Venture capital companies aren't bothered if they can't get listed on the stock market; it simply deprives them of another source of funding.
But with so many other sources blocked as well, the pursuit of overseas funds is becoming an attractive and necessary option.
"We don't really care whether venture capital companies can get listed companies on the Over-the-Counter market," said Clark Su (蘇拾忠), chairman of the Venture Capital Association (創投公會). "What concerns us is that by keeping the current tough regulations on banks' investment in venture capital companies, the finance ministry is driving away companies that are seeking funds."
Banks are currently only allowed to invest 5 percent of their capitalization in venture capital firms. The Ministry of Finance (
What's more, Su doesn't expect to see the regulations loosened soon following last week's scandal. Last Thursday, at least four legislators were reported to have strong-armed state-owned banks into injecting money into venture capital companies in which the respective legislators held a stake.
The finance ministry has refused to consider allowing venture capital companies to get listed on the OTC exchange before the end of June.
"Most high-tech companies that venture capital companies invest in are already listed," Finance Minister Paul Chiu (邱正雄) said recently.
Su agrees. "It makes no sense for venture capital companies themselves to get listed -- it's repetitive," he said.
But that misses the point. "No listing is no big issue," Su said. Internationally speaking, there are not many cases where venture capital companies have sought a listing.
"The only reason for supporting this is because venture capital companies here cannot receive as much money from banking and insurance industries and pension funds as they do in the US. It [listing on the OTC market] can at least attract some retail investors' money," he said.
According to the Securities and Futures Commission (
But the concern is groundless, according to Su. "Every venture capital company in Taiwan is making profits -- it is just the degree of the profits that differs," Su said.
On average, the approximately 150 venture companies made a 20 percent profit in 1999, according to the finance ministry. The companies have a total capital of NT$100 billion.
Meanwhile, of that total capital, about 30 percent is invested in start-up high-tech companies, Su said. The proportion is on a par with the equivalent US investment in this field, according to Su. Further, he added, 95 percent of proposals are denied funding, which goes to show "we are very picky about projects."
According to Su, companies generally choose to invest in high-tech projects that have key personnel hiring and unique ideas; sometimes they help with technology transfer and management.
Tekram Venture Capital Corp (
As well as listing restrictions and bank investment caps, the recently passed "Statute for Upgrading Industries" (
The exemption will likely slow down their growth rate by depriving them of 30 percent of their funding resources, according to Su. "But it [the removal of the tax exemption] takes away investors who are only interested in getting tax credits, rather than promoting the high-technology sector," he said.
According to Su, 60 percent of the funds for venture capital firms in the US derive from financial sector and pension funds. In Taiwan, that figure is less than 10 percent.
The Cabinet-level Council for Economic Planning and Development (經建會) has expressed support for the development of venture capital companies by proposing that four government funds be allowed to invest in such companies.
But the current situation at home is encouraging more and more venture capital companies to go overseas in search of funds. According to the Liberty Times, HoTung Venture Capital Corp (和通), WK Technology Fund, and HanTech Venture Capital Corp (漢通) have already followed this path.
"It's like watching kids running away from home," said Hu Chung-ying (
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