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Where are all the Thai startups?

Hi everyone,

Time flies and we are now coming to the end of 2022! A lot of exciting things had happened this year. So far, we have closed an apt number of 22 investments in 2022, growing our APAC portfolio to 87 amazing startups! We also had our bi-annual APAC Summit 8.0 in November, bringing together the best that innovation has to offer. This is the first fully in-person event we’ve had in 2 years, with over 1,100+ total registrations for the 1-day event.

Our portfolio companies, namely Decentro, FlexOS and Antbuildz also have some fantastic news to share. We are proud to announced that Decentro, which helps companies enter the fintech market by deploying its APIs, has raised $4.7 million in a Series A round led by Rapyd Ventures. We are happy to partner with FlexOS, a hybrid work platform, to release a report on the State of Hybrid Work in Singapore, surveying what employees are looking for from their hybrid workplace and how employers can strengthen their company culture. Lastly, Antbuildz, a construction equipment rental platform, has published an article on the Advantages of Embracing Digital Transformation in Construction Equipment Rental.

That’s a wrap for 2022! Wishing everyone a very happy holiday, and we look forward to another great year with our partners, vc friends and founders!

Best regards,

Yanisa Suratpipit

Plug and Play Ventures

Where are all the Thai startups?

Prior to the tech crash in 2022, as valuations in the US and Europe are getting more and more expensive, and less and less linked to fundamentals, venture capitalists are eagerly seeking investment in alternative, developing economies - Southeast Asian countries. The region’s digital and tech industries have seen a substantial boom over the last few years. In fact, as of 2020, tech startups in the region collectively have a valuation of $340 billion in 2020, with the number expected to triple by 2025.

With its recent growth in emerging industries such as fintech, coupled with its highly digitalized population, some would say Thailand makes an alluring market for tech investments. The past years see growth-stage companies, Series B and above, raising record-breaking funding rounds. Line Man Wongnai, Flash Express and Ascend Money are some of the startups that have emerged triumphant in recent years and are now part of the elusive ‘unicorn club’. We also see Pomelo - a Thailand-based fashion commerce startup - planning to either raise a Series D or even potentially, an IPO. So, are Thai startups becoming more investible or are these portrayals just an illusion?

The Neighbours

Despite seeing increased funding and the number of new tech startups multiplying in the past few years, Thailand is still trailing behind. The growth of its tech ecosystem remains stagnant at a premature stage when compared to not just acclaimed startup hubs, but also to regional neighbours such as Singapore and Indonesia. Did you know that a decade ago, less than 5 Thai startups were funded? That number has since increased to 46 in 2019, with a slight dip to 27 in 2020, climbing to a commendable recovery to 58 in 2021. Nonetheless, the number is severely lacking compared to that of Singapore, where the number of fundings is easily tenfold: at 527 in 2020 and an impressive 747 in 2021, respectively. Today, many early stage startups in Thailand are still struggling to secure follow-on investment, signaling that they do in fact have a hard time attracting funding.

The Global Startup Ecosystem Index 2021 by StartupBlink, the world's most expansive startup ecosystem map and research center, presented the Top 100 Countries on the World's Best Startup Ecosystem. Thailand ranked 50th in the world, 4th in ASEAN after Singapore (ranked 10th), Malaysia (ranked 40th), Indonesia (ranked 45th) and Vietnam (ranked 49th). As Southeast Asia pushes to establish itself as a global hub for technology and innovation, with Singapore, Indonesia, Vietnam leading the pack, Thailand is still playing catch-up.

Thai founders are grappling with many of the same constraints as those in other Southeast Asian countries such as skilled labour shortages, relatively few formalized investment channels, and a complex regulatory framework that is an encumbrance to startups and VC firms. Be that as it is, there are more to Thailand startup ecosystem challenges than meets the eye.

So what are the underlying issues plaguing the Thailand startup ecosystem then?

Unsupportive regulatory system driving founders away

An array of Thai startups are migrating to other countries, such as Singapore, where the regulatory system isare much more supportive of the entrepreneur ecosystem. For one, their tax legislations are much more attractive to secure investors, whereas Thailand lacks these investors' funding to support early-stage startups. Given that most of the capital is concentrated in the growth stage, only a few survive and make it to that stage. Many Thai startups still remained at Series A or earlier funding levels, thanks to the country’s poor tax incentives and red tape regulations. According to Techsauce, as of 2021, only 14 startups received Series B and above fundraise. As a result, those that couldn’t raise funds to further scale their business could either choose to remain in Thailand to die out or to move and incorporate overseas.

There is indeed a shortage of domestic investment funds for Thai startups as the country’s regulation lacks incentive for VCs. Foreign VCs are not allowed preferred stock or a capital gains tax waiver when they invest in Thai startups. Only those domestic VCs, which are far and few, are eligible.

CVC Partnership - a blessing or a curse?

This brings us to the next point - Thailand’s sources of capital, which is a rather unique one. This largely comprises local corporate venture capital (CVC) arms, conglomerates, and the government. Big banks, telecom operators, industrial conglomerates and agriculture companies are all pouring their resources into forming innovation units and investing out of their CVC arm. As corporations look to develop new capabilities and technology to tackle disruption, many are partnering with startups to build on their competitive advantages and to attract new customers. Having a stake in a startup means that rather than simply providing funding, CVC would also work closely with them on pilot or proof-of-concept projects to co-develop solutions.

