Venture capitalists want rules relaxed

The nation's venture capitalists yesterday urged the government to raise the ceiling on capital investments by financial institutions and to allow four state-run funds to invest in venture capital businesses.

Currently, local banks are restricted from injecting more than 40 percent of their capital into re-investments, including venture-capital investments, and can only take up a maximum 5 percent stake in venture-capital firms.

Paul Wang (王伯元), chairman of the Taiwan Venture Capital Association (創投公會) yesterday said such restrictions reduced the industry's capital-raising sources.

"A drain on sources of capital has seriously suffocated the local venture-capital industry," Wang told the 2004 Taiwan Venture Forum yesterday. The forum marked the industry's 20th anniversary of the establishment of the first venture-capital fund, in 1984.

In his opening remarks, Wang said that the venture-capital industry has made great contributions over the past 20 years, nurturing entrepreneurship in some 8,000 start-up high-tech companies through 227 funds, which have input NT$170 billion in total capital.

But he criticized the government's decision to scrap a 20 percent tax-break for venture-capital investments in 2000 as having driven private capital away from the venture capital market.

Richard Chen (陳仕信), chairman of Vincera Ventures (華鴻創投) -- a mid-sized venture capital group, concurred with Wang.

Chen said the government had gained NT$280 million in tax revenues each year since scrapping the tax-break, and that while the amount was insignificant to government coffers, it has been detrimental to the industry.

He further said that it's unreasonable for the government to prohibit venture capitalists from taking part in managing pension funds while investment-trust companies, which he considered to be similarly high-risk, are allowed to do so.

Chen, who is also vice chairman of the Taiwan Venture Capital Association, expressed the hope of holding talks with the managing committees of the four governmental funds, to outline venture capitalists' risk-control capabilities.

President Chen Shui-bian (陳水扁), a guest speaker at the forum, responded to calls for the government to allow four state-run firms to invest in venture capital businesses.

The Executive Yuan's Development Fund (開發基金) plans to initiate a NT$100 billion venture capital fund, 70 percent of which will be funded by the private sector, to make re-investments in early-stage high-tech entrepreneurs, he said.

By the year 2011, the government estimates that the Development Fund will have investments in 1,500 companies, creating a total of 25,000 jobs, the president said.

Others looked to opportunities across the Strait.

Ben Chang (張忠本), president of Hotung International Co (和通創投), further urged the DPP government to allow local venture capitalists to enter China's market.

Taiwanese venture capitalists are well positioned and capable of raising international funds by utilizing their China-related knowledge and financial expertise to benefit from the emerging venture-capital boom in China, Chang said.

Former vice minister of finance Yang Tze-kiang (楊子江) said the government should expand venture capitalists' business scope by placing as few restrictions as possible on their investment targets.

Currently, venture capitalists are only allowed to invest in early-stage high-tech companies.