TLDR

The Stars Have Aligned, Finally

Nearly a decade ago, I took a leap of faith and went all-in on a startup opportunity in Taiwan. Fueled by a fascination with founder stories and a passion for building something meaningful, I embraced every challenge that came my way, ready to do whatever it took to make it happen.

Let’s just say my story didn’t have the fairytale ending I had envisioned. After all, 9 out of 10 startups don’t make it past their first year. But what I gained was invaluable: one of the steepest and most transformative learning experiences of my life.

Fast forward to today, and the landscape couldn’t be more different. What once felt impossible is now within reach. The tools, fundings, talents, and networks we only dreamed of are now at our fingertips (or at least, closer 🤏)

After attending Meet Taipei 2024, Taiwan’s premier startup exhibition, one takeaway stood out loud and clear: “We are finally on track to build incredible things, right here in Taiwan.”

Linking the Past, Present and Future

In my recent LinkedIn post, I outlined three key trends shaping Taiwan’s startup ecosystem (the “Future”, also illustrated in the images above). Here, I want to add more depth and perspective, but first, let’s set the stage with some eye-opening stats of the “Present”:

The 🤦 Stats

• Market Size Disparity: According to IDC, Taiwan's software market is projected to hit $4B by 2027. In contrast, the U.S. will reach $177B—44 times larger. While population differences (Taiwan: 24M vs. U.S.: 345M) explain part of this gap, Israel’s software market ($58B by 2027) proves that a small population (9M) isn’t necessarily a limitation.

• Valuation Gaps: In October 2024, TSMC achieved a trillion-dollar market cap, becoming the world’s 10th most valuable company. By contrast, Taiwan’s largest software company, SYSTEX, is valued at $1B—a 1,000x difference.

• Investor Confidence: TSMC’s 2024 P/E ratio stands at 26, while SYSTEX is at 19. For comparison, Microsoft’s P/E ratio is 34. The historic P/E ratio trends for SYSTEX (in the chart below) indicate subdued investor confidence in Taiwan’s software sector.

Together, these numbers paint a stark picture: Taiwan’s software industry struggles to keep up with its booming semiconductor sector. While startups extend beyond software, the software industry’s agility and lower capital requirements make it particularly suited for SMBs aiming to thrive in AI-driven markets.

Adding this up, we have a depiction of the software industry and market in Taiwan, where things seem a bit gloomy especially compared to sky-rocketing semi-conductor industry. While startup is definitely not limited to software, there is consensus that software business is generally less capital intensive and moves fast and nimble, all fitting into the circumstances of SMBs to make quick wins in the fierce AI arena.

Why the Struggle?

Based on a decade of observations of the “Past”, here are three key factors holding back Taiwan's software ecosystem:

• Software talents in Taiwan are DAMN cheap (undervalued) -

  • AI engineers earn ~$30K annually (Source: Cake) compared to ~$150K on average in the U.S.

  • This suppressed pricing, combined with abundant talent, drives a culture of high customization and project-based work. Startups often focus on linear, service-based growth instead of scalable product development.

  • Founders frequently lament this norm: “Less product, more projects.”

• Weak product marketing and packaging - Without strong product development, marketing efforts falter. Startups miss the chance to encapsulate value into products, undermining efforts to scale and compete globally.

• Limited Funding - While the government has pledged $338M for AI startups over the next decade, this pales in comparison to the $181M allocated to semiconductors in a shorter time frame. This funding gap leaves startups reliant on project-based outsourcing just to stay afloat.

A New Horizon at Meet Taipei 2024

Despite these challenges, there’s optimism on the horizon. The government, investors, and startups are finally aligned, creating a unified vision for Taiwan’s future. Here are the main themes that emerged from the event:

• AI Power

  • Taiwan is positioned as an “AI Foundry,” combining its hardware strength with software innovation to lead the global AI wave.

• Tech Power

  • Startups are leveraging Taiwan’s established hardware ecosystem to scale big and innovate faster by standing on the shoulders of industry giants.

• Global Power

  • For startups facing local limitations, global expansion is no longer optional—it’s essential. As one founder put it during the event: “If a place isn’t working, you should leave.”

The following conversation that took place at the event was enlightening:

Surely not what I would hear 10 years back!

Taiwan's startup ecosystem may face unique challenges, but the alignment of government policies, capital, and entrepreneurial vision is unlocking unprecedented opportunities. With the right strategy and focus, the path forward is clear: aim high and build boldly.

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