88 PERSPECTIVES ON BUSINESS AND ECONOMICS | VOL 43 | 2025 Sources: Financial Supervisory Commission R.O.C (Taiwan), 2012; National Development Council, 2023, 2025; Small and Medium Enterprise and Startup Administration, 2025. Lack of deal flow and Asian investments due to low hit rates Start-ups worldwide are experiencing revaluations in both private and public equity markets, correcting the 2021 bubble and creating a “funding winter” (StartupBlink, 2024). This revaluation is so drastic that in the first quarter of 2024, global funding fell to its second-lowest level since early 2018 (Teare, 2024). The Asia–Pacific region was hard hit dealing with hesitant investors. According to Bain & Company, the number of PE deals plummeted in most markets after 2021’s highs for both PE funding and PE exits (Lamy et al., 2024). This overcorrection after 2021 is particularly important for Taiwan, which has been experiencing a VC funding gap, especially in early equity investor stages. According to the Ministry of Economic Affairs, 90% of new companies in Taiwan fail within one year, with 90% of the remaining 10% failing within five years (Venture+, 2023). According to those data, 636,648 Taiwanese companies were established during 2017–2022. Of those, only around 2000 (0.31%) received VC investment and only 155 (0.02%) listed themselves as IPOs, indicating that VCs in Taiwan are caught in funding an extremely limited number of firms with those firms having limited success. In addition, the combination of PE- and VCbacked funding from 2019 to 2024 followed a concerning trajectory. From 2020 to 2023, the total number of PE and VC investments declined from 29 to 13, with a corresponding 70% decrease in aggregate value, from US$3.2B to US$0.96B (Vidal & Sabater, 2024). As described previously, the volatile relationship with China has led to significant fluctuations in the number of deals made with mainland China, increasing from no deals in 2020 to US$1.9B in 2021 before falling back to no deals in 2023. Taiwan must mitigate this expansion for any hopes of sustaining a start-up ecosystem. Taiwan has not entirely ignored the inconsistent deal flow, with one of ASVDP 3.0’s goals to increase the funding raised for start-ups The TVCA has recommended lowering the financing threshold to NT$500,000 from a single angel investor; encouraging new VC funds to allocate 40% of their funds to start-ups in return for a 20% tax incentive; implementing tax breaks for large enterprises investing in or acquiring start-ups; and assisting the Taiwan Stock Exchange and the Taipei Exchange in generating 100 start-up IPOs (Wu, 2024b). While these initiatives lay the groundwork for more investment in the future, they do not address the limited risk tolerances of Taiwanese funders. Taiwanese start-ups aim to promote products in vast international markets, but the small domestic market cannot adequately prepare them, highlighting another major difficulty for Taiwan, its geopolitical isolation and weak position in global supply chains. Table 1 Four main departments involved in Taiwan’s start-up ecosystem Governmental entity Roles and responsibilities National Development Council Oversees policies and initiatives for Taiwan, such as ASVDP 3.0 and the Action Plan for Enhancing Taiwan’s Startup Ecosystem: 1. Ample early-stage funding for start-ups 2. Developing talent and adjusting regulations 3. Building partnerships between start-ups and the government 4. Providing start-ups with various exit channels 5. Helping start-ups tap into global markets Ministry of Economic Affairs Manages funding, regulations, and financial/networking initiatives for start-ups Oversees the Small and Medium Enterprise and Startup Administration Financial Supervisory Commission Regulates venture capital and the financial markets, particularly from mainland China National Science and Technology Council Manages Startup Island TAIWAN and NEXT BIG program, which aim to identify and promote benchmark start-ups
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