Fifteen years ago, software and Internet startups were few and far between in Taiwan. The country was still reveling in the success of indigenous semiconductor and PC industries, and with the vast majority of investors balking at investing in software due to the dotcom bust of 2000-2001, most companies preferred building their business around hardware to software solutions.
It was around the same time when Jordan Forssman and his teammates started to fundraise for their cybersecurity startup Armorize Technologies. He recalled meeting local investors, mostly from investment banks, who were old fashioned in how they communicate, operate, and structure their firm.
Back in the day, most people in the investment sector are old at age, wear a suit with tie, and favor hardware companies. But as the local venture capital industry emerges, they’re being replaced by young analysts, in a T-shirt and jeans, passionately talking about new technologies they focus on like AI, blockchain, and genomics.
It’s “a whole different vibe” in the investment community, Forssman described. He had been working as the head of business development for Armorize Technologies before it was acquired by Proofprint in 2013. “There was nothing like this when we started in Armorize, not even close.”
During his 17 years of living in Taiwan for study and work, Forssman witnessed first-hand not only how the the local investment environment has become more vibrant but also how drastically the country has changed in an effort to catch up in a software-based economy.
How far Taiwan has gone
Historically, hardware companies in Taiwan achieved their success by competing on price. With the cheapest products in hand, they didn’t need to reach out to customers with sophisticated marketing strategies; instead, they often waited for them to knock on their door.
“It was safe to do business, but you can only make it safe for so long,” Forssman said. “Now, the rest of the world catches up and competes with you, sometimes even in your home market.”
It’s true that these companies have built Taiwan’s economy, but in the era of Internet and globalization, they risk being outcompeted by those who provide even cheaper products from countries like China and India.
Fortunately, this type of business is also becoming less and less attractive to the new venture builders. As this shift away from hardware plays out, investors are also feeling more comfortable backing companies who work on software solutions they used to dismiss as risky.
“In this era, you need to have a mindset shift to this risk loving approach,” Forssman said. “This change is inevitable, and if it’s forced upon you, you have no control.”
With startup companies diving into new technologies and the support of venture capitalists, Taiwan may be “well on its way and more advanced than many other countries” as a technological powerhouse, Forssman said. But Taiwanese companies still need to learn to engage and interact with their customers around the world.
He considers this to be one of the major challenges for the country to integrate into the global, knowledge-based economy. After all, “software and services are for people,” Forssman said, “not just about manufacturing a product and shipping it to other places in the world.”
English-speaking countries like India, Ireland, and South Africa might gain an upper hand in this respect, but he expects the situation to turn around as Taiwan transforms itself into a bilingual nation in the upcoming decade. Along with other government initiatives like the Employment Gold Card, Forssman believes the change will attract foreign entrepreneurs and incentivize global companies to set up their regional headquarter or an R&D center in Taiwan.
Becoming the next Silicon Valley
While Taiwan strives to earn a place in the new economy, the Internet has spawned hundreds of thousands of software startups in the Silicon Valley. Despite Taiwan’s efforts in becoming the Silicon Valley of Asia, it can take a few decades for the island nation to catch up.
For one, a typical Silicon Valley startup founder is “in their twenties but already in their second company or sixteen investments,” Forssman said. They hit rich at a young age, exit from their startup company, and start investing in other ventures.
In Taiwan, Forssman said the first generation of successful software entrepreneurs like Wayne Huang, founder of Armorize Technologies, saw their opportunity to do the same only in their late thirties or early forties -- after spending a lot more years of building a company than their Silicon Valley counterparts.
The twenty- or thirty-year gap is indicative of how Silicon Valley is ahead of Taiwan, where the culture of running the risk to invest in future unicorns is just taking shape.
But Forssman holds out hope that the next wave of entrepreneurs will help vitalize the ecosystem with their knowledge, network, and financial resources when they exit successfully at a younger age.
Today, with a great number of accelerators created, young founders in Taiwan are also receiving support and learning how to build their first startup. “I think we are in the midst of building the environment for entrepreneurs,” Forssman said, to engage in the startup industry early in their life and keep it running.
Recognizing what Taiwan has
Over the past few years, Taiwan has been working to strengthen its innovation ecosystem by launching startup accelerators and incubators like Taiwan Tech Arena and funding startup companies. But doing so with Silicon Valley as the only reference drives the country into a tunnel vision.
“It’s a great target to be like, but don’t forget that other countries, who also want to be like the Valley, don’t have what you have,” Forssman suggested. “Be aware of the fact that you’re lucky.”
Here, he’s talking about the group of Taiwanese-American entrepreneurs, who have successfully exited from their startups via acquisition in the 2000s like Steve Chen (co-founder of Youtube), Jameson Hsu (founder of Mochi Media), and Kai Huang (founder of RedOctane). Known as the Taiwan Mafia -- reminiscent of the Paypal Mafia, most of them have been staying in Taiwan now to help local startup founders build and grow their business globally.
“Most countries don’t have the success stories coming back home, re-planting the seeds, and sharing their knowledge,” Forssman said, noting that it makes a huge difference in the ability to develop a new industry and catch up with the rest of the world. “People in Taiwan don’t understand how special this is.”
Most recently, Taiwan’s success in handling the coronavirus pandemic has put the nation in the spotlight, and Forssman said it should take advantage of the situation to reach out to other countries. He called the "Taiwan Can Help" campaign of mask donations a brilliant act.
Ten years ago when working for Armorize, Forssman recounted, they needed to explain to their customers that they’re a Taiwanese company. But now, “everybody knows about Taiwan because of COVID-19,” and, quite unexpectedly, Hong Kong’s civil unrest.
With increased visibility and many advantages for businesses -- a clear legal framework, protection of intellectual property rights, and close connections with neighboring countries like Japan, to name a few, he believes Taiwan will come out of the crisis much stronger.