Eight years ago, Wu Jong-shinn (吳宗信), a mechanical engineering professor at National Chiao Tung University (NCTU) in northern Taiwan’s Hsinchu City, launched an ambitious project to develop a homegrown rocket capable of sending satellites into orbit. Involving professors and students from a number of Taiwanese universities, the scheme quickly achieved impressive results, producing several rockets capable of reaching ever higher altitudes. In 2012, the group cemented its progress by establishing NCTU’s Advanced Rocket Research Center (ARRC).
Wu’s current goal is to build a craft capable of reaching the Karman line, the boundary 100 kilometers above the Earth’s surface that marks the beginning of space. While this task requires overcoming a number of technical challenges, the greatest difficulty that the ARRC faces is not related to expertise but funding.
Amid fierce competition for resources in the nation’s research community, the government decided in 2014 to stop providing grants to the center. Faced with a considerable funding shortfall, Wu feared that he would have to suspend the project. It was at this point, in the fall of 2014, that he was introduced to the possibility of using the Internet to solicit donations from the public. “Crowdfunding is helping us overcome our budgetary issues,” he says. “We likely wouldn’t have been able to move forward without the support we’ve received through this channel.”
The professor was encouraged to reach out to netizens by Lin Ta-han (林大涵), the founder of Backer-Founder Co., a local consultancy that provides promotional and technical services to crowdfunding projects. Backer-Founder designed and built a new website for the ARRC that illuminates the center’s goals. The unveiling of this site in March 2015 was designed to coincide with the launch of SciMu, a crowdfunding platform for scientific projects established by PanSci Knowledge Corp. that is the only one of its kind in Taiwan. The ARRC’s fundraising campaign was the first to appear on SciMu, while the promotional website designed by Backer-Founder can also collect donations. As a result of these efforts, the ARRC had garnered more than NT$7.38 million (US$227,080) from 2,233 netizens by mid-December last year, and Wu is now hopeful that his team will be able to launch a rocket capable of reaching the Karman line this spring.
Members of Shu-Yi & Dancers perform in southeastern Taiwan’s Taitung County. The nonprofit troupe received more than NT$540,000 in financial support after posting a fundraising campaign on zeczec, a prominent local crowdfunding platform. (Photo courtesy of Chen Chang-chih)
Unlike e-commerce platforms or brick-and-mortar stores, crowdfunding sites introduce projects in the early stages of their development, offering artists, entrepreneurs and scientists a platform through which they can gain enough funding from the public to realize their visions. In turn, backers typically get some form of reward, such as a completed product.
Crowdfunding has become a global phenomenon over the last five or six years since the launch of major U.S.-based platforms such as Kickstarter and Indiegogo. The first Taiwanese sites of this kind, typically small startups comprising a handful of people, were established in 2012. Since that time, large enterprises including realty brokerage Sinyi Realty Inc. and recruitment agency 104 Job Bank have created such platforms.
One of the more recent additions to the sector in Taiwan is DIT Funding. The site was launched in February last year by DIT Incubator & Venture Management Inc., a joint venture among five Taiwanese gaming companies. “We understand the needs of startups and the difficulties they face when trying to develop a new project,” says Rosa Fu (傅慧娟), deputy general manager of DIT Incubator & Venture Management. “That’s because the founders of the five companies behind DIT were quite young when they started their own businesses.”
According to Backer-Founder’s Lin, more than 15 Taiwan-based crowdfunding platforms have been established thus far. He estimates that in total, these sites had helped around 900 projects take off and garnered roughly NT$800 million (US$24.6 million) from netizens by the end of last year. The vast majority of that amount was collected through FlyingV and zeczec, the two pioneers and biggest players in the sector locally, notes Lin, 28, who also co-founded FlyingV.
As a rule, if a campaign successfully reaches its fundraising goal on a crowdfunding site, the platform receives a 5 percent commission, while another 3 percent goes to the operator of the online payment system used to process the contributions. If a project fails to meet its target, no money is collected from the backers. Websites for nonprofit projects can have different rules, however. SciMu, for instance, allows proposers to hold open-ended campaigns and does not require them to reach their targets in order to receive the promised funds.
