There’s no shortage of ambitious founders and creative teams looking to solve Thailand’s most pressing problems. But startups simply can’t succeed on good ideas alone—they need talent, capital, mentors, regulatory clarity, and good infrastructure to operate within. Indeed, it takes a village to raise a startup, but we need to first build up that innovation village in Thailand.
In 2022, the Thai startup ecosystem ranked 53rd worldwide and 4th in Southeast Asia, lagging behind regional peers like Singapore, Indonesia, and Malaysia, according to StartupBlink. Progress in this area has stalled, with Thailand dropping three global ranks from the prior year.
Thailand currently suffers from a negative feedback loop—where there are relatively few venture capital (VC) firms investing in earlier stages, which leads to fewer unicorn success stories, and which makes it difficult to attract top talent into the ecosystem—a chicken and egg conundrum.
Key challenges to address
In order to advance its startup and VC ecosystem, Thailand will need to confront a number of barriers—namely early-stage financing gaps, difficulties in attracting talent, and gaps in innovation infrastructure.
Seed-stage financing is particularly difficult to come by in Thailand. The number of seed stage funding rounds has decreased from a high of 33 in 2019 to less than half of that in 2020, according to Innovation Club Thailand. This is partly because Thailand’s VC scene is dominated by corporate VC firms, who typically invest in later-stage startups that are less risky and have more defined strategies. Many startups struggle to find opportunities to obtain this earlier stage, high-risk, high-reward financing—and are not able to operate without it.
The Thai startup ecosystem also struggles in attracting top-tier business and technology human resources, often competing with established corporates in the talent war. When asked who their ideal employers were, Thai tech graduates are likely to cite established corporations like Google, Microsoft, Facebook, Grammy, and PTT, according to Universum.
Startup culture often revolves around mentorship—with successful founders sharing lessons learned with the next generation. But in Thailand, mentorship can be hard to come by, partly because there are relatively few alumni of successful unicorns. As a result, it’s often difficult for many current founders to adopt and develop the risk-taking and global expansion mindset typically required to build businesses at scale.
The infrastructure to support startups and VCs is often lacking. There aren’t as many accelerators or incubators in Thailand compared with regional or global leaders, and the number of non-specialized accelerators and incubators in Thailand has been declining.
Existing government programs are not yet able to plug all the infrastructure gaps, and have financing and operational challenges of their own. For example, Thai grant programs today provide between USD 20,000 to USD 150,000, whereas a typical early-stage startup needs at least USD 500,000 to operate between 1-2 years. Additionally, many government programs require paper-based applications and receipt-based reimbursements, with slow or delayed disbursement processes—putting undue strains on startups’ operating cashflow.
Key learnings from abroad
While there is no silver bullet or blanket approach to address the above challenges, different countries have successfully initiated a variety of financial and non-financial programs to support their respective startup and VC ecosystems.
Israel, for example, has centralized many of its government startup and VC initiatives under a single agency—the Israel Innovation Authority (formerly the Office of the Chief Scientist). This has helped prevent multiple agencies from setting up programs with overlapping mandates, and it has also made it easier for startups to search for and seek government support.
To address early-stage financial gaps, Israel set up its now famous Yozma program. During Yozma’s early years in the 1990s, the program set goals to attract financing and expertise from VCs abroad—and achieved those goals by creating a co-investment scheme that enabled VCs to enjoy upside potential (i.e., foreign VCs were able to buy out government shares at cost plus 5-7% interest). The initiative successfully brought in foreign capital and investment talent into Israel, and created a bridge for knowledge transfer. Today, partly as a result of Yozma’s success, the Israeli startup ecosystem ranks third in the world, behind only the US and UK.
Singapore initiated similar programs to address seed-stage financing gap, such as through SEEDS Capital and the SG Startup Equity scheme. In addition to co-investing, SEEDS Capital also works with VC partners to provide additional support to help startups with commercialization, business development, and global expansion.
To address challenges related to lack of talent and mentorship, the National University of Singapore created the NUS Overseas Colleges Program (NOC) that allowed Singaporean students to intern at overseas startups in top global hubs. The program had proved to be successful, with alumni that have gone on to start multiple unicorns—many of whom cite their experience abroad as formative ones.
Opportunities for startup and VC ecosystem in Thailand
Based on key learnings from abroad, Thailand can consider a number of moves to grow its innovation ecosystem, including establishing cornerstone programs, empowering a coordinating body, providing enhanced grants, and strengthening collaboration between startups and academia.
Thailand’s cornerstone co-investment scheme can potentially be a flagship program (like the Yozma program in Israel or SEEDS Capital programs in Singapore) to attract international capital and investment talent, and open up a global network for Thai portfolio companies. This program can be an important step to attract VC participation into the ecosystem.
An increasingly empowered government body can help to centralize initiatives from multiple agencies into a single place (akin to the Israel Innovation Authority), making it easier for both startups and VCs to navigate. The body can continue to support the national vision by ensuring that different agencies do not have overlapping mandates and are well coordinated to support startups through their whole lifecycle, from early stage to later stage.
Thailand’s enhanced grant programs can address the pain points of current programs by providing larger sized and more impactful funding, while doing away with the high amount of paperwork and operational requirements needed for qualified startups to receive disbursements.
Finally, Thailand can build stronger ties between the academic and startup communities—for example by providing additional funds that enable startups to hire PhD scientists and tech talent from universities, subsidize student internships at top startups, and help expand connections with overseas startup and innovation communities.
The vision is for Thailand to become a dynamic startup and venture capital ecosystem—where unicorn success stories inspire regional VCs to invest in more local startups, where experienced founders can mentor the next generation of entrepreneurs, and where innovation can become ingrained into Thai business DNA. Both government and the private sector play key roles in bringing this virtuous cycle to life.
Article by Dr. Metinee Jongsaliswang, Thailand Country Consulting Leader, Deloitte Consulting
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