Is Taiwan’s innovation environment ‘diseased?’ Kaifu Lee, ex-Google China chief, thinks so.

Is Taiwan’s innovation environment ‘diseased?’ Kaifu Lee, ex-Google China chief, thinks so.

October 29, 2013

by Josh Horwitz

Last month Kai-fu Lee, ex-Google China chief and current CEO of Innovation Works, announced he would be moving back home to Taiwan in order to receive treatment for cancer. Now, after weeks of rest, Lee made his first public appearance today at Taiwan’s 11th Annual Global Views Summit, where he described Taiwan’s innovation environment as “diseased.”According to UDN, Lee states that the root of Taiwan’s poor state of innovation lies in its “small market mentality,” which has prevented the island from developing a first class industry for information and connectivity. Having missed out on the software, mobile, an internet revolutions, Taiwan must “swallow some tough medicine” in order to cure itself.

Lee then pointed to previous internet success stories in Taiwan like Yam and PCHome (two popular web portals in Taiwan) as examples of past “masterpieces” that were well-made but never left the island. Emphasizing that companies can’t grow successful if they stay focused on small markets, he noted that the earlier success of Taiwan’s hardware industry was due to its ability to reach markets around the world.

In addition, Lee reportedly lamented how even nowadays internet entrepreneurs in Taiwan remain focused almost exclusively on the domestic market. They first say they’ll focus on the traditional Chinese market and later try out the simplified Chinese market, but then years pass and they still haven’t expanded beyond Taiwan’s borders.

Lee’s comments will certainly hit a nerve within the startup community in Taiwan, which regularly wrestles with the issues that Lee touches upon. Well aware of the small size of the domestic Taiwan market compared to the greater Chinese speaking market, many entrepreneurs remain torn as to whether to focus on Taiwan’s 23 million residents, expand into the mainland, or adopt an international strategy from the get-go. Each option presents its own challenges.

Lee’s VC firm Innovation Works recently announced it would be setting up an office in San Francisco to work with its US-based investments and help them find footing in the Chinese market, having already put up an aggregate of $2 million in its American portfolio. Innovation Works is also an investor in TMI, a Taiwan-based incubator with ties to WI Harper, an early-stage VC firm with offices in Taipei, Beijing, and San Francisco.

Industry leader prescribes tough medicine for Taiwan’s industries

By Ted Chen, The China Post
October 30, 2013, 12:18 am TWN

TAIPEI, Taiwan — Lee Kai-fu (李開復), former head of Google China and founder of Innovation Works (創新工場), a US$500 million venture capital fund based in China, yesterday deemed the condition of Taiwan’s industries as critical and requiring tough medicine, while outlining several points of advice.

Lee yesterday spoke at a summit meeting of industry leaders, hosted by the CommonWealth Magazine (天下雜誌).

In his address, Lee equated the state of Taiwan’s industries with his own struggles with lymphoma. As a lymphoma patient about to undergo chemotherapy, Lee said that similarly, drastic measures need to be taken to alleviate Taiwan’s ailing industries.

According to Lee, there is a dearth of venture capital initiatives in Taiwan, with many entrepreneurs and startups lacking funds. Consequently, lagging returns in the field have deterred the participation of investors, creating a vicious cycle where idle capital has nowhere to flow except for the properties market, driving up home prices. In this vein, Taiwan’s industries are similar to his own struggles with lymphoma, a result of vicious cycle, said Lee.

Lee hopes to see a revival to the period of booming growth under the stewardship of former Finance Minister Lee Kwoh-ting (李國鼎), who played an instrumental role in founding the Hsinchu Science Park, propelling Taiwan into one of the world’s leading players in the global technology sector.

Taiwan must explore new horizons in the technology sector, including software, hardware, cloud computing and wearable devices, said Lee.

In his address, Lee advised Taiwan to bring in innovative entrepreneurs and startups from China and the U.S., and urged for a fostering environment to promote more local entrepreneurial initiatives to break the vicious cycle. He also advised companies to go after large markets, and cited the example of Taiwan’s PChome, who’s stellar US$500 million net worth pales in comparison to Alibaba’s US$100 billion valuation.

On investment terms, Lee urged regulators to remove unreasonable obstacle such as the NT$10 face value requirement for issuance of shares, while advising investors and major shareholders of technology companies to allocate more shares to incentivise employees in the development and engineering departments. Lee also urged the government to consider the variable interest entities investment arrangement commonly seen in China’s startup ventures. In order to create new possibilities, Taiwan must be able to attract venture capitalists to create a complete ecosystem for startups.

However, Lee questioned the motives behind certain universities’ entrepreneurial and startup endeavors. As they have already received funding from the government, universities should not ask for a share of students’ startups, said Lee.