Lin says few crowdfunding sites in Taiwan have turned a profit thus far, partly because the competition is already fierce. “Project proposers are now looking to foreign-based platforms as well as local ones. Plus, many people are choosing to create their own individual crowdfunding websites,” he says. “So while more and more netizens are contributing to campaigns, local platforms have seen relatively little growth in the past two years.”
As the nation’s crowdfunding infrastructure has evolved, the practice has become increasingly popular among artists and social movement organizers in addition to entrepreneurs. For instance, nonprofit dance troupe Shu-Yi & Dancers, which has been giving free street performances around Taiwan since 2011 with the aim of bringing modern dance to the masses, collected more than NT$540,000 (US$16,615) in just one and half months on zeczec in the summer of 2014.
“Emerging talents in Taiwan often face difficulties when seeking funding for their projects. The value of zeczec lies in its ability to provide these people with a channel through which they can get enough money to develop their ideas,” says Quake Hsu (徐震), a co-founder of the site. According to the thirty-something, he and his two fellow co-founders are not currently receiving any remuneration for their work on zeczec and all have other jobs.
Backer-Founder Co., which was established by Lin Ta-han, middle row, second left, is the first Taiwanese firm set up to provide consultancy services to crowdfunding projects. (Photo courtesy of Backer-Founder Co.)
Regardless of whether local platforms were established for altruistic or financial reasons, the sites have opened up a crucial new fundraising avenue for creative talents and young entrepreneurs. “Without crowdfunding, I wouldn’t have been able to collect enough money to launch my projects,” explains Elton Chang (張之耀), co-founder and chief executive officer of startup Molu Technology Industrial Co., which designs audio consumer electronics.
Among the several products that Chang has managed to complete with the help of online backers is a battery-free micro audio amplifier for use with headphones. Called Aqua, the gadget, which he claims is the lightest of its kind in the world, received funding totaling more than NT$10 million (US$307,700) from netizens, first through FlyingV in February 2015 and then later, with help from Backer-Founder, through Kickstarter.
An initial version of the product was delivered to the FlyingV backers last summer. However, the devices had some issues due to a minor chip-related defect. In view of this, Chang has decided to send each of these supporters a properly functioning replacement, even though he will take a loss on the project as a result. “When it comes to branding, initial profits shouldn’t be your primary consideration,” he states. “I don’t expect to make money on the products I finance through crowdfunding. What I care about is making sure they satisfy their users, which will help establish my brand.”
By offering the ability to simultaneously market new concepts and gain funding for their commercialization, crowdfunding platforms are fundamentally changing how startups develop. “Crowdfunding is a great pre-marketing tactic,” DIT’s Fu says. “If you can win significant attention by telling a good story about your product in the early stages of its development, you’ll often find businesses approaching you to express their willingness to place orders.”
Of course, with crowdfunding there is an inherent risk that projects will fall short of expectations, experience significant delays or fail completely. Hsu notes that he tries to prevent such situations from occurring by carefully assessing proposers’ capabilities to execute their goals, although zeczec, like all other platforms, has a disclaimer noting that it is not responsible for any such failures. “I’ve screened out many proposals, but we’ve naturally received some complaints from backers,” he says.
While netizens must accept a certain amount of risk when contributing to crowdfunding campaigns, the practice is likely to experience substantial growth in Taiwan over the next several years, particularly in light of changes to the regulatory environment. In early 2015, the Financial Supervisory Commission (FSC) approved the practice of equity crowdfunding, enabling members of the public to fund private businesses with capital assets of less than NT$30 million (US$923,080) in return for equity. Five securities companies had obtained permits from the FSC to run equity crowdfunding sites by December last year, through which startups are permitted to raise up to NT$15 million (US$461,540).
The equity platforms are set to further expand the influence of crowdfunding in Taiwan, though Backer-Founder’s Lin believes the practice is already having a noticeable impact on society. “Creative projects are now being realized one after another thanks to crowdfunding. Crucially, some of these ventures are ideas that initially seemed unlikely to win support, which makes people think, ‘If those projects can succeed, why can’t mine?’” he says. “This trend will encourage more people to chase their dreams. That’s why the growth of crowdfunding in Taiwan is so significant.”
Write to Oscar Chung at mhchung@mofa.gov.tw