Venture capital for financing technology in Taiwan

This study provides empirical evidence of the venture capital activity in Taiwan. It also explains the differences in the perceptions of the venture capitalists and the investee companies vis-h-vis the extent and quality of the management assistance provided by the Taiwanese venture capitalists. In Taiwan, venture capital was formally introduced in 1984, and it has grown rapidly since then. At the end of 1994, the number of the venture capital firms increased to 29 with cumulative venture capital funds of NT$15 billion. The study shows that the Taiwanese venture capitalists actively solicit deals. They generally prefer financing ventures at the development stage. About one-fifth of their funds goes to the start-ups. The initial screening of ventures is based on the nature of the industry, and the five most important criteria for the evaluation of the ventures are return on investment, market need for product, the venture team's technical skills, the potential market growth and the liquidity of the investment. The investee companies in Taiwan depend on the venture capitalists only for about one-tenth of their fund requirement, and mostly for financing the development stage. Their choice of the venture capital firms is based on the venture capitalists' reputation and image, help in identifying consultants, flexibility in obtaining funds and assistance in going public. The venture capitalists in Taiwan provide management assistance to the investee companies, and they consider their involvement in the ventures as a significant contribution. However, the managerial involvement of the venture capitalists is considered. Copyright (C) 1996 Elsevier Science Ltd