VC group keen on state support for startup funds

VC group keen on state support for startup funds

The Thai Venture Capital Association (TVCA) is urging the new government to amend regulations and promote investment in Thai startups, which lag behind regional rivals in Malaysia and Indonesia.

The latest survey by Thailand Tech Startup Association (TTSA) found the majority of startups still remained at Series A and pre-series A funding levels in 2018, primarily from a lack of tax incentives and red tape regulations.

"The TVCA will submit a proposal to the new government to stimulate faster growth of local startups, as some promised amendments to key legislation from the former government have not been executed in the past few years," said Thanapong Na Ranong, president of the TVCA, during a seminar called "Securing growth -- What's next for Thai startups?" by Baker McKenzie.

There is still a lack of big local investment funds for domestic startups as regulation is not attracting venture capital firms (VCs), primarily because foreign VCs cannot have preferred stock or a waiver of capital gains tax when they invest in Thai startups. Only local VCs (of which there are few) are eligible to have their capital gains tax waived.

Exits from IPOs on the Stock Exchange of Thailand and Market for Alternative Investment (MAI) still require registered capital of 50 million baht.

"This should be relaxed through the use of capital registers combined with premium stock for VCs," Mr Thanapong said.

He said the average VC expects to exit from a startup investment after five years. The most attractive regulations for VCs are in Singapore, said Mr Thanapong.

According to a 2018 TTSA survey of 215 respondents, 45.6% of tech startup remain in the seed round and received funds from accelerators or angel investors.

Some 24.2% of respondents received Series A funding from a venture capital firm, 16.7% were on the pre-seed round receiving funds from government grants, angel investors or friends and family. Only 6% received Series B, 1.4% Series C, and 0.7% could exit.

The average startup founder's age is 33 and 81.6% are male. Business/service tech, e-commerce and education tech are the top three startups fields, accounting for 23.7%, 10.7% and 7.91% of total respondents.

The survey found one-third of local startups are researching deep tech, which is considered a significant scientific advancement.

Papon Charoenpao, an associate at Baker McKenzie, said the government needs to consider amending the Thai Civil and Commercial code with a corporate law to allow convertible debt for startup to attract investors.

Moreover employee stock options (ESOP) should be allowed for startup workers. In developed countries, ESOPs average 10% of shares in order to attract and retain talent.

Thailand should also have fewer licences for certain tech businesses as they are too complex and create a barrier for startups, he said.

Prapan Charoenprawatt, president of the MAI, said it will launch a new feature on its crowdfunding platform LIVE for startups and SMEs because after one year of operations as it has yet to attract investors. The feature will allow startups and SMEs to access strategic partnerships, rather than raise equity funds.


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