorns, only 0.14% has backing by VCs. This means many have thrive without them until they were suddenly born.


Taiwan unicorn is here, and all it needs is unicorn thinking

They weren’t called unicorns for no reason. By definition (from Google) it is a mythical animal typically represented as a horse with a single straight horn projecting from its forehead. This is an imaginary animal and if Taiwan aims to have one, it must foster a culture of thinking outside the box (as cliché as it sounds) and provide a nurturing environment. If I may put it explicitly, it must marry Taiwanese and foreign founders and give them a happily ever after.


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