Guest Post: What a Bitkub unicorn means for Thailand’s startup ecosystem

Bitkub founder and CEO Jirayut Srupsrisopa (left) and SCB chief executive Arthid Nanthawithaya

It seems that hardly a month goes by without Siam Commercial Bank, one of Thailand’s oldest and largest financial institutions, making a gargantuan announcement that shakes the country’s tech and startup ecosystem to its core. Back in September, the bank announced a massive corporate restructuring and plans to raise a US$600–800 million DeFi venture fund. A few hours ago, news broke that the soon-to-be-christened SCBX would be acquiring a controlling 51% interest in Bitkub, Thailand’s largest digital asset exchange, for US$537 million, arguably minting Thailand’s first verifiable unicorn (while there are one or two other Thai tech companies claiming billion-dollar valuations, the Bitkub deal is the only one so far to disclose pricing and valuation information that confirms its unicorn status).

The reaction in the hours since the announcement has been fairly predictable: metaphorical dancing in the streets. Euphoria in the ecosystem, a flurry of posts on social media, and a widespread hope that Thailand’s moment on the regional or even global startup stage has finally arrived. I saw much reason for celebration, but not necessarily for the reasons everyone else may be celebrating.

While much of the Thai startup ecosystem is abuzz over its billion-dollar fintech, another very important point is getting lost in the excitement: Bitkub was bought at a very reasonable, very rational, very sane valuation. Consider the numbers reported in SCB’s notification to the Stock Exchange of Thailand: “For the period of Jan — Sep 2021, Bitkub reported a total trading volume of the digital assets of approximately THB 1.03 trillion to the SEC, representing a market share of approximately 92 percent. For the same period, Bitkub had total revenue of THB 3,279 million and net profit of THB 1,533 million.” Essentially, a US$1.05 billion valuation on ~US$102 million of 9 months of revenue and ~US$48 million on 9 months of profit.

So not only is Bitkub profitable, but the value of the deal prices the company at approximately 8x revenue and 17.5x profit (annualizing the reported numbers). This is an incredibly grounded valuation, and a fantastic deal for SCB. More importantly, it could bring down valuation expectations for other Thai startups across the board, whose unrealistic expectations have long hindered the flow of venture capital into our startup ecosystem. In my years as a VC, I have spoken with numerous local startups seeking VC funding whose lack of a path to profitability never depressed the over-inflated self-estimation of their valuations, often at revenue multiples of 30x or higher, thus reducing VC interest in the Thai market and making it difficult for Thai startups to attract capital. A Bitkub-inspired recalibration that brings startup valuations back down to earth could be the trigger that finally advances the Thai ecosystem past the inflection/tipping point that puts it on a rocket ship trajectory.

But a Bitkub unicorn could also ignite Thai startup activity in other ways. Once Bitkub CEO Jirayut “Topp” Srupsrisopa and his fellow co-founders and early employees are able to monetize some of their equity (either in the near term if there was a cash component to the acquisition, or later down the line following a lock-up period if it was an all-stock deal), we might see several of them become super-angels, launch VC funds, or start new ventures, forming a “Bitkub Mafia” much in the same way that Paypal founders and executives such as Elon Musk, Peter Thiel, Reid Hoffman, Max Levchin, Keith Rabois, Dave McClure, Joe Lonsdale and others constituted the Paypal Mafia, a force that collectively funded and created Silicon Valley’s subsequent generations of unicorns. A one-two punch of grounded valuations plus a cohort of newly-minted millionaires hungry to fund or create startups in Thailand could be a powerful jolt that our ecosystem desperately needs.

I see a few other possible ripple effects stemming from the Bitkub acquisition. First, expect Thai corporates to accelerate their tech and innovation strategies. In a Medium post I wrote a few weeks ago titled Startup Ecosystem Development & Thailand’s “Seattle Problem”, I predicted that the SCB reorganization would touch off a round of activity from other Thai corporates, and sure enough, in the weeks that followed, SCB competitor Kasikornbank announced a broad decentralized finance (DeFi) strategy that includes an incubator/venture builder and an NFT marketplace, the retail arm of Thailand’s energy giant PTT announced a corporate VC collaboration with 500 Global, and investment holding company Thoresen Thai Agencies acquired a controlling interest in services-on-demand startup Skootar.

What activity might the Bitkub deal touch off? I can only speculate, but I would be really surprised if some other bank (or even non-bank financial institution) wasn’t taking a hard look at Thailand’s other digital asset exchange Zipmex. And Zipmex is hardly the only Thai blockchain/crypto startup to gain traction in recent years. Like sharks to chum, we could have a startup investment feeding frenzy on our hards.

I also see the potential for a new class of startup to emerge: those formed, structured, designed, and grown to specifically be acquired by corporates, not unlike those produced by startup factory Rocket Internet and targeting exit-by-acquisition from large tech giants. While the aforementioned Bitkub Mafia scenario would certainly boost early stage funding to Thai startups, later stage investment or even outright acquisition by Thai corporate could evolve into an incredible exit avenue for Thai startups, especially with Thailand resembling a “Seattle-type ecosystem” that I described in my Medium post where tech and innovation activity is dominated by large corporates; in Thailand’s case, large corporates looking to boost their innovation strategies via investment & acquisition instead of organic transformation could be the lucrative endgame for the next generation of Thai entrepreneurs.

Regardless of any ripple effects that SCB’s acquisition of Bitkub may or may not produce, this blockbuster deal is an unequivocally positive thing for Thailand’s startup ecosystem, and regardless of whether or not we see any other activity for the remainder of the year (though given the pace of recent activity, all indications point to more eye-opening announcements to come), 2021 has certainly become the year that put Thailand’s startup ecosystem on the global map.

Paul Ark is a partner and head of Environmental, Social and Governance (ESG) at venture capital firm Gobi Partners. This post was originally published on Medium

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.