Thailand’s Startup Ecosystem: Time to Take Off the Training Wheels
One of the common complaints I hear about America’s Millennials is that we have created a generation of coddled, self-entitled youth. A generation who gets trophies just for showing up. Who scores low on international tests of math and sciences, but high on self-esteem and assessments of self-performance. Who needs safe spaces. Who isn’t prepared for the rigors and harsh realities of the real world. Whether any of these judgements are fair or not is not my argument to make, but they do come to my mind when I think about Thailand’s young startup ecosystem.
By all metrics, innovation in Southeast Asia has taken off like a Saturn rocket (or perhaps more contemporaneously, like a SpaceX Falcon 9), and over the past several years, Thailand has emerged as a regional hotbed of startup activity. According to Techsauce, from 2012 to mid-2016, 71 Thai startups were funded to the tune of US$136 million, up from the 3 startups receiving US$2 million in funding in 2012, a 23- and 68-fold increase respectively. Similarly, the local funding scene grew from a single VC fund raising US$7 million in 2012 to the 60+ financial and corporate investors raising US$79 million by mid-2016, a 60- and 11-fold increase respectively (Techsauce, Thailand Tech Startup Ecosystem Q2 2016). Sure, the numbers are strictly minor league compared to the ginormous global tech hubs in Silicon Valley, London, or even Singapore, but even from this small base the pace of development is blistering, and Thailand is fast approaching that inflection point in the hockey-stick growth chart that we techie-tech startup folk so love to see.
Numbers aside, Thailand possesses all the ingredients that would characterize a major and enduring startup hub, if not globally then at least regionally. We have a growing population of English-speaking, tech- and social media-savvy university graduates who matriculate both locally and overseas; a healthy diversity of business, technical, and creative talent; a strong infrastructure complemented by attractive retail, dining, entertainment, and leisure offerings; relatively foreigner-friendly immigration policies that has attracted skilled professionals from around the world; a growing cadre of regional and global venture capital funds eyeing Thailand as a rich hunting ground for investment; and a government and regulators who are throwing their weight behind this embryonic ecosystem. In a nutshell: the Thai startup ecosystem is on fire.
So, what’s my gripe, you ask?
Let me start by sharing a bit of context. I was recently installed as the head of corporate venture capital for a Thai commercial bank, but prior to that spent several years mentoring and funding startups in multiple countries as an angel investor. I’ve also had stints as a mergers & acquisitions banker in both Asia and North America, and helped international retailers break into and expand throughout China. I’ve spent more than my fair share of time on airplanes and in hotel rooms, and in just the first seven months on the job as a VC, I’ve immersed myself in nine startup ecosystems around the globe. I’ve seen more pitches than I care to count, and even judged a handful of pitch competitions, the most recent being a local Demo Day (those marathon pitch days featuring startups completing an accelerator or incubator program). By and large, I was disappointed with the great majority of the newly-minted graduates. I had critical comments and questions for almost every one, and I wasn’t alone. I even joked with the judge/fellow VC sitting next to me that we were both competing to be the Simon Cowell of the demo day, and judging from our rather pointed critiques, we were running neck & neck.
In the days that followed, I spent a lot of time thinking about those startups and the quality of their presentations. The entrepreneurs were intelligent and capable, and many of their ideas were stunningly creative and innovative. So why were their performances so unremarkable? In contrast, I think back to an international pitch competition which held its finals in Bangkok earlier in the year, bringing the world’s best social enterprise startups together. Each of the 10 finalists, coming from every far corner of the globe, presented pitches that I considered to be among some of the very best I had ever seen. As I considered these two divergent competitions, I had two basic observations: 1) the very top echelon of startup pitches in Thailand are strong enough to compete head-to-head against those by regional and global peers, but 2) the overwhelming majority of pitches are decidedly underwhelming, and would struggle on the world stage. This isn’t an indictment of any specific startup, accelerator program, or advisor/investor/mentor. Rather, it is a problem endemic throughout our local ecosystem, with the Thai culture being a root cause.
