Thai­land’s Startup Ecosys­tem: Time to Take Off the Train­ing Wheels

Thai-American Business (T-AB) Magazine - - Contents - Writ­ten by: Paul Ark

One of the com­mon com­plaints I hear about Amer­ica’s Mil­len­ni­als is that we have cre­ated a gen­er­a­tion of cod­dled, self­en­ti­tled youth. A gen­er­a­tion which gets tro­phies just for show­ing up; which scores low on in­ter­na­tional tests of math and sci­ences, but high on self- es­teem and as­sess­ments of self- per­for­mance; which needs safe spa­ces; which isn’t pre­pared for the rig­ors and harsh re­al­i­ties of the real world. Whether any of these judge­ments are fair or not is not my ar­gu­ment to make, but they do come to mind when I think about Thai­land’s young startup ecosys­tem.

By all met­rics, in­no­va­tion in South­east Asia has taken off like a Saturn rocket ( or per­haps more con­tem­po­ra­ne­ously, like a Spacex Falcon 9), and over the past sev­eral years, Thai­land has emerged as a re­gional hotbed of startup ac­tiv­ity. Ac­cord­ing to Tech­sauce, from 2012 to mid- 2016, 71 Thai star­tups were funded to the tune of USD 136 mil­lion, up from the three star­tups re­ceiv­ing USD 2 mil­lion in fund­ing in 2012, a 23- and 68- fold in­crease re­spec­tively.

Sim­i­larly, the lo­cal fund­ing scene grew from a sin­gle ven­ture cap­i­tal ( VC) fund rais­ing USD 7 mil­lion in 2012 to the 60+ fi­nan­cial and cor­po­rate in­vestors rais­ing USD 79 mil­lion by mid- 2016, a 60- and 11fold in­crease re­spec­tively. Sure, the num­bers are strictly mi­nor league com­pared to the gi­nor­mous global tech hubs in Sil­i­con Val­ley, Lon­don, or even Sin­ga­pore, but even from this small base the pace of de­vel­op­ment is blis­ter­ing, and Thai­land is fast ap­proach­ing that in­flec­tion point in the hockey- stick growth chart that we techie- tech startup folk so love to see.

Num­bers aside, Thai­land pos­sesses the in­gre­di­ents that would char­ac­ter­ize a ma­jor and en­dur­ing startup hub, if not glob­ally then at least re­gion­ally. We have a grow­ing pop­u­la­tion of English- speak­ing, tech- and so­cial me­dia- savvy uni­ver­sity grad­u­ates who ma­tric­u­late both lo­cally and over­seas; a healthy di­ver­sity of busi­ness, tech­ni­cal, and cre­ative ta­lent; a strong in­fra­struc­ture com­ple­mented by at­trac­tive re­tail, din­ing, en­ter­tain­ment, and leisure of­fer­ings; rel­a­tively for­eign­er­friendly im­mi­gra­tion poli­cies that have at­tracted skilled pro­fes­sion­als from around the world; a grow­ing cadre of re­gional and global ven­ture cap­i­tal funds eyeing Thai­land as a rich hunt­ing ground for in­vest­ment; and a gov­ern­ment and reg­u­la­tors who are throwing their weight be­hind this em­bry­onic ecosys­tem. In a nut­shell: the Thai startup ecosys­tem is on fire.

So, what’s my gripe, you ask?

