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Interview conducted & written by Misha Lu, Editor of TechTaiwan.

Hive Ventures, founded in 2019 by three Taiwanese entrepreneurs, has been one of the few Venture Capital firms in Taiwan dedicated to early-stage startups, with a particular focus on companies that make artificial intelligence (AI) accessible to everyone. Yan Lee, a founding partner, sat down with TechTaiwan to share the VC’s vision as well as his observations of Taiwan’s startup investment scene and data economy.

Can Taiwan nurture seed-stage startups all the way to exit?

According to Yan Lee, Hive Ventures is filling a crucial gap left open by the country’s uneven investment scene. Despite the fact that Taiwan has a lot of capital, few go into early-stage startups. Instead, most of the fundings have been concentrating on two ends: on one end, Taiwan has approximately 200 incubators and accelerators ready to nurture seed-stage teams. Most of them are government programs. On the other end, big investment funds as well as industry leaders all have plenty of capital, but their investments have been either conservative or driven by their own strategies.

Yan Lee, Founding Partner of Hive Ventures. Source: Hive Ventures

Industry leaders, such as Taiwan’s largest electronics contract manufacturer Foxconn Technology Group, or Quanta Computer Inc., the world’s largest manufacturer of servers, are often better at investing or acquiring companies that have already made it through early series A, B rounds of funding. In addition, they prefer to invest in proven technologies beneficial to vertical integrations or pose serious competitions in the future. As Lee puts it, rather than joining the race to the top with startups, most of these big investors prefer to wait at the finishing line, where risks are significantly lower.

As a result of this pattern, Taiwan has seen very limited success in early stage startups, while big companies continue to drive the stock market. In response, people have also been raising doubts regarding Taiwan’s prospective as a start-up hub: can the Taiwanese environment really nurture seed-stage startups all the way to exit?

That’s where Hive Ventures enters the picture. The founders of Hive Ventures, including Lee, especially recognize the great potential of Taiwan’s software industry. As the continuous progress of AI requires ever closer integration of software and hardware, it is of great importance for Taiwan’s software sector to catch up with its globally renowned hardware industry.

Currently, semiconductors and electronic devices are already Taiwan’s core strengths, and its ecosystem enjoy great support from Taiwan’s dominant hardware players. In contrast, the software which these devices will ultimately carry need the support of funds like Hive Ventures. The capital-light and agile nature of the software industry also suits VCs better.

“Taiwan has a unique understanding of the hybrid world”

In fact, when it comes to AI, Hive Ventures is the only VC in Taiwan focusing on the role of data in AI implementation, and as data has become not only the fuel of technological transformation but also an infrastructure of modern economy, Lee sees Taiwan’s significant advantages in a digital world increasingly underpinned by hybrid cloud – a symbiosis of public and private clouds.

The growing demand for edge computing in many application scenarios, from smart manufacturing to smart healthcare, has given Taiwan a particular opportunity as the country is the world’s largest supplier of both cloud and edge servers. “We have engineers familiar with both architectures and build for both,” said Lee, “Taiwan has a unique understanding of the hybrid world.” In contrast, according to him, the United States places more emphasis on cloud than edge.”.

As hyperscale cloud service providers like Google and Microsoft are turning their attentions to Taiwan, Lee also sees its significance for Taiwan’s hybrid cloud industry and its data economy. Last year, Google confirmed its plan to build a third data center in Taiwan, while Microsoft’s first data center in Taiwan is scheduled to enter operation as early as this year.

This close proximity to the decision makers of cloud infrastructure, according to Lee, provides an opportunity for Taiwan to form a Silicon Valley-like innovation hub oriented around these data administrators. However, Lee perceives the development of private cloud, a major enabler of industry 4.0, to be a priority for Taiwan, complementary to the public cloud sector dominated by the hyperscalers. In fact, private cloud development, with its difficulty to scale up, is an area where public cloud service providers often hesitate to enter, leaving a gap open for Taiwanese players.

Finally, with Taiwan on the path to obtain a GDPR (General Data Protection Regulation) adequacy status from the European Union, Lee believes it will further strengthen Taiwan’s competitiveness in global data economy, as the status will align Taiwan’s understanding of data to global standard, allowing Taiwanese industry to speak a common language with the rest of the world when it comes to obtaining, processing and storing data.