In search of uni­corns

Tai­wan is shift­ing gear to re­vi­talise a stag­nat­ing econ­omy and keep pace with the new dig­i­tal rev­o­lu­tion, writes Tam­sin Cocks

Business Traveller (Middle East) - - Business In... -

On a Satur­day af­ter­noon in March, I headed to App Works, one of Asia’s largest start-up ac­cel­er­a­tors, which fo­cuses on in­ter­net-ori­ented ven­tures. Housed in a com­mer­cial build­ing in the heart of Taipei’s CBD, the mod­ern 1,150 sqm “school for start-ups” was buzzing with ac­tiv­ity de­spite the week­end.

In one of the 11 glass-fronted meeting rooms, a group of 30-some­things were locked in an­i­mated dis­cus­sion, sur­rounded by notes, spread­sheets and di­a­grams. A Pow­er­point pre­sen­ta­tion was tak­ing place next door un­der a bright-or­ange ceil­ing with a bold call-to-ac­tion graf­fiti mu­ral in the back­ground. In an­other cor­ner of the cen­tre, I spied a stan­dalone bas­ket­ball hoop that added a def­i­nite“Google HQ”feel.

App Works was founded in 2009 by Jamie Lin, a suc­cess­ful en­tre­pre­neur and chair­man of the Tai­wan In­ter­net and E-Com­merce As­so­ci­a­tion, who’s on a mis­sion to en­sure Tai­wan – and South­east Asia as a whole – takes its place in the fore­front of the cur­rent dig­i­tal rev­o­lu­tion.“The in­ter­net is rewrit­ing hu­man so­ci­ety,” says Lin.“Our the­sis is, if you don’t lever­age the in­ter­net in the 21st cen­tury, it’s prob­a­bly im­pos­si­ble for you to be suc­cess­ful.”

Every six months, App Works ac­cepts 35 start-ups who ben­e­fit from one-on-one men­tor­ing, im­mer­sion in a com­mu­nity of like-minded en­trepreneurs, and op­por­tu­ni­ties to pitch for in­vest­ment from prom­i­nent cor­po­rate part­ners.

“If you want to be a jour­nal­ist, you go to a school of jour­nal­ism, learn a lot, get a de­gree and em­bark on your ca­reer,” says Lin,“whereas if you want to be a start-up founder, there’s no school for you to go to. And ac­tu­ally, most start-ups will fail, so it would be weird to pay tu­ition for that. We don’t charge any­thing, and it’s more like de­sign school, where you learn by in­spi­ra­tion, not rep­e­ti­tion.”

The re­sults are im­pres­sive: af­ter seven years, App Works has 305 ac­tive start-ups in its com­mu­nity gen­er­at­ing US$850 mil­lion per year and with 3,800 em­ploy­ees. To­gether, they are val­ued at more than US$1 bil­lion.

START-UPS PLAY CATCH-UP

Lin’s rea­son for set­ting up the cen­tre and play­ing such an ac­tive role in Tai­wan’s start-up com­mu­nity is sim­ple.“Some of the coun­tries in this re­gion missed the boat at the turn of the last cen­tury. China for ex­am­ple was a power coun­try in the 19th cen­tury, but it missed the In­dus­trial Rev­o­lu­tion so it be­came an underdog, the ‘sleep­ing dragon’. I don’t want to see that hap­pen again to Asian coun­tries where this dig­i­tal rev­o­lu­tion goes on and we miss out.”

Lin is right to be con­cerned. By the 1980s, Tai­wan had es­tab­lished it­self as one of the big­gest elec­tron­ics

man­u­fac­tur­ers on the planet – ar­guably the most fe­ro­cious of all Asia’s tiger economies. This con­tin­ued through­out the 90s, with ma­jor multi­na­tional firms such as Acer, HTC and Fox­conn all hail­ing from Tai­wan. Ac­cord­ing to The New York Times, in 2001 Tai­wan was mak­ing 53 per cent of the world’s lap­tops and 25 per cent of its desk­top PCs, plus an even larger per­cent­age of pe­riph­eral prod­ucts like scan­ners, mon­i­tors and key­boards.

