The Taiwan Institute of Economic Research (TIER) has released a report of Taiwan's venture capital (VC) investment trend, showing that VCs have displayed a trend of "lower quantity but higher price," with the health and energy sectors being the most popular. Corporations have also been focusing more on VCs in recent years, looking to use investments in startups to stimulate internal innovation, stated Eric Wu, director of Wistron's CVC office.
According to Ping-Hang Fan, deputy director of TIER's research division VI, TIER's Findit research team has observed the trends since 2015. The number of investments reached a recent peak of 433 cases in 2019. Afterward, the number of cases decreased each year, and yet the overall scale increased. In 2021, 353 startups received investments, with a total amount of US$2.35 billion. Compared to 2019, which had a scale of US$ 790 million, it grew nearly 300%.
In 2022, the number of startups receiving investments continues to slide, with 316 reported so far. However, the overall investment scale is expected to increase to US$3.08 billion. The average transaction per case has gone from US$ 3.69 million in 2020 to US$ 7.43 million in 2021, to US$ 8.99 million in first-quarter 2022.
Taiwan early investment trend, 2015- 2022
Source: TIER, compiled by DIGITIMES Asia, August 2022
The report shows that the main sectors that received investments are health technology, electronic products, corporation service (software, etc), energy, media entertainment, and IoT. The energy sector is especially popular, seeing significant growth in cases since 2018. From 2015 to 2017, there were 3-8 energy startups that received VC investments. That number increased to 14 in 2019 and to 49 in 2021. In terms of money, it grew from US$1.9 million to US$770 million in 2021, the most across all invested sectors.
As to who these early investors are, the report shows that the largest investors are corporate and corporate VCs, followed by venture capitalists, the national development fund, and foreign investors.
Wu is one of the several corporate and VC investor representatives TIER invited to the report conference to share their experiences. Wu stated that Wistron is always thinking about sustainability and believes that innovation is required to achieve sustainability. The reason why Wistron invests in startups is to hope that innovative ideas from the outside can stimulate innovation within the company.
However, Wu also admitted that CVC is not as easy as imagined. The key is to select a startup team that has synergy with the corporation. According to Wu, Wistron CVC will choose industries related to the company's business groups, such as EVs or medical supplies, when selecting its investment target. In addition, it also considers startups that are beneficial to social development. These investments are not always about making a profit; they are also about realizing corporate social responsibility.
Fan observed that there are new topics in VC investment every year. Some new ones include big data, NFT, Web 3.0, and metaverse. However, regardless of the trends, the health tech sector always remains a focus. The popularity of energy investments also reflects the importance of climate change in recent years.
Regarding the recent capital market downturn, Fan believes that startups should put "how to survive" as their no.1 principle and prepare resilient projects. Wu added that if the startup has a good enough case, they do not have to worry about not getting the funds. Even though the capital market is not looking good, key VC businesses will be looking to buy cheap rather than leave the market.