Founded in 2019, Hive Ventures differentiates itself from fellow venture capital firms by adopting investment + counseling, a business model of making early-stage venture capital investment in startups plus providing counseling services to help them solve clients' crucial problems, according to company co-founder Yan Lee.
Startups have to solve clients' pain points to define products
Hive Ventures has found that Taiwan-based startups specializing in AI, big data and IoT have internationally competitive advantages. The competitive advantages are attributable to many technological experts with hardware/software know-how cultivated by ICT supply chain in Taiwan and, in addition, Taiwan-based startups are more open-minded toward the global market than Japan- and South Korea-based ones. As compared with Southeast Asia-based startups mostly specializing in software, Taiwan-based ones gain the upper hand in hardware expertise and the entire value chain. Thus, Taiwan-based startups can enhance international competitiveness if they are able to integrate their technological expertise with ICT hardware makers' strength.
On the other hand, however, the advantages have constrained these startups' business development, and the investment + counseling model is intended to offset the constraint to help them in business development.
The constraint is due to too much reliance on technological advantages, equivalent to the concept that technology can overcome everything, and neglect of the key point that solution of clients' problems is crucial to business development. Technologies used to solve clients' problems are not necessarily advanced or profound but should be systematic and innovative.
With most of clients being enterprises, these AI, big data and IoT startups have to focus B2B marketing on their capability of solving problems instead of appeal by their technological advantages. Besides, some of IoT startups are still hardware-minded and consequently mostly focus marketing on promoting sales of data capture equipment (such as sensors) instead of data-analytical software services.
In a bid to make up for the startups' deficiency, Hive Ventures systematically provides startups with counseling services on branding, marketing models, talent recruitment and goal setting in different fund-raising stages, a bid to enable them to use their technologies in quick response to clients' pain points and to quickly understand possible deviation from the way of building preliminary business models based on their technologies for correcting the models as early as possible.
Venture capital operation in Taiwan unlike in Silicon Valley
Silicon Valley-based venture capital firms' familiarity with methods of assessing startups' potential in each stage has become SOP (standard operating procedure). Besides, venture capital investment in Silicon Valley is characterized by fast flows of sufficient funds, with startups there progressing quickly from pre-seed stage throughout seed, series A, B and C funding.
In comparison, venture capital investment in Taiwan is inferior to that in Silicon Valley in mobility and amount of funds and, as a result, startups with large technological potential may not progress smoothly in fund-raising process.
Due to the gap in venture capital ecosystem between Taiwan and Silicon Valley, venture capital firms and accelerators in Taiwan have been developing models of cooperation with startups that are different from those available in Silicon Valley. This is the reason for Hive Ventures to develop the investment + counseling model.
Taiwan entrepreneurship ecosystem benefits from COVID-19
Although US-China trade wars and coronavirus pandemic have caused some impact globally, Hive Ventures continues to focus on venture capital investment in startups with technological potential in AI, big data and IoT.
Arising from US-China trade wars, there has been international concern and worry about China's policies and measures regarding AI, software and data protection, and this has led to more international attention to Taiwan-based AI startups. In the meantime, mainly due to Taiwan's excellent performance in fighting the pandemic, many international venture capital fund managers and co-founders have chosen to stay in Taiwan for long time and thereby have had more opportunities of understanding or even participating in the entrepreneurship ecosystem in Taiwan.
Due to the pandemic, overseas entrepreneurship promotional activities such as Demo Day have been shifted from physical exhibitions and conventions to online ones, providing Taiwan-based startups with easy access to what overseas venture capital firms and accelerators care about for their investment. Due to the pandemic as well, many international venture capital funds and fund managers are expected to move to Taiwan, making them better understand the Taiwan market and consequently introducing more international investors to Taiwan.
Taiwan government supports entrepreneurship ecosystem in Taiwan
For Taiwan-based startups to tap overseas markets, there have been several successful cases in the Japan market because Japan culturally puts strong faith in Taiwan. Besides Trend Micro and Appier listed on the stock market in Japan, Vpon, Beseye Cloud Security and awoo Intelligence have so far fared well in the Japan market. For tapping the US market, however, Taiwan-based startups should change operational mentality from price consideration to value consideration to gain more business development opportunities.
For Taiwan-based startups, Southeast Asia with manufacturing and agriculture being the core of economic development is a market worthy to tap. Many local enterprises in Southeast Asia have good relations with Taiwan-based ones and there are increasingly many Taiwan-based companies investing in the region, bringing opportunities for Taiwan-based startups. In particular, Taiwan-based startups specializing in smart manufacturing can solve Southeast Asia-based clients' pain points as well as go along with Taiwan-based companies investing in Southeast Asia to tap the regional market.
The National Development Fund keeps investing in, providing counseling services for and subsidizing Taiwan-based startups through cooperation with venture capital firms and accelerators, signifying the Taiwan government's actively boosting development of entrepreneurship ecosystem in Taiwan. Besides, the Taiwan government has provided dedicated financial bailouts for local startups impacted by the pandemic.
Hive Ventures founder and managing partner Yan Lee
(Editor's note: Readers can download "2021 Taiwan Startup Ecosystem Survey" jointly conducted by PwC Taiwan, TIER and DIGITIMES: https://www.pwc.tw/en/publications/taiwan-startup-ecosystem-survey.html)