The role of the startup community (on top of the role of company leadership) in making and breaking a startup is especially apparent in Thailand. Given its traditional and hierarchical culture, a top-down mentality has diffused across corporate Thailand, and has stifled startup growth. Just as the problem is top-down, so to must the solution be top-down. Entrepreneurs and young talent must be empowered by their peers and supervisors, by investors and mentors, and by the government. Is the Thai startup community up to the task?
Over the past two years, there has been a significant rise in angel investment and particularly corporate investment in Thailand. In 2016, Thai startups raised funds of at least US$86 million, including the country’s three biggest deals yet led by TenCent’s US$19 million investment in e-book startup Ookbee. These figures are still dwarfed by the level of investment in more established markets like the U.S., Israel, and China, which number in the US$ billions annually, but are still impressive relative to what they were a few years prior. To give a sense of the exponential investment growth, from 2012-2016, Thailand has grown from having less than 3 funded startups to over 75 funded across e-commerce, fintech, food & restaurants and more.
500 Startups, dtac Accelerate, and InVent are among the most well known and active VCs in Thailand, but the true growth in capital raised has come from the Corporate Venture Capital (CVC) arms of Thai companies as direct investors as well as limited partners. This corporate investment has occurred over the past several years in waves across various industries: telecom (2012-2015), banking (2016-2017), and most recently construction, energy, insurance, and real estate.
In terms of foreign investment, the language barrier does make it more difficult to communicate with foreign investors who don’t speak Thai. Regardless, there has been a massive increase in foreign investment from other Asian countries, most notably China. In addition to TenCent’s sizable investment in Ookbee referenced above, Chinese ecommerce giant JD.com signed an agreement in September 2017 with Thai retail conglomerate Central Group to invest up to US$500 million on the establishment of two joint ventures in Thailand covering online sales and fintech services. Apart from the impressive VC presence, the accelerator space in Thailand is still early in its evolution, with only a handful of accelerator programs established in the country. Interestingly, Kanchanasuwan Gling, whose company Zpring is in its early stages, commented that not all Thai startups are even concerned with raising capital, and some have taken the bootstrapping self-funding approach by choice as opposed to by necessity. According to Gling’s logic, unless these companies are in a growth phase, the cost of living in Thailand is low enough that not so much capital is needed to sustain their business.
Experienced mentors and advisors are greatly lacking in Thailand, and most founders have needed to teach themselves the knowledge and skills to build their businesses. Many entrepreneurs learned about business and fundraising in university or master’s programs, or even from YouTube videos. Hopefully the increase in investment and Corporate Venture Capital will translate to a corresponding increase in capable and willing mentors. Because young Thai workers have a top-down mentality instilled in them, they require seasoned business professionals to school them and help reprogram them before they can begin to operate as entrepreneurs showing initiative and taking calculated risks.
Business and government are very connected in Thailand, and the Thai government has launched several longer-term projects tin an attempt to address the startup growth roadblocks detailed above.
In 2016, the government rolled out the Thailand 4.0 initiative, a broad “economic model that aims to unlock the country from several economic challenges resulting from past economic development models which place emphasis on agriculture (Thailand 1.0), light industry (Thailand 2.0), and advanced industry (Thailand 3.0).” Thailand 4.0 aims to transform the country into a high-income nation through an emphasis on R&D, science and technology, creative thinking, and innovation. The model also designates five priority clusters for innovation and startups, including Food Agriculture & Biotech Health, Wellness & Biomed Smart Devices, Robotics & Mechatronics, Digital, IoT & Embedded Technology, and finally Creative, Culture & High Value Services.
In theory Thailand 4.0 offers a long-term roadmap to get Thailand on track for increased startup growth, however this model is unproven and its ultimate impact questionable. The government is currently experiencing difficulty building awareness among businesses for this initiative, and several of the project goals have a deadline of 2032, an incredibly long timeframe especially in the context of startup development.
In addition to Thailand 4.0, the government announced a THB20 billion (US$604 million) venture fund in 2016 focused on startup growth, and has made use of its Startup Thailand platform to promote local startups and attract foreign investment. These demonstrations of increased government commitment are steps in the right direction, but are large scale top-down initiatives whose impact on individual companies will be hard to discern. The initiatives are also undermined by many of the other current government policies. From increased internet restrictions and censorship to investment laws precluding increased investment opportunities (e.g., as a general rule foreigners cannot hold greater than 49% of a Thai company’s stock and private companies in Thailand are prohibited from issuing convertible notes or bonds, effectively eliminating the key investment structure that VC firms use in their investments), the Thai government has a long way to go in creating a truly supportive environment for innovation and startup growth.