Thai startups are moving towards a business-to-business (B2B) model and integrating with super apps to boost growth as they struggle to scale because of a lack of funding.
Natavudh Pungcharoenpong, founder of e-book store Ookbee and managing partner of 500 Tuks Tuks, the local operating unit of US venture capital (VC) firm 500 Startups, said that for the next few years Thailand's startups may grow slower than those in Indonesia and Vietnam, where there are larger markets that have greater potential to attract large funds.
He expects large VC funds to start coming in from next year, with plans to invest in US$30-50 million per deal.
"I expect that within 3-4 years, Thailand will have a unicorn startup [valued at $1 billion] as startups in Series C funding are expected to raise further funds in multiple rounds," Mr Natavudh said, citing the example of Pomelo, a Thai fashion e-commerce startup that raised $52 million in Series C funding.
Such startups, he said, have the potential to attract large market bases.
Ookbee also aims to raise more funds to build digital content company Ookbee U after making a partnership deal with Chinese internet giant Tencent in 2017.
Mr Natavudh said the recent troubles of WeWork, a US co-working space unicorn, have rattled VC funds, which are now more likely to pivot towards businesses that have potential for profitability and annual sales growth.
500 Tuks Tuks, which mainly invests in startups for seed and Series A funding rounds, is looking beyond Thailand and wants to invest in Vietnam and Myanmar, particularly startups involved with deep tech and fintech, he said.
Pawoot Pongvitayapanu, founder of E-frastructure, which invests in startups, said Thailand has an advantage in payment and transport systems that are conducive to startup investment, while Vietnam and Indonesia have bigger populations.
He said his company is more interested in B2B startups, as the business-to-consumer model may need a substantial amount of investment to gain consumer attention.
Legal and cultural hurdles
Panachit Kittipanya-ngam, president of the Thailand Tech Startup Association, said Thailand's startups are facing various challenges, particularly in regulations and local cultures, which cause the majority of local startups to be subject to only seed and Series A funding rounds.
Mr Panachit said the country lacks experienced startup founders aged 30-35 because in Thai society it's considered unusual to risk leaving a large firm to start one's own business.
Young graduates, meanwhile, lack experience, which commonly results in business failure, he said.
Corporate VCs in Thailand do not have the mindset to invest in startups that require long-term planning for achievements, Mr Panachit said. Regulations also make it difficult for local startups to exit, including rules related to IPOs, mergers and acquisitions.
He said many startups likely to be subject to seed funding and Series A funding will disappear by next year, while some 20 local startups could still scale further.
In 2020, startups are more likely to focus on the B2B segment, he said, as they don't need to spend a huge amount of money to engage with consumers directly, which carries a steep cost.
"We will see startups involved with the consumer market shift to integrate with super apps in order to access larger customer bases," Mr Panachit said.
Exit of DTAC accelerate
DTAC Accelerate, a startup incubator under Total Access Communication that has operated for seven years, is in discussions with several VC firms to sell its operations. InnoSpace Thailand is a potential buyer.
Thibaut Girard, head of strategy and innovation at DTAC, said the company is seeking new partners to drive the startup accelerator programme to the next level.
"The process of looking for a long-term viable solution has already commenced, with ambitions to conclude a deal in the beginning of 2020," Mr Girard said.
Mr Natavudh said DTAC is likely to focus more on making business profits because the programme has not yielded positive returns.