A recent survey by the World Economic Forum suggests 41 per cent of startups will be shutting down before the end of June if they fail to pivot their businesses away from COVID-19’s devastating impacts.
Conducted in late March, the study found that nearly half of startups in the world had just enough capital to stay afloat for three more months. Simply put, if there is nothing to reverse the downward trend triggered by the pandemic, these enterprises will have to shut down within the next few weeks.
“The situation looks scary,” KT Ventures chief executive officer Sompoat Chansomboon said during an exclusive interview with The Story Thailand.
According to him, even startups in growth stage risk crumbling down. Forecast suggests one third of these startups have had the capital to keep going till September or October only. Their survival, in other words, is also at risk.
Sompoat explained that all these grim predictions resulted from the fact that the pandemic had shaken the entire startup system – affecting its capital, talent and market. About 75 per cent of startups will have to lay off their staff. Worse still, up to 30 per cent of startups will have to dismiss more than 60 per cent of their employees.
Market looks as gloomy. About 75 per cent have reported shrinking revenue, and between 16 and 20 per cent have said their revenue has plunged by over 80 per cent.
During the COVID-19 crisis, startups across the world are seriously struggling hard to stay afloat.
Opportunities for Thai Startups?
While COVID-19 delivers big blows to Thai startups in general, it presents ample opportunities to some. In the eyes of Sompoat, fin-tech startups should be able to grow well later as COVID-19 has practically forced people to go online. There is a high chance that consumers will get used to online financial services in the end.
“I think EdTech and TeleMed startups will have bright prospects too,” he said.
Investors are Biding Their Time
For the Southeast Asian market, Sompoat said investors had now decided to delay, not cancel, their plans to invest in startups. “Instead of putting in their money this year, they will prefer to wait till next year. They will want to see which startups survive the COVID-19 crisis,” he said.
Sompoat said when compared with European, Chinese or American startups, the Southeast Asian choices offered good buys – quality at a lower price.
He therefore suggested that startups try their best to brave through the ongoing hard time, for example by means of finding new sources of income and curbing expenses, and prepare good strategies. In some cases, he said business owners might have to keep operating in the red for a while to wait for opportunities. “Personally, I think tourism industry will rebound in a big way. People who have to stay home during COVID-19 crisis must be craving for a vacation. Their travel spending may increase by three folds after the crisis ends,” he pointed out.
KT Ventures Gets Ready!
Sompoat said COVID-19 did not hamper the newly-launched KT Ventures’ aspiration to empower small and medium enterprises (SMEs) with digital technologies through investments in startups.
“Because the COVID-19 happens, we become even more eager to invest,” he said, adding that KT Ventures will start investing as soon as it completes all legal procedures for its establishment.
Backed by Krungthai Bank, KT Ventures expects to start investing in the fourth quarter of this year. By that time, Sompoat believes it will be clear which startups have pulled through the COVID-19 crisis.
“Thailand’s startup market is still young and it has the potential to produce unicorns or centaurs,” he quipped.
Since 2012, Thai startups have attracted about USD400 million in capital funds. Of the amount, USD100 million came to their hands in 2019.
