Members of the Asia Pacific Economic Cooperation (APEC) forum yesterday urged governments in the region to develop healthy venture capital markets to help sustain regional technology growth.
The speakers, who have been in Taipei for the past two days, also cautioned that these markets need supervision by experienced government bureaus.
Attorney Paul Hsu (
Hsu said that between 1985 and 1991, the Executive Yuan started a small number of seed funds to help spur investment in the local information technology sector. Since 1985, those funds have grown into full-fledged venture capital investment portfolios funded by Taiwan's industrial sector.
"As of February ... the number of those venture capital enterprises has increased to 161 with an aggregate capital stock of NT$109.4 billion," Hsu said.
To get venture capital from portfolios into the pockets of small companies, investment companies needed the freedom to operate, said Morgan Stanley Dean Witter-Asia Chairman John Wadsworth.
He said the very words "venture capital" explain the amount of risk associated with such funds, and that the term was coined to attract "people with wacky ideas who were looking for some start-up money."
Wadsworth added that the investment banker's role should be to find the best kind of investment money available for a new com-pany. He said that many companies are unprepared for the amount of outside management that comes in after an initial public stock offering, when large fund investment personnel take a closer look at company accounting and business operations.
Wadsworth also warned that there are a large number of investment firms out there who may not be able to help manage new company growth properly.
Internet entrepreneur Christine Hsu (許清美) said Wadsworth's point about finding the right investment partners resonated with her. She attended the APEC meeting hoping to find information helpful to her start-up, www.oriented.org, a Taiwan portal geared towards the international business community.
"I was surprised to hear that a lot of the Web incubators and `angel' investors don't really know themselves what they're doing," Hsu said.
She said one of the most important considerations for her company in its next phase of development is to find investors who can help manage a new company's growth.
Hsu said her Web site started from a group of partners who funded it out of their own pockets, but in order to grow into a regional portal, the company needs outside funds.
US Small Business Administration senior policy advisor, Saunders Miller, said the need for initial start up money for companies such as Hsu's comes from venture capital companies or government sponsored investment companies.
Miller said that initial start up money under US$250,000 usually comes from "the three F's -- family, friends and fools."
But beyond US$250,000, small companies need other investment sources.
That's where the role of government comes in to develop seed funds or other kinds of venture capital.
But Miller cautioned governments against taking on risk in starting or sponsoring such investment funds. He said that private investors must risk losing their capital first before the public sector does.
Miller suggested countries with less developed venture capital markets work with and learn from nation's with more experience.
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