Often overlooked by investors betting on more active SE Asian tech markets, the Thai startup ecosystem got a boost with the emergence of three unicorns and later-stage transactions marking deal activity in 2021.
What is more encouraging, according to industry watchers, is that exits are in plain sight as the Thai stock exchange gears up for tech listings.
Furthermore, there is an increased interest from prominent Thai corporates to partner or acquire tech startups, paving the way for strategic investments and trade exits, they add.
“We’ve seen a lot of startup activity in the earlier stages, but it has been quite an unclear path in terms of where startups will eventually go if they’re able to achieve a certain scale,” said Paul Ark, partner and head of Environmental, Social and Governance (ESG) at Gobi Partners.
However, exit visibility has now become more noticeable, he added.
Corporates lead the way
The significant influence of local conglomerates in the growth of startups is something unique in Thailand compared to other markets in the region.
“Thailand is a place where you’re more likely to achieve a unicorn investment because a large corporate group comes in at a later stage,” Ark said.
In November, Thailand’s third-largest lender Siam Commercial Bank announced a 51% stake acquisition of digital asset exchange Bitkub, bringing the latter’s valuation to over $1 billion. Earlier in September, CP Group’s Ascend Money was valued at $1.5 billion following a $150-million financing. Meanwhile, Thailand’s first unicorn, logistics firm Flash Express, was seeded by Alibaba Group.
“Many Thai startups that do not have the backing or association with large corporates in the country will encounter more challenges in getting traction,” according to Krit Phanratanamala, managing director of Bualuang Ventures, a subsidiary of Bangkok Bank.
Established incumbents are present in many of the market segments, making it more difficult for smaller startups to establish themselves and drive adoption of their services, he added.
Take the micro or nano financing segment, for instance. SCB and Kasikornbank have entered the space through their units SCB10x and LineBK, respectively. Their market-leading position and huge networks pose a challenge that is tougher for much smaller startups to surmount.
New Thai CVCs minted in 2021
|Global Disruptive Technology Venture Capital Fund||Siam Commercial Bank, Charoen Pokphand Group||$800M||Global|
|CP Group-Telenor fund||The merged entity of True Corp and dtac||$200M||Thailand|
|ORZON Ventures||PTT Oil and Retail Business, 500 Global||$50M||Thailand, Southeast Asia|
|Thai Wah Group's fund||Thai Wah Group||NA||Thailand|
[Note: In addition to the new CVCs in the table above, AddVentures by Siam Cement Group, which was launched in 2017, had told DealStreetAsia earlier that it will invest in the later stage, writing cheques between $5 million and $10 million. It typically invested in the region of $1 million per deal backing post-seed to Series A and B rounds.]
In addition to the participation of Thai corporates both through investments and acquisitions, local tech startups, even the non-profitable ones, now have the potential to list on the Stock Exchange of Thailand (SET) as the bourse is working on a new platform allowing these businesses to go public.
The best performing stock market in Southeast Asia in three consecutive years, SET has received an IPO application from e-commerce enabler aCommerce. As reported by DealStreetAsia earlier, a spate of Thai tech startups is also eyeing a local listing.
“Now that there’s some more clarity on the exit paths, I would hope to see a lot more startup creation and investment activities. It will be a big boost to the Thai ecosystem,” Ark predicted.
The recent deals and exits in the ecosystem are expected to increase as both domestic and foreign investors will pay more attention to Thailand, Phanratanamala added.
Major overseas investments are also likely to aid local startups’ market penetration abroad as the addressable market size of Thailand, apart from e-commerce, is too small for a tech company to scale up.
Thai unicorns are already preparing the ground for their regional expansion.
Ascend Money is seeking opportunities for partnerships and joint ventures in Vietnam to secure a digital lending licence in the neighbouring country.
Bitkub is planning to take its brand to Vietnam, Malaysia and the Philippines next year. Meanwhile, Flash Express has launched in Laos and is looking to expand to Vietnam and Cambodia as well.
Others like aCommerce, fashion platform Pomelo and proptech Builk have already forayed into several SE Asian markets.
Deals get bigger
Thailand clocked more growth investments this year flowing into companies particularly in e-commerce-related sectors – financial infrastructure firm Lightnet ($48 million), insurtech startup Sunday ($45 million), digital asset platform Zipmex ($41 million), e-commerce solutions provider CREA ($25 million), logistics startup Giztix ($10 million) and e-book store Ookbee (securing capital from Tencent and Sumitomo).
In 2021, Thai startups raised at least $1.1 billion across 31 deals compared to $500 million raised by 27 firms in 2020, according to data compiled by DealStreetAsia.
Thai tech industry is estimated at $30 billion in 2021, according to the e-Conomy SEA 2021 report by Google, Temasek and Bain & Co. It is also projected to hit $57 billion by 2025.
“Digital adoption in the market has been accelerated during COVID-19, and will continue to see growth, particularly as the Thai government aims to make the country the region’s hub of technological innovation through the Thailand 4.0 agenda,” Phanratanamala asserted.
The e-commerce boom has lifted opportunities in the supply chain, payments, logistics and SaaS platforms, resulting in deal traction across the allied sectors.
Going forward, industry watchers predict fintech segments (insurtech, microfinance and BNPL), business automation, AI and agritech to account for significant deal activity.
Ark also believes in technology-enabled disruption in highly fragmented and regulated sectors such as healthcare and education.
Thai startups stand to attract a greater pool of capital from international investors if they emerge as leaders in ESG compliance.
“As the stock exchange integrates ESG scoring and sustainability reporting, that ultimately flows down to large-cap private companies preparing to go public. Over time, that thinking just gets pushed earlier in a company’s lifecycle,” Ark said.
Ark, who is ESG head at Gobi Partners, says, SET is considered one of the most progressive stock exchanges when it comes to ESG reporting. Listed majors such as Siam Cement Group and Thai Union rank quite high in terms of sustainability and ESG, and these companies are active in the corporate innovation space.
While early ESG adoption throws open new opportunities for Thai startups, the challenges on talent availability and skill diversity remain. The National Innovation Agency’s Thailand Startup Ecosystem Report 2021 notes that the next phase of startup acceleration in the country will require a “people-focused” approach.
Ark is bullish about the contribution of female founders and teams to the Thai startup ecosystem. Female teams and startups with women co-founders – Zipmex, Sunday and Alpha Finance Lab – raised a record amount of capital this year.
As founders raise larger rounds and find a viable exit window, it will accelerate the development of the next generation of Thai startups, he added.