Cash-rich VCs eye startup opportunities
Venture capitalists (VCs) in Thailand are turning their focus to investing in startups in the growth stage because of the large amount of capital they have following governments' large financial injections into the economy, says the Thai Venture Capital Association (TVCA).
Sarun Sutuntivorakoon, president of TVCA, said VCs in Thailand and abroad have excess liquidity and they need to find ways to deploy this money.
"Since last year, governments in many countries pumped money into the system. Money went to the stock market, funds and VCs," Mr Sarun said in an online talk organised by the National Innovation Agency.
VCs are more likely to invest in startups that are mature with a sizeable investment, rather than those in the early stages which need less funding, he said.
As a consequence, startups in the growth stage are likely to raise more funding from VCs.
Mr Sarun said startups in the early stage may suffer from a lack of cash and have to endure difficult times until they can secure funding, but those who survive are likely to know how to use money prudently.
He said startups in later stages have the potential to become giant companies in the 4-5 years, but questions should be raised as to which startups can follow in their footsteps as those in the early stages are struggling financially.
Hundreds of startups are now in the early stages, said Mr Sarun.
Startups in the early stages can still access capital through funding by networks of angel investors, he said.
Mr Sarun said VCs are now looking for high-growth startups with an asset-light model, which requires non-substantial investment to thrive, as well as those with product-based operations with minimal customisation.
He said service-based operators, on the other hand, require more human resources when they scale.
According to him, VC investments in startups hinge on three factors: quality of the team, business edge or competitive advantage, and market size for business.
Mr Sarun also expressed concerns about some startups that have a "too flat structure", which makes it hard to scale.
He said a startup's structure should be more like a pyramid shape, where capable employees can see their career path in the organisation.