Growth of Startups in Thailand

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When we talk about Thailand, the most common thing that would come to our mind is its TukTuk, beautiful long beaches and its gold-colored architectures. It is a country well known for its tourist destinations and people from all over the world flock to this wonderful country. But Thailand is serious about its startups as well.

The word ‘Startup’ is buzzing everywhere and has caught increased attention from governments all over the world. Thailand is no exception to it.

Thai Startup Ecosystem

As per Thailand market research performed by some of the major business consultants, Thailand has a population of about 68.2 million with a mobile subscription of 133%, internet penetration of 67%, 67% active mobile social users and 30% 4G subscriptions. By 2018, Thailand will be the third largest 4G market in Southeast Asia. Decent market size, Technology adoption and other support infrastructure easily accessible makes it easy breeding ground for startup coming up with a differentiated solution to solve problems faced by people.

In 2016, Startups in Thailand raised funds of about 86 million USD. It is important to note that this doesn’t include several undisclosed deals at Series B level. Three of the biggest deals to date happened in 2016. The biggest startup deal happened in Thailand was an investment of 19 million in Ookbee by Chinese Internet giant Tencent. It was followed by 17.5 million USD in Omise Payment and 15 million in Orami. Within a period of 4 years, from 2012 to 2016, Thailand went from having less than three startups to more than 75 startups which are funded. Please refer to below figure for the amount of received in different startup sectors in 2016. Fin-Tech is at the top of the list, followed by Food Tech, Ecommerce & Lifestyle, and Logistics & Transportation etc.

But if we look at the sheer number of deals rather than the amount of funding, E-commerce stands at the top with 24 rounds of funding almost triple the number for second/third in line (Fin-Tech and Logistics, 9 rounds each).

To have a look at the investors, the most active Venture Capitalists are 500 Startups (12 deals to date), dtac accelerate (22 deals to date) and Invent (10 deals to date). Thai Venture Capitalist (VC) and Corporate Venture Capitalist (CVC) raised a funding of about 247 million USD since 2012 – the biggest of them being 50 million USD by Digital Venture in 2016. Digital Ventures was founded by SCB, a Thai bank, first of its kind by a bank. The investment scenario has been mostly dominated by Corporate VCs in recent years and this is bound to grow by leaps and bounds. Thai Corporate Venture Capitalist had 3 phases – the first (2012-2015) is dominated by foreign investors and telecom companies, as in early days, most of the innovations are mobile-based; second phase (2016-2017) saw interest from banks as number of Fin-Tech startups started, increasing leading to SCB’s Digital Ventures, Krungsri Finovate etc. The third phase is where diversification started – companies in sectors like construction, energy, insurance, and properties entered the scenario.

Startup Opportunities in Thailand

Thailand investment opportunities particularly in startup activities gained huge momentum in last five years as it is shown from funding growth in startups in below figures. The median funding deal value has increased from 60,000 USD in 2012 to 1.1 million USD in 2016.

Majority of startups in Thailand today are in Fin-Tech vertical. Fin-Tech made up the bulk of the deals in 2016, at over 27 million USD. Most of the Fin-Tech startups are in e-payment services- online payment services, electronic payment system and e-wallets. Thanks to growing middle class, burgeoning Logistics sector and rise in mobile payments, growth in this sector have been excellent in recent years over other sectors. Government supports this sector through the creation of regulatory sandbox and multi-national e-payment initiatives such as PromptPay.

There are several business opportunities in Thailand, however, second most lucrative startup sector is Food Processing and Technology. The appeal of this sector for aspiring entrepreneur is not surprising considering that Thai cuisine is popular all over the world and the demand for it is ever growing due to increased inflow of tourists from all over the world and rise in domestic wage levels, reached an all-time high of 409 USD in 2016. Thai Government has come up with a five-year initiative (2016-2020) to become one of the top five exporters of halal products and services in the world. The size of the global halal industry is estimated to be around 10 billion USD by 2030 and considering that more than 60% of Muslims in the world live in South Asia and the Asia Pacific, the opportunities are immense for the aspiring entrepreneurs to miss out on business development in Asia.