Let me start by shar­ing a bit of con­text. I was re­cently in­stalled as the head of cor­po­rate ven­ture cap­i­tal for a Thai com­mer­cial bank, but prior to that spent sev­eral years men­tor­ing and fund­ing star­tups in mul­ti­ple coun­tries as an an­gel in­vestor. I’ve also had stints as a merg­ers & ac­qui­si­tions banker in both Asia and North Amer­ica, and helped in­ter­na­tional re­tail­ers break into and ex­pand through­out China. I’ve spent more than my fair share of time on air­planes and in ho­tel rooms, and in just the first seven months on the job as a VC, I’ve im­mersed my­self in nine startup ecosys­tems around the globe. I’ve seen more pitches than I care to count, and even judged a hand­ful of pitch com­pe­ti­tions, the most re­cent be­ing a lo­cal Demo Day ( those marathon pitch days fea­tur­ing star­tups com­plet­ing an ac­cel­er­a­tor or in­cu­ba­tor pro­gram). By and large, I was dis­ap­pointed with the great ma­jor­ity of the newly- minted grad­u­ates. I had crit­i­cal com­ments and ques­tions for al­most ev­ery one, and I wasn’t alone. I even joked with the judge/ fel­low VC sit­ting next to me that we were both com­pet­ing to be the Si­mon Cow­ell of the demo day, and judg­ing from our rather pointed cri­tiques, we were run­ning neck and neck.

In the days that fol­lowed, I spent a lot of time think­ing about those star­tups and

the qual­ity of their pre­sen­ta­tions. The en­trepreneurs were in­tel­li­gent and ca­pa­ble, and many of their ideas were stun­ningly cre­ative and in­no­va­tive. So why were their per­for­mances so un­re­mark­able? In con­trast, I think back to an in­ter­na­tional pitch com­pe­ti­tion which held its fi­nals in Bangkok ear­lier in the year, bring­ing the world’s best so­cial en­ter­prise star­tups to­gether. Each of the 10 fi­nal­ists, com­ing from ev­ery far cor­ner of the globe, pre­sented pitches that I considered to be among some of the very best I had ever seen.

As I considered these two di­ver­gent com­pe­ti­tions, I had two ba­sic ob­ser­va­tions: 1) the very top ech­e­lon of startup pitches in Thai­land are strong enough to com­pete head- to- head against those by re­gional and global peers, but 2) the over­whelm­ing ma­jor­ity of pitches are de­cid­edly un­der­whelm­ing, and would strug­gle on the world stage. This isn’t an in­dict­ment of any spe­cific startup, ac­cel­er­a­tor pro­gram, or ad­vi­sor/ in­vestor/ men­tor. Rather, it is a prob­lem en­demic through­out our lo­cal ecosys­tem, with the Thai cul­ture be­ing a root cause.

DOES THAI CUL­TURE HIN­DER STAR­TUPS?

Thai so­ci­ety is a po­lite so­ci­ety, one that places high value on em­pa­thy and har­mony. But it is also one that shuns con­fronta­tion or crit­i­cism, even when it is con­struc­tive. It is a cul­ture that has cre­ated one of the great­est ser­vice and tourism in­dus­tries in the world, but to some ex­tent, it is one that hand­i­caps its own startup ecosys­tem. En­trepreneur­ship is hard. Re­ally, re­ally hard. And for the en­trepreneurs with the courage, en­ergy, and spirit to em­bark on such a gru­el­ing un­der­tak­ing, it can be a lonely, soul­crush­ing, stress- rid­den ex­pe­ri­ence. The best ecosys­tems in the world are those that can nur­ture their en­trepreneurs with en­cour­age­ment and pos­i­tive re­in­force­ment, but still ad­min­is­ter bru­tally hon­est and crit­i­cal ad­vice, all in equal mea­sure. And therein lies the prob­lem with the Thai ecosys­tem. The aver­sion to crit­i­cism and con­fronta­tion by de­fault cre­ates a safe space for our en­trepreneurs, with a dis­tinct fla­vor to Thai ac­cel­er­a­tors, pitch com­pe­ti­tions, and even fund­ing rounds. Ask any Thai en­tre­pre­neur about their Se­ries A fundrais­ing, and they will in­evitably have to dis­tin­guish be­tween an “in­ter­na­tional A round” vs. a “Thai A round”, the lat­ter be­ing no­tably smaller in scale ( akin to an in­ter­na­tional seed or pre- A round), and in some case with deal struc­tures a bit more ad hoc, ir­ra­tional, and in­dul­gent com­pared to more stream­lined in­ter­na­tional deals. I’ve met more than a few en­trepreneurs pos­sess­ing an over­in­flated sense of their startup’s worth, based on overly- gen­er­ous val­u­a­tions un­der­pinned by van­ity met­rics de­signed to gen­er­ate ooh’s and aah’s, but of­ten with only the most ten­u­ous con­nec­tion to solid busi­ness fun­da­men­tals. Thank you for show­ing up, here’s your tro­phy.