Thai society is a polite society, one that places high value on empathy and harmony. But it is also one that shuns confrontation or criticism, even when it is constructive. It is a culture that has created one of the great service and tourism industries in the world, but to some extent, it is one that handicaps its own startup ecosystem. Entrepreneurship is hard. Really, really hard. And for the entrepreneurs with the courage, energy, and spirit to embark on such a grueling undertaking, it can be a lonely, soul-crushing, stress-ridden experience. The best ecosystems in the world are those that can nurture their entrepreneurs with encouragement and positive reinforcement, but still administer brutally honest and critical advice, all in equal measure. And therein lies the problem with the Thai ecosystem. The aversion to criticism and confrontation by default creates a safe space for our entrepreneurs, with a distinct flavor to Thai accelerators, pitch competitions, and even funding rounds. Ask any Thai entrepreneur about their Series A fundraising, and they will inevitably have to distinguish between an “international A round” vs. a “Thai A round”, the latter being notably smaller in scale (akin to an international seed or pre-A round), and in some cases with deal structures a bit more ad hoc, irrational, and indulgent compared to more streamlined international deals. I’ve met more than a few entrepreneurs possessing an overinflated sense of their startup’s worth, based on overly-generous valuations underpinned by vanity metrics designed to generate ooh’s and aah’s, but often with only the most tenuous connection to solid business fundamentals. Thank you for showing up, here’s your trophy.
The Thai ecosystem does subject its startups to many of the rigors of the wider startup world, and its VCs and mentors do provide much needed feedback that any would and should give a startup, but it’s like we’ve baby-proofed the room: we’ve taken the hard edges and pointy corners off the furniture. We compliment, we pat on the back, we offer the carrot. But when it comes time to apply the stick, our critique becomes muted, our scrutiny tempered. We host pep rallies disguised as bootcamps, we spare feelings. And for the early years of the Thai ecosystem, as its first generations of entrepreneurs learned new-to-Thailand startup skills like creating MVPs (minimum viable products, i.e. prototypes), generating traction (i.e. users, revenue), and raising seed rounds of capital, it made sense to create an entrepreneurial biosphere (like the fintech “sandboxes” under discussion today) in which embryonic ideas and nascent enterprises are given enough shelter and a fighting chance to make it past that early, fragile stage of their lives.
But that time is past. This ecosystem has grown, developed, blossomed, matured. We as entrepreneurs have digested Lean Startup methodologies, learned the pirate metrics, done our A-B testing, ventured abroad to study global peers, and entered new foreign markets. We as investors shouldn’t be pulling our punches at a time when today’s entrepreneurs need to learn how to take a punch, to roll with a punch, and even to punch back. The startup world constantly talks of the value of grit and perseverance, but those are qualities that are only born of challenge and adversity. We need our gauntlets, our agoges, our rites of passage. We can withstand the competitive forces that pummel startups and pressures that turn coal into diamonds, and do.
As an American-born Thai, I am often chastised for my characteristic Western bluntness, which in the past has gotten me into no end of trouble with the large Thai conglomerates and family groups for whom I have worked. Today, I’ve been given a bully pulpit, and a real platform from which to contribute to and enhance our young-but-robust startup ecosystem, and I mean to use it. So, to all those entrepreneurs I encounter who think my blunt-but-well-meaning comments are unnecessarily harsh, see if the indifference of a market that doesn’t want your product suits you any better. As a startup investor, mentor, cheerleader, and evangelist that wants to see you create a unicorn and elevate our ecosystem, I would rather hurt your feelings and spare your life savings than the other way around. And to the Thai startup ecosystem, I tell you this: time to take off the training wheels.
Originally published in Thai-American Business Magazine, Vol 6: The Rise of Entrepreneurs and Startups, American Chamber of Commerce in Thailand, 20 January 2017, and LinkedIn at https://www.linkedin.com on January 24, 2017.
