Just getting started
Over the past few years, Thailand has proven a promising market for startups and innovators. Although start-up businesses became a phenomenon in Thailand around 2012, the country has seen a huge increase. In 2012, a total of 70 million baht was raised by start-ups here. Today, the total value of start-up investments is over 10 billion baht.
Fintech and e-commerce are among the leading sectors disrupted by start-ups, and there will be more in other fields, such as tourism, property, food, fashion and education. Unfortunately, Thailand is the only country where no start-ups receive up to US$1 billion (35.28 billion baht), while Vietnam, Malaysia and Indonesia already have raised over $1 billion.
For Thailand’s tech industry to be able to step forward, it’s essential to have VC (venture capital)-backed start-ups and non-VC-backed start-ups or SMEs (small- and medium-sized enterprises), which is the backbone of the country. To achieve this, Krating Poonpol, a managing partner of 500 TukTuks who also runs Disrupt University, a start-up school where around 800 students have graduated so far, is of the opinion that the start-up ecosystem must be comprised of optimism and belief.
“Start-ups are creators of digital talents — they will create the next wave of start-ups. The successful start-ups of the first wave have become investors and further create the next wave,” Krating said, pointing out that Vietnam has already passed the first wave and now is on the second.
Krating and Ookbee CEO Natavudh Puncharoenpong, also a managing partner of 500 TukTuks, shared their experience in venture capital at Epson: Trust In Your Commitment, a recent gathering for start-up communities.
Krating provided China as an example. There, once someone creates a business model such as peer-to-peer lending — a financial-loan transaction without any bank — the other 8,000 start-ups in the country are immediately ready to follow the model.
“In Thailand, we follow a certain level of developed countries, so we can apply those business models here. The market in Thailand is big enough that we [as venture capital] will invest in that company and support them,” said Krating.
Natavudh said that business model is an essential issue when it comes to start-ups, and winning or losing depends on the founding ideas. It should create a new one or imitate others. “I believe there will be an evolution of start-ups,” he said.
Look at China, Alibaba and Tencent, or Baidu — they are really a clone of the first wave. Tencent started from a clone, but today it’s totally different. The next innovation must therefore look at China, which evolved from imitation, and now they create their own unique attributes, with a rapidly growing overall market.
Krating noted that there are opportunities for start-ups in many sectors. Education is a large market — five times larger than telecommunication, but the number of EdTechs today is very limited. Tourism is counted for 13% of the country’s GDP, but investment in travel technology so far is very small. Property and agriculture are also large and inefficient markets, and have a lot to do with disrupting the whole value chain.
“Digital technology will disrupt the outdated inefficient industries, and players are already there,” said Krating. Natavudh explained that each start-up’s fundraising process usually takes around 10-18 months, before expansion can occur.
He pointed to a study by Stanford University which found that VC-backed start-ups account for 60-70% of all start-ups, and naturally employ a great number of people.
Natavudh noted that 45% of start-ups are younger than five years old, and only 30% of start-ups are over 10 years old. Seventy-five percent of start-ups discontinue employment after the business expands to a certain level. In fact, only 1-2% of start-ups can essentially expand their businesses to a level that sees significant change in employment.
“The issue of the start-up ecosystem in Thailand today is not about a lack of human resources, but how to truly have those start-ups grow into large businesses,” he added.
As for 500 TukTuks, the company has been operating for 18 months, and has already invested in 30 companies. It has a target to invest in 200 within two years.