TIME TO TAKE OFF THE TRAIN­ING WHEELS

The Thai ecosys­tem does sub­ject its star­tups to many of the rig­ors of the wider startup world, and its VCS and men­tors do pro­vide much needed feed­back like any would and should give a startup, but it is like we have baby- proofed the room: we have taken the hard edges and pointy cor­ners off the fur­ni­ture. We com­pli­ment, we pat on the back, we of­fer the car­rot. But when it comes time to ap­ply the stick, our cri­tique be­comes muted, our scru- tiny tem­pered. We host pep ral­lies dis­guised as boot­camps, we spare feel­ings. And for the early years of the Thai ecosys­tem, as its first gen­er­a­tions of en­trepre- neurs learned new- to- Thai­land startup skills like cre­at­ing MVPS ( min­i­mum vi­able prod­ucts, i. e. pro­to­types), gen­er­at­ing trac­tion ( i. e. users, rev­enue), and rais­ing seed rounds of cap­i­tal, it made sense to cre­ate an en­tre­pre­neur­ial bio­sphere ( like the fin­tech “sand­boxes” un­der dis­cus­sion to­day) in which em­bry­onic ideas and nascent en­ter­prises are given enough shel­ter and a fight­ing chance to make it past that early, frag­ile stage of their lives.

But that time is past. This ecosys­tem has grown, de­vel­oped, blos­somed, ma­tured. We as en­trepreneurs have di­gested Lean Startup method­olo­gies, learned the pi­rate met­rics, done our A- B test­ing, ven­tured abroad to study global peers, and en­tered new for­eign mar­kets. We as in­vestors shouldn’t be pulling our punches at a time when to­day’s en­trepreneurs need to learn how to take a punch, to roll with a punch, and even to punch back. The startup world con­stantly talks of the value of grit and per­se­ver­ance, but those are qual­i­ties that are only born of chal­lenge and ad­ver­sity. We need our gauntlets, our agoges, our rites of pas­sage. We can with­stand the com­pet­i­tive forces that pum­mel star­tups and pres­sures that turn coal into di­a­monds, and do.

As an Amer­i­can- born Thai, I am of­ten chas­tised for my char­ac­ter­is­tic Western blunt­ness, which in the past has got­ten me into no end of trou­ble with the large Thai con­glom­er­ates and fam­ily groups for whom I have worked. To­day, I’ve been given a bully pul­pit, and a real plat­form from which to con­trib­ute to and en­hance our young- but ro­bust startup ecosys­tem, and I mean to use it. So, to all those en­trepreneurs I en­counter who think my blunt­but-well- mean­ing com­ments are un­nec­es­sar­ily harsh, see if the in­dif­fer­ence of a mar­ket that doesn’t want your prod­uct suits you any bet­ter. As a startup in­vestor, men­tor, cheer­leader, and evan­ge­list that wants to see you cre­ate a uni­corn and el­e­vate our ecosys­tem, I would rather hurt your feel­ings and spare your life sav­ings than the other way around. And to the Thai startup ecosys­tem, I tell you this: time to take off the train­ing wheels.

The best ecosys­tems in the world are those that can nur­ture their en­trepreneurs with en­cour­age­ment and pos­i­tive re­in­force­ment, but still ad­min­is­ter bru­tally hon­est and crit­i­cal ad­vice, all in equal mea­sure.

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