Corporate venture capital (CVC) is playing a more important role in start-up investment than before, as big companies want partnerships with start-ups to raise their game or to find targets with solid returns, Taiwania Capital Management Corp (台杉投資管理) said yesterday.
Among the 729 investments, worth US$2.3 billion, in local start-ups from 2015 to August this year, CVCs led with 414 cases, or 52 percent of the total, higher than the traditional venture capital (VC) at 48 percent, the National Development Fund at 17 percent and foreign investors at 14 percent, Taiwania’s white paper showed.
“In 2010, VCs did most of the investment in start-ups and CVCs were not known to many people. But now, corporate funds have become an important support for them,” the white paper’s author Simon Fang (方頌仁) said at a forum in Taipei.
That reflected the corporate need to find good targets for solid financial returns amid a low-interest-rate environment, as well as a strategy to employ emerging companies’ technology, mindset or solutions to upgrade corporate businesses, Fang said.
Contract electronics manufacturer Wistron Corp (緯創) and contract chipmaker United Microelectronics Co (聯電) have respectively invested more than US$300 million and NT$20 billion (US$653 million) in start-ups over the past 10 years, the report said.
However, CVC investment has its shortcomings, as most corporate funds come from local technology companies and the competition between them is quite tense, Fang said.
“Once a start-up is invested in by a technology firm, it is difficult for it to set partnerships with other firms in the same business, as everyone will consider the young firm as part of the rival’s business,” he said.
“If you [start-ups] do not have your own clients, markets and networks, it is better to stay away from CVCs, or you will be easily affected by the big investors and find it hard to expand,” Taiwan Institute of Economic Research (台灣經濟研究院) deputy director Eric Fan (范秉航) said.
The amount of money invested in local start-ups continued to grow from US$434 million in 2015 to US$540 million last year.
Overall, with the average amount per investment totaling US$2.9 million, Taiwanese investors are still conservative compared with their foreign peers, he said.
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