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How Taiwan will become a major Asian startup hub

Tim Lin

Like many countries after the 2008 financial crisis, Taiwan’s unemployment rate rose with no signs of stopping. Coupled with the country’s deep rooted values in academic excellence and career advancement, stability became paramount.

Terry Cooke, former senior commercial officer of AIT Taiwan, points out: “With a small internal market of only 23 million, fully 70 percent of Taiwan’s GDP is accounted for by exports.”

“As a result of its high degree of integration with global supply chains,” he says, “Taiwan took a stronger hit and is suffering a longer recovery time from the impact of the global recession than its regional competitors.”

In a time when stability was paramount, risk was out of the question and so were startups.

Striving for more innovation

However, in recent years, Taiwan has been gearing to become the epicenter of innovation in Asia Pacific for a multitude of reasons. It ranks 15th in global competitiveness, 10th in innovation and has one of the largest populations of software and hardware engineers in the world.

This workforce is responsible for parts of Tesla’s original design as well as the production of flagship products by global electronics leaders like Apple, Sony, and Microsoft. The country has also dominated the semiconductor industry for over three decades.

Technological centers and innovation clusters are also growing organically throughout major cities such as Taichung, Tainan, and Kaohsiung.

Along with this, Taiwan also ranks first in global expat rankings and continues attracting foreign talent in all sectors.

These characteristics give Taiwan a unique regional and international advantage. However, there are institutional and cultural barriers limiting growth. Here are two suggestions on addressing these barriers.

Abandon the build-it-and-they-will-come model

Recently, the Taiwanese government allocated over US$310 million to construct a new technological center, which they dubbed Asian Silicon Valley.

Taiwan’s Premier, Lin Chuan, states, “It hopes this effort will bring the world’s most advanced ideas to Taiwan and attract high-level talent from overseas to improve the country’s competitiveness in the global market.”

While the government certainly has good intentions, new constructions alone will not infuse Taiwan with the Silicon Valley spirit.

While the government certainly has good intentions, new constructions alone will not infuse Taiwan with the Silicon Valley spirit.

What’s more worrisome is the country’s track record of government funded constructions becoming abandoned buildings soon after launch. If Taiwan wants to replicate the magic of the Bay Area, it needs to adopt its principles before all else.

Instead of sinking over US$310 million into a brand new tech cluster, Taiwan would benefit from adopting the lean methodology and refurbish older abandoned buildings for a fraction of the budget. After refurbishing, the remainder of the money could be spent on tax breaks for foreign startups or financial support for homegrown startups that are showing traction.

In Singapore, the government revamped dilapidated factory warehouses into the country’s biggest innovation hub. The project became known as Block 71, which is now home to 250 startups.

Leverage Cultural and Regional Individuality

It is tempting to copy successful startups. Although there have been successes with similar companies in China, Taiwan is fundamentally different. It doesn’t have China’s market size nor the protectionist government policies.

Taiwanese entrepreneurs need to recognize and leverage the country’s fundamental differences and design novel solutions addressing those in the region.

Tim Cheng, CEO of FlyingV, the largest crowdfunding platform in Taiwan, shares his insights from seeing thousands of projects come and go.

Culture should be reflected behind any product.

“Taiwan is unique in Asia as it is a melting pot of Chinese, Japanese, American, and aborigines cultures,” he says. “This unique background and perspective should be the backbone of every business in Taiwan.”

Some startups that leverage Taiwan’s individuality are Gogoro and 17 media. Both companies stray away from the copycat model to create novel and suitable products for the region.

Good Things Are Coming

A decade ago, many of the top talent joined established companies such as Foxconn and TSMC. While these major companies held their market positions, they deprived startups of great talent. Larry Wang, CEO of Taiwan Innovation Entrepreneurship Center (TIEC), shares his unique perspective after 20 years of experience in the Bay area and Taiwan.

The most difficult hurdle to overcome is the mindset.

“The most difficult hurdle to overcome is the mindset,” he says. “Now, the mindset of entrepreneurship has changed and the awareness of startups has been revived. Top talents want to start startups. This community is now collaborating to grow new markets.”

Aside from the organic shift in mentality, Taiwan is also taking active measures to cultivate an environment for innovation.

Incubating a startup ecosystem

The country’s National Development Council (NDC) created the “Head Start Taiwan” Project intended to facilitate an effective startup ecosystem. The project’s tech accelerator, Taiwan Startup Stadium (TSS), aims to breed a new narrative of startups and to continue building relations with Silicon Valley.

Witnessing this shift, TSS CEO, Anita Huang, adds, “The government is looking to support and not lead, delegate and not control. This deregulation is great news for startups.”

Additionally, as of June 2015, Taiwan became the first Asian nation to set up a government funded outpost: TIEC in Silicon Valley.

Serving to bring vetted startups to the Valley, eligible teams are granted a US$20,000 stipend for living expenses. Lastly, the government backed international funds reached US$400 million, while local accelerators such as AppWorks reached a US$50 million investment, catering to domestic startups.

A final word

To boost its global competitiveness, the government can implement tax incentives for domestic companies looking to create a venture arm. In addition, it can provide a platform allowing entrepreneurs to showcase their products or services to potential investors.

As the effort continues, founders, employees, investors, and the government will need to work collectively to improve the overall landscape. In addition, startups should leverage Taiwan’s assets to secure their positions in Asia Pacific.

If Taiwan continues on with its recent progress, it will likely become the major tech center in Asia Pacific.

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