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Business

Taiwanese startups seek their fortune at IT expo

Startups competed for a $30,000 prize at Innovex.

TAIPEI -- One of Asia's largest information technology trade shows has put Taiwan's burgeoning startup ecosystem on display as the island tries to revitalize a flagging technology sector, catching the eye of venture capital firms searching for the next big thing.

The 36th edition of Computex Taipei kicked off here in late May. The event marked the debut of Innovex, an exhibition area just for startups, featuring 217 businesses.

Iru Wang pitched U.S.- and Taiwan-based startup MoBagel during a competition here Thursday. The MoBagel platform lets users make a variety of predictions about consumer behavior, co-founder Wang said confidently.

MoBagel, one of the eight remaining competitors at the time, uses cloud technology to collect and analyze such data as usage information from sensors in home appliances. The company won the contest, taking home a $30,000 prize.

The various other technologies on display at Innovex included transparent solar cells, as well as sensors for raising cattle more efficiently.

Alarm bells

Computex, which began in 1981, is a computer festival where such companies as Microsoft and Taiwanese personal computer makers show off new wares. It became known as an opportunity to take the IT industry's pulse.

But the PC market has dwindled, and China is stealing the IT trade show spotlight. CES Asia -- an offshoot of the International Consumer Electronics Show, the world's largest such exhibition -- debuted in Shanghai last year. The introduction of a just-for-startups Computex exhibit signals alarm over this state of affairs.

Venture capital firms have taken a keen interest. Rui Ma, a partner at 500 Startups, said the California-based fund plans to actively search in Taiwan for companies to add to its portfolio.

Also present at Computex are representatives of Fenox Venture Capital and GGV Capital -- prominent firms with such big names as Alibaba Group Holding under their belts. IT expos are turning into places for these funds to mingle with startups seeking growth capital.

Yet many Asian countries and regions are pursuing a similar strategy of nurturing startups to stimulate their economies. Without a unique strength to point to, Taiwan could get lost in the shuffle.

Built-in advantage

Taiwan's deep manufacturing base has caught the attention of Takashi Sano, a venture partner at Japanese venture capital firm Global Brain. Sano said supply chains built for contract manufacturing of PCs and smartphones can be put to use making devices connected to the "internet of things."

"We can expect new ideas from creators," he said.

Gogoro is a Taiwanese electric-scooter producer dubbed the "Tesla of scooters," after American electric-car maker Tesla Motors. Nearly all of the parts it uses, aside from batteries, are made in Taiwan. The company called Taiwan the ideal environment for a manufacturing startup.

The island has the potential to attract talent with a global vision. Taiwan Semiconductor Manufacturing Co. Chairman Morris Chang, founder of the chipmaker that pioneered the foundry model, cut his teeth in the U.S. before forming a company here.

The problem is that "there weren't many funding sources until now, so startups didn't really thrive," said Shingo Ito, head of the China unit at the Mizuho Research Institute. Talent and money have drained out of Taiwan and into China lately as startups proliferate in that massive market. And development of the biotech startup ecosystem stalled amid political tension during former President Ma Ying-jeou's eight years in office.

Taiwan saw 43,800 new companies created in 2015, up 4% from a year earlier. But many were restaurants or other businesses that are easy to set up. Few robust new startups have emerged. Taiwan faces the pressing question of whether it can cultivate another TSMC or Hon Hai Precision Industry, known as Foxconn, anytime soon.

Escaping China's orbit

The government of President Tsai Ing-wen, who took office in May, is making an effort to foster startups. The IT industry remains mired in a slump amid slowing exports to the Chinese market. Weaning Taiwan off its reliance on China will require nurturing new sources of growth.

In a speech at the Computex opening ceremony Tuesday, Tsai said the government will move forward with a plan to create an Asian Silicon Valley in Taoyuan, the site of an international airport. The plan envisions turning the city into a startup hub with talent and money from Taiwan and abroad.

The new government will need to create an environment from which startups can more easily take on global markets. Whether Taiwan can sign on to the Trans-Pacific Partnership or other wide-ranging free trade agreements is a point of particular interest. Though the government set up an over-the-counter funding market for startups in 2014, laying the groundwork for easier fundraising is also important.

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