These CVCs and conglomerates which dominate and control the market hold the golden key for many B2B Thai startups. Aside from their deep pockets, they also have the influential connections much required for many local startups to secure clients and partnerships. In fact you are likely to find CVC in most, if not all, Thai startup’s capitalization table. According to Techsauce, 2 most active investors in Thailand, as well as 6 out of the top 10, are CVCs. This proves to be advantageous to many local startups raising Series A and B rounds who successfully secured CVC fundings. However the capital flowing to the earlier stage ventures are still rather minimal.

Nonetheless, as a large part of Thailand’s innovation and capital become mostly corporate-focused, one might argue that startup's innovation isare being suffocated by corporates. Often, corporate-backing tends to come with strings attached, which proves challenging for founders to move quickly and push out new products. VCs, funded by limited partners who are relatively uninvolved, tend to leave founders alone to do as they please. CVCs, on the other hand, are part of and financed by big corporations. Like VCs, they might have started out with a similar promise of complete autonomy. However, unlike VCs, not-so-soon after their head offices would eventually start to get involved and dictate the fund manager on what and who they can do business with. The main reason innovation is arguably disproved by the corporations is because every step undertaken needs to be backed by the cold, hard numbers.

CVCs are impairing the ecosystem, be it on funding, or on the founder's effort to build something new and creative. Ultimately, start ups have to decide if they would rather receive funding from CVCs at the expense of their freedom to conduct their business, or to remain as outsiders looking in.

Competition for talent amid brain drain

Last but not least, there is a lack of appropriately skilled workers in Thailand. The country is running out of young and skilled workers as it faces low birth rate and a rapidly ageing population. Over half of its total domestic workforce has an average age of 40, higher than other regional countries such as Vietnam, Myanmar and Indonesia. What’s more, the current education system is inadequate to produce sufficient graduates in science, technology, engineering, mathematics (STEM) fields to meet the industry demand. This is hurting the country’s innovation and technological progress.

To make the matter worse for startups, corporate activities are sucking up what’s available in an already limited talent pool. As the tech ecosystem competes for talents from data engineer to business development, startups are frantically raising funds to bid and win over the skilled talents. Corporate innovation units only aggravate this labour scarcity. Corporate jobs makemakes for an alluring career choice for the young and risk-averse tech workers who want to work at the forefront of innovation but also prioritize financial/job security given the current Thai economy. With the country’s ambitious push to become Thailand 4.0, to develop into the region’s innovation and knowledge-based digital hub, entrepreneurs looking to kickstart a local business may however find the ecosystem to be barren, empty of resources of capital and talent that are mostly outflowing towards corporate.

Hence, putting up barriers against foreign entrepreneurs and talent doesn’t protect local startups, it’s actually hurting them. A trend commonly seen in Thai startups includes local founders teaming up with foreign founders, with the likes of Eatigo, Pomelo, Flash express, AppMan and many more, balancing both globalization and localization. This tends to form a solid founding team with outstanding products, leading to a differentiated solution that has great product market fit and is still suited to the nature of the domestic market. What would have been a better option - a competitive but dynamic ecosystem pertaining both local and foreign founder teams; or a stagnant but sheltered local startups ecosystem inhibited by the country’s corporate giants?

Fortunately, amidst the intensifying competition within the region to create new industries and technology, the government has recently introduced a new visa program in September this year to attract foreign talent. The 10-year visa is targeting professionals belonging to more than 10 industrial or technological categories including electric vehicles, electronics, medicine and defense. With this visa, companies no longer have to abide by the rule of one foreign employee to every four Thai nationals hired, a regulation currently in place to protect the domestic workforce. The exemption is intended to make the new visa scheme applicable for both SMEs and startups. This could potentially give Thailand the much needed edge to win over skilled talents against regional neighbours like Singapore who has stricter foreign workforce policy.

What’s next for Thai startups?

Thailand shows great potential to transform into a regional tech hub, but one that may have corporates overshadowing startups. How can we fulfil the ambition of making Thailand into a regional tech startup hub then?

To achieve so, Thailand needs to attract foreign venture capital funding and build a community of global entrepreneurs and tech talents. Thankfully, small but significant changes are already underway. In March 2022, the government announced that it will exempt income tax for investments in Thai startups both directly or indirectly through individuals, companies, or through corporate venture capital. They expected the newly implemented regulation to boost funding for local startups up to 320B Baht over the next 4 years, creating at least 5,000 local startups. It is noteworthy that the move will not translate to foreign investment immediately shifting to Thailand, but it is a step in the right direction to help startups secure more capital support and hopefully catch up with the neighbouring countries.

More importantly, Thailand needs to find the right balance to the ecosystems, where startups can agilely navigate its way around the large corporations and co-exist peacefully



As an in-house venture capital, our goal is to fund the teams that are building the defensible businesses of the future. By leveraging our capital, our network of VCs, and our corporate partners, we give our portfolio companies an added advantage. Join our platform today!

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