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Fundraising by Start-up Businesses in the Capital Market

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Fundraising by Start-up Businesses in the Capital Market

Four years after President Tsai Ing-wen first advocated to “allow start-up businesses to gain access to the capital market more quickly,” the Financial Supervisory Commission (FSC) instructed the Taiwan Stock Exchange (TWSE) and the Taipei Stock Exchange to develop a plan for start-up businesses to enter the capital market earlier. In July 2021, the Taiwan Innovation Board (TIB) and Pioneer Stock Board (PSB) opened, signifying that the fundraising environment for Taiwan’s start-up businesses is one step closer to the fundraising heaven of Silicon Valley.

Since there are no complicated criteria for registering on the TIB or PSB, start-up businesses can raise funding more easily if they are on the board. Venture capital funds will invest in start-up businesses at an even earlier stage, improving the overall fundraising environment for start-up businesses in Taiwan.


One day in late December 2015, presidential candidate Tsai Ing-wen attended the 2015 Taiwan Investment Summit Forum hosted by the Taiwan Private Equity Association. In Tsai’s speech, she specifically mentioned “allowing start-up businesses to gain access to the capital market more quickly.” At the time, no one paid attention to the significance of Tsai’s “policy.” Five and a half year later, TWSE and the Taipei Stock Exchange rolled out the Taiwan Innovation Board (TIB) for listed companies and the Pioneer Stock Board (PSB) for registered companies, fully delivering the government’s policy from that time. 

Even though only one company is currently on the PSB, the opening of the TIB and PSB in 2021 was still a groundbreaking achievement. The establishment of these two boards that cater to the capital market for start-up businesses signified that the ecosystem of start-up businesses in Taiwan is getting closer to that of Silicon Valley in the United States. Maybe one day, the Taipei Stock Exchange will become the NASDAQ of Taiwan. 

The TIB and PSB allow companies that have not reached the developmental stage to be easily  “registered” or “listed” on the board. Companies with small amounts of capital, not yet dispersed equity, or small numbers of shareholders can attract more investors and investments and disperse their equity by being on the TIB and PSB, while the original shareholders can still operate their stocks. What is pioneering about TIB is that is uses valuation instead of pay-in capital as the criteria of entry. As for the PSB, there is almost no threshold for entry. Using “simplified” public offerings instead of traditional public offerings can save one year of time. Even though only professional investors are allowed to purchase the stocks, with relaxed criteria, qualified investors after the company is on the board will be at least 100 times more than before. 

In the past, start-up businesses could only raise funds by reaching out to angel investors, venture capital funds, or relevant businesses. Now if they are on the board, they can raise funds “publicly” from thousands or even tens of thousands of professional investors. As long as the company is in an industry with good fundamentals, and has clear future development, the opportunities to get funding can increase by tenfold. 

In addition, after a start-up company is on the board, its share price may go up if it has innovative technology, an innovative operation model, and praise from professional investors. Then for venture capital funds, which can only invest at a low share price, start-up businesses on the board will no longer be on their “target list.” Therefore, if venture capital funds want to earn investment gain from start-up businesses, they will have to invest before they are on the board. By the quickest estimate, a company can be on the board two and a half years after it is founded. Venture capital funds might find it hard to reject a capital injection invitation along with the recommending securities firms before the company is on the board, as there might be no more chances in the future. When venture capital funds start moving their investment timing earlier, other investors like angel investors, friends and family, or cooperating businesses will also move their investment timing earlier. Maybe an angel investment ecosystem similar to that in Silicon Valley will evolve in Taiwan. 

To improve the fundraising environment for Taiwan’s start-up businesses, the government amended the Company Act, breaking down regulation obstacles for entrepreneurs and start-ups; it stipulated tax benefits for angel investment, encouraging early investment by individuals. The National Development Fund set aside NTD 5 billion for angel investment to invest in start-up businesses. Now, the opening of the TIB and PSB will support the government to promote entrepreneurship and start-ups.

Since the amendment to the Company Act in 2018, non-par value stocks, preferred stocks, and convertible bonds, commonly seen in the start-up environment of Silicon Valley, could be legally traded in Taiwan. With various tax incentives for early investment and research subsidies specifically for start-ups, the local start-up ecosystem was getting close to that of developed countries. However, start-up companies still found it hard to acquire funds in Taiwan. Tax deduction for angel investment was available, but there were few angel investors. Many start-up businesses had to forgo their dreams when funding from their friends and family dried up. Now, the opening of the TIB and PSB fills in the last piece of Taiwan’s start-up ecosystem, and as it builds up a comprehensive ecosystem for start-ups in Taiwan, future development can grow exponentially.  

The success of TSMC dates back to two decades ago. If Taiwan wishes to maintain its key position in the global industry chain, continuous entrepreneurship is the only way. The government has always valued start-ups by actively implementing the 5+2 industry policies and designating the six strategy industries. While the National Development Fund set aside NTD 5 billion for angel investment, private funding injection into start-ups was still limited. Now the TIB and PSB will effectively attract abundant private funding and directly inject it into start-up companies. The daily transaction amount of Taiwan’s stock market is around a few hundred billion NTD. Just one ten-thousandth of that amount to support start-up businesses would be tremendously helpful. By opening a new board, guiding funding from the stock market into start-ups, and inviting everyone to participate in start-up investment, the entire fundraising environment can be improved, and would fulfill President Tsai’s industry policy. 

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