Even now, Tai­wan is still a mas­sive pro­ducer, sup­ply­ing com­po­nents for com­pa­nies such as Ap­ple, Mi­crosoft, Com­paq, Dell and IBM. How­ever, dur­ing the past decade the econ­omy has stag­nated. Ac­cord­ing to April 2016’s Asian Devel­op­ment Out­look, Tai­wan’s GDP in 2015 grew just 0.7 per cent, while the 2016 fore­cast was just 1.1 per cent – lagging far be­hind key Asian neigh­bours such as South Korea (2.6 per cent), Hong Kong (2.1 per cent) and China (6.5 per cent).

Part of the prob­lem is the grow­ing com­pe­ti­tion from th­ese neigh­bour­ing coun­tries: Tai­wan is no longer the only coun­try with the abil­ity to masspro­duce tech­ni­cal parts. With cheaper al­ter­na­tives, elec­tronic gi­ants are nat­u­rally shop­ping around, leav­ing Tai­wan’s ex­port-reliant econ­omy in shock.

And this is the sec­ond part of the prob­lem: while Tai­wan has ex­celled in hard­ware, it hasn’t man­aged to bridge the gap into soft­ware – de­vel­op­ing ap­pli­ca­tions for the In­ter­net of Things (IoT) – and so has lost its tech­ni­cal edge. The in­no­va­tion and cre­ativ­ity needed to go to the next level just isn’t there.

PLAN OF AC­TION

Luck­ily, it’s not just Lin who is de­ter­mined to stop Tai­wan be­ing left be­hind. Recog­nis­ing this short­fall, the gov­ern­ment has started to play a much more ac­tive role in sup­port­ing en­tre­pre­neur­ial ef­forts, with high-tech parks and hubs be­ing es­tab­lished in cities such as Hs­inchu and Taipei. The Tai­wan Startup Sta­dium is one such ex­am­ple.

In 2016, Pres­i­dent Tsai Ing-wen un­der­lined this com­mit­ment, un­veil­ing plans to cre­ate the “Asian Sil­i­con Val­ley” – a cru­cial part of her bold 5:2 re­forms to re­ju­ve­nate the ail­ing econ­omy. The Asian Sil­i­con Val­ley Devel­op­ment Agency (ASVDA) was of­fi­cially in­au­gu­rated in Jan­uary this year, with head­quar­ters set up in Taoyuan to foster the cre­ation of an in­no­va­tion hub in the coun­try’s main in­ter­na­tional gate­way.

CEO of the ASVDA com­mit­tee, Gong Mingxin re­vealed: “Ac­cord­ing to in­sti­tu­tions like McKin­sey, the es­ti­ma­tion for the global mar­ket value of the In­ter­net of Things by 2025 is US$6.2 tril­lion. If we can get 5 per cent of that mar­ket share, it’s worth about US$310 bil­lion – so there is great po­ten­tial. Ac­tu­ally, the po­ten­tial eco­nomic value is much higher when you con­sider the knock-on ef­fects to our every­day lives.”

The ASVDA ini­tia­tive is com­pre­hen­sive, with a re­al­is­tic as­sess­ment of the coun­try’s strengths and weak­nesses, and a strat­egy de­vised to bridge the gap.“There are a num­ber of bot­tle­necks in Tai­wan,” says Gong.“Busi­nesses con­cen­trate mainly on man­u­fac­tur­ing in their spe­cific do­mains, with lit­tle ef­fort put into things like re­search and devel­op­ment. There’s also lit­tle in­volve­ment with in­ter­na­tional IoT or­gan­i­sa­tions and even a lack of in­te­gra­tion among lo­cal IoT com­mu­ni­ties.”

The plan is to cre­ate an all-en­com­pass­ing ecosys­tem that con­nects univer­si­ties, cor­po­ra­tions, re­search in­sti­tutes, start-up com­mu­ni­ties and re­search and devel­op­ment clus­ters. By cre­at­ing the right breed­ing grounds, the gov­ern­ment hopes to en­cour­age col­lab­o­ra­tion, cre­ativ­ity and even­tu­ally a vi­brant in­dus­try that sparks in­no­va­tion, start-ups and even a few uni­corns (the in­dus­try term for start-ups so suc­cess­ful they are val­ued at more than US$1 bil­lion).

The gov­ern­ment has set aside NT$10 bil­lion

From left: Jamie Lin, suc­cess­ful en­tre­pre­neur and chair­man of the Tai­wan In­ter­net and E-Com­merce As­so­ci­a­tion; and an App Works class­room ses­sion

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