The third most important sector would be Travel and Hospitality industry. Bangkok airport received traffic of more than 50 million visitors in 2015 but its capacity is only 45 million. Most tourists seek for localized travel experience, creating demand for local search and discovery services and local guides. Therefore, the opportunities for travel firms are immense considering the need for localized travel.

Considering that Thailand is one of the cheapest destinations for medical tourism, the opportunities in healthcare and pharmaceutical industry is huge. For example, as per World Health Organization, cost of treating a kidney failure is 7,300 USD in Thailand but the same is 15,584 USD in neighboring Singapore. Startups can help by providing hassle-free short-term care to foreign tourist and maintaining standards in hospitals to personalized healthcare services for patients with severe ailments like heart conditions, diabetes etc.

Thailand is one of the world’s leading suppliers of agricultural products. Thailand’s agricultural sector contributes about 10 percent of its GDP and provides labor for about 40-50 percent of its labor force. The major food exports include seafood products, rice, meat, sugar, vegetables, and fruits. It is the largest rice exporter in Southeast Asia (4.4 billion USD in 2016). The size of meat and seafood industry is about 5.9 billion USD. Agri-Tech can help Thailand achieve sustainable and inclusive growth in agriculture, by providing farm management solutions, analytics for sowing, harvesting and weather prediction, etc. For example, Thai Agri-Tech firm ‘Tech Farm’ provides a solution to farmers in the area of soil management and water quality monitoring.

Government Initiatives

Government push for startups in Thailand hasn’t restricted to Thailand market alone. It has bigger dreams- it wishes to become an international platform for setting up startup for investors, founders, students and aspiring entrepreneurs alike. This message is obvious from the theme of the recent event held in July 2017 for startups, called ‘Startup Thailand’.

To the advance, the development of startups, Minister of Science and Technology, in alliance with private entities, academic institutions, government departments, has organized ‘Startup Thailand’ as a platform for investors, students, founders and entrepreneurs to showcase their startup ideas. The central theme of this event is ‘Startup Thailand: Scale Up Asia’ which proposes to showcase Thailand and Asia as a leading region for future growth and to emphasize Thailand’s enthusiasm in the field of Science, Technology, and Innovation. It aims to incubate, fund, mentor and develop startup which has the ability to scale up to entire Asia, maybe the entire world. This event was launched in five major cities – Bangkok, Chonburi, Songkhla, Khon Kaen and finally Chiang Mai.

To support the growth of startups, National Startup Committee is working on incubator programs, skill development platforms and providing support through business laws and financial incentives. In addition, Thailand’s Board of Investment provides income tax exception for a period of five years for startups, like those in Fin-Tech, and Venture Capitalist are exempted for a period of ten years.

Future Outlook

Thai Startups has expanded and diversified in last five years and they are in expansion phase now. Previously, startup was requiring funding only at Series A or Seed level but now, startup is going to Series B or Series C funding. These startups which are trying to expand should aim for regional markets as well, as the domestic market is too small. Thailand also requires an experienced pool of mentors to guide entrepreneurs to transform themselves from a startup phase to a stable company with sustainable and healthy growth, without forgetting unit economies in name of growth in size.

Sectors like Fin-Tech, E-commerce, Food Tech, Agri-Tech, Logistics and Travel & Hospitality seems to be promising. It is good to observe that Thai Government is focused on specific sectors which are of economic and strategic importance to it and coming up with programs and incentives to promote those sectors. The Thai government should, effectively and efficiently, transform the strategic objective, behind those programs which it has initiated towards promoting startups, into a viable operational plan with responsibilities and goal assigned time bound. Performance evaluation should be done periodically so that programs which are not generating results can be pruned out at the early stage.

The future of technology lies in virtual reality, robotics, automation, augmented reality, artificial intelligence. Thai Startup should focus on incorporating these technologies into their innovation so that the technology which supports their business idea is futuristic. Since Thailand Startup ecosystem is seeing a lot of funding activities from Corporate Venture Capitalists in recent years, doing business in Thailand can help you leverage the broader market access, expertise, technology and experience those corporate have and grow at a much faster rate.

For more information’s, please check out startupinthailand.com for comprehensive startup solutions in Thailand. You may also download an e-book on Startup in Thailand which describes the common pitfalls in a startup and provide valuable tips to do business in Thailand.