Innovation and entrepreneurship are important driving forces for the socio-economic development of a country, and establishing a sound entrepreneurial ecosystem is conducive to the growth and development of startups. Over the past decade, with the joint efforts of entrepreneurs, the government, venture capitalists, and related service organizations, Taiwan’s entrepreneurial ecosystem has made great progress and gradually moved from a desert to a rainforest. As startups require a certain amount of capital investment at each stage of growth, the capital provided in recent years by the government, venture capitals, enterprises, and angel investors which is needed for the growth of startups at different stages has been quite beneficial to the recent startups.
After ten years of development, Taiwanese startups have achieved certain results, and more growth-oriented digital innovation companies have decided to enter overseas markets. Obtaining sufficient funding is their primary challenge. In the past, it was generally difficult for domestic venture capitalists to invest large capital, and international venture capitalists also paid little attention to Taiwanese startups, making it more challenging for Taiwanese startups to obtain the necessary funding for internationalization.
The funds invested in startups must have a timely exit channel, in order for the funds to become active and continue to be invested. However, the exit of startup investments in Taiwan still heavily relies on the startup’s listing, rather than mergers and acquisitions commonly seen abroad. Therefore, it is particularly important for Taiwan to construct a capital market that is conducive to the smooth listing and funding of highly growing but not yet profitable startups, as well as the exit of early investors.
With the advent of the AI era, there will be more startups with AI related applications in the future. Taiwan plays a crucial role in the global AI industry chain, and has a good foundation and development opportunities in AI applications. If a cluster of digital innovation enterprises can be shaped in Taiwan’s capital market, it will attract more Asian startups in digital technology application to choose to list in Taiwan.
In 2021, the Taiwan Stock Exchange (TWSE) launched the Taiwan Innovation Board, aiming to shorten the lead time for startups to enter the capital market for fundraising, as well as expand market participation. After three years of promotion, although a certain number of innovative companies have been listed on the Taiwan Innovation Board, due to relevant regulations that result in low liquidity, many startups are still on the sidelines. Therefore, although there has been some progress in the Taiwan Innovation Board, no clustering effect has yet been formed.
The TWSE will significantly relax trading restrictions for participants on the Taiwan Innovation Board next year (2025), including lifting investor restrictions, and opening up margin trading, securities lending, and intraday odd-lot share trading. The relaxation is expected to promote growth-oriented startups to choose to be listed on the Taiwan Innovation Board, and create the following strategic impacts：
1. Assisting in the sustained growth of startups：
The relaxation will drive more growth-oriented and international startups to apply for listing on the Taiwan Innovation Board, in order to obtain the necessary capital for expanding overseas markets or scaling up and continue to grow; Gogolook is a typical successful example. Through the relaxation, there will be opportunities to nurture more startups like Gogolook in the future.
2. Promoting the flow of investment funds into startups：
By loosening measures to improve the liquidity of the Taiwan Innovation Board, more Taiwanese startups can be attracted to join the board to allow early investors of these startups to exit smoothly, and reinvest their funds in other startups in the future. It is expected that this trend will become a source of funding for startups, and create a positive impact on their future development.
3. Driving the clustering effect of innovative applications and funding：
As more Taiwanese startups choose to list on the Taiwan Innovation Board, related digital innovation companies will also form a certain clustering effect, which will attract the attention of domestic and foreign investors and further expand funding sources. In the future, it is expected that more international startups will be attracted and choose to list on the Taiwan Innovation Board; this will not only form a positive cycle, but also contribute to the internationalization of Taiwan’s capital market.
In the long run, the relaxation measures of the Taiwan Innovation Board are crucial for the development of Taiwan’s startups, as they will not only drive growth-oriented startups to go public, obtain the necessary funds for international expansion and accelerated growth, but also promote the flow of investment funds into startups, and attract foreign startups to choose to list in Taiwan through the clustering effect. This will provide important support for the internationalization and upgrading of Taiwan’s entrepreneurial ecosystem, and be conducive to accelerating the internationalization of the local capital market.