Investors keen on mature startups

Investors keen on mature startups

Startups eyeing IPOs in next 3-4 years

Clockwise from top left are Pariwat Wongsamran, director of Entrepreneur and Enterprise and director of Startup Thailand at National Innovation Agency, Mr Sarun, Mr Sirapun and Mr Pattaraporn.
Clockwise from top left are Pariwat Wongsamran, director of Entrepreneur and Enterprise and director of Startup Thailand at National Innovation Agency, Mr Sarun, Mr Sirapun and Mr Pattaraporn.

Thailand's startup ecosystem is thriving in hyper growth mode that could drive economic recovery after the pandemic while more focus will be on large-sized investments in mature startups, say startup industry pundits.

In the next 3-4 years, there will be startups jumping into the stock market to raise funds while a shortage of human resources continues to be a pressing problem in the startup industry.

The pundits shared their views in an online seminar entitled 'The change of startup ecosystem landscape after Covid-19 pandemic' at the World Business Angel Investor Week 2021.

MATURE STARTUPS

Sarun Sutuntivorakoon, president of the Thai Venture Capital Association (TVCA), said venture capitalists (VCs) now prefer to invest in mature startups with sizeable funding, compared with six years ago when there was a lot of seed funding for startups at the early stage.

Governments around the world are now pumping money into their economies due to the pandemic and some of the money flows to VCs, he said.

"When the fund size gets bigger, the focus will be more on mature companies," Mr Sarun said, adding that bigger startups are likely to inspire more confidence among VCs in terms of risk management and return.

In 2022, younger startups are likely to undergo bootstrapping --attempts to build a company from personal finances -- before they can receive funding.

Once they can start to get funding, the amount they receive will be bigger than in the past, he said. The funding size would be larger than 10 million baht.

Series A, B and C funding rounds would also see a lot bigger funding than in the past.

Startups engaged in fintech, financial inclusion, entertainment, online payment, cryptocurrency and revolutionary types of commerce would be the focus of new funding.

Mr Sarun said corporates which have excess money will establish corporate venture capital (CVC) funds. Regular startups may struggle to draw more talents who are likely to join CVC-backed startups, which secure more funding.

There will be startups raising funds through initial public offerings (IPOs) in the next 3-4 years, he added.

SHORTAGE OF WORKERS

Pattaraporn Bodhisuwan, president of the Thai Startup Trade Association (TSTA), said the pandemic has taken a toll on startups, particularly those in the travel and entertainment segments, and many were forced to pursue other businesses or pivot.

However, some sectors experienced strong growth, such as fintech and logistics, while demand for technology and digital solutions are on the rise.

Due to the pandemic, many startups have adopted remote work, similar to what happened with multinational firms.

"There has been a change in business mindset among local startups as now they want to scale regionally and explore markets outside Thailand. In the past many thought this approach would be difficult," said Mr Pattaraporn.

The shortage of human resource is likely to continue in the startup industry, particularly those with engineering and specialised business skill sets that need to scale startups, he said.

"Now is the opportunity to bring foreign talents to Thailand," he said.

According to Mr Pattaraporn, investors are now more likely to focus on startups that gain traction, particularly those with hyper growth potential.

The competition in the startup industry will be on a global scale. "Those that focus only on the local market will be under threat," he said.

Sirapun Yongwattananunth, investment promotion officer of the Board of Investment (BoI), said Thailand has four types of smart visas to attract talents and investors with some privileges offered.

The first is Smart I (Investor), given to individuals or through VCs with the direct investment sum of at least 20 million baht in technology-based business or an investment of at least 5 million baht in a startup.

The second is Smart T (Talent), provided to highly skilled professionals. Others are Smart S (Startup), given to technology-based startup entrepreneurs and Smart E (Executive), granted to executives in technology-based companies.

As of last month, some 800 people had received these smart visas.

According to Mr Sirapun, BoI also supports a grant under the Competitiveness Fund to subsidise human resources costs for startups. Startups can join a pitching competition for the subsidy that will be held in December.

The selected startups must focus on the BCG model (bio-, circular and green technology).

The subsidy will cover the payroll cost for technicians and executives for 50% of a monthly salary with a ceiling of 100,000 baht per person for two years.

Startups receiving the subsidy programme must have investment funding of at least 5 million baht.

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