The coming Thai startups resurgence

I have been going to Thailand for the past twenty years. Of all the places I have traveled to around the world, it’s the country I have gone to most and have spent the most amount of time.

It’s a hike to get there from NYC, but once I land, all stress and cares seem to vanish. The people are friendly, the cuisine is amazing, and I love the easy access to the sea and the mountains. Some of the most stunning sights I have seen have been in Thailand.

Many feel the same way. About 40 million people visited Thailand in 2019, making it one of the top 10 travel destinations in the world. All of this tourism also contributes a significant portion of the GDP, as high as 21.9% back in 2019.

While the pandemic put the brakes on tourism, Thailand is recovering with 25 million visitors in 2023. For a country so reliant on tourism though, that was a huge economic hit. Compared with other ASEAN countries, Thailand GDP growth has been the slowest to recover to pre-pandemic levels.

There was something else I noticed though as I returned to Thailand during the summer of 2022. Besides the fact that there were a lot less tourists, the startup ecosystem seemed a lot less active. It was hard to describe, but it felt like things slowed down from pre-pandemic times.

In all the years I traveled to Thailand, the idea of doing business there was never a thought in my mind. Then during my tenure at Stack Overflow, I spent more and more time in Asia to connect with the many developer ecosystems, speak at events, and build the Stack Overflow Teams business.

That exploration eventually took me to Bangkok to meet engineering leaders from enterprises to startups. Fun side fact, the first startup I visited was the GetLinks office. Anyway, it was encouraging to see large corporates invest more into engineering teams to drive digital transformation and entrepreneurs going out on their own to launch tech-enabled startups.

The years between 2016 to 2020 were a renaissance for the Thai startup ecosystem. The government began to promote and build policies focused on fostering local startups through tax breaks and grants. Large enterprises such as True, AIS, DTAC, SCB, Kbank, Krungri and others launched startup accelerators and corporate venture firms. Other investors followed include 500 Global to setup shop in Thailand as 500 Tuktuks.

The injection of capital and support led to an emerging and active startup community. Some of the earliest startups like Ookbee, OPN, Pomelo, and aCommerce snagged growth capital. Others like Flash Express, Line Man, Sunday, and Finnomena launched during this time, just as co-working offices and services providers entered the ecosystem to support the needs of startups.

Then COVID-19 took over the planet and startups were thrown into chaos. But just as quickly as the pandemic spread, startups adjusted and many managed to thrive. The years 2020 and 2021 saw historic rises in startup funding. Thailand startups also experienced a metoric rise in funding, but it also hid a troubling sign. The overall Thai startup ecosystem was going in reverse.

Others also noticed the slowdown as well. When I recently posed the question “Does Thailand have an ailing startup ecosystem?” on LinkedIn, many folks more familiar with the Thai startup ecosystem chimed in to share their thoughts. Here’s what they had to say summarized into 10 key points (go here to find each person’s full insights into the Thai startup ecosystem):

• Government Support: There's a need for larger government grants to help early-stage startups While grants do exist for Thai startups, the current funding amounts are insufficient for the type of recruitment and growth to scale startups.

• Developer Talent: The work ethic of Thai developers is seen as lagging behind counterparts in Vietnam and Indonesia, leading to outsourcing which poses significant risks for startups as they begin to build traction.

• Language Barrier: Limited English proficiency hinders founders from effectively pitching to foreign investors and adopting global best practices. According to one study, Thailand ranked 101 out of 113 non-native English-speaking countries in English competency.

• Seed VC Investment: Most startup investment is at the growth stage through corporate VCs, not at the early-stage. Of the 180 funded startups in Thailand, 57% are seed stage, 18% are Series A, the lowest proportion across ASEAN. There are angel investors in Thailand though, there just needs to be more of them.

• Legal and Financial Challenges: Managing equity structures and preference shares under Thai law is frustrating, and there's a perception that there's no market need for VC funding due to a thriving economy without tech investors.

• R&D and IP: R&D patents and IP registration are tied to universities, with little spillover effect from academic research to commercialization. For universities that do have tech transfer programs, they tend to be highly bureaucratic and do not provide favorable terms.

• Entrepreneurial Culture: The most talented individuals often return to family businesses or corporate roles, and successful tech founders with late funding rounds or exits are often non-Thai. The result is that the wealth generated does not go back into the startup ecosystem.

• Global Ecosystem Connectivity: Scaling startups require a global culture and language from day one. Thai founders need to interconnect more and engage with startup ecosystems in other countries, like Singapore and Indonesia, to gain a broader perspective and learn from founders that have globally scaled startups.

• Online Payment Systems: While there has been progress, the lack of online payment systems and consumer behavior was a significant challenge in the past. However, others noted that there are no issues with digital payments in Thailand. One point regarding financial services adoption is that currently 63% of the population is either unbanked or underbanked.

• Diverse Ecosystems: Thailand has more than one startup ecosystem; a global ecosystem adhering to global metrics and culture in Bangkok, a digital nomad ecosystem of mostly foreign creators, and a local ecosystem with local founders and investors across the rest of Thailand.

Many others have noticed the same challenges as noted in reports from BCG to Deloitte as well as the voices of prominent figures in the Thai startup community. But they all believe a tech startup future is inevitable in a country that has a stable economy, a sizable population, and a massive SME sector barely scratching the surface of digitization. When one in five Thais actively use digital currencies (the highest across ASEAN) and have 141% mobile penetration, the consumer desire for more digital services is only going to grow, and with it the need for startups to service that interest.

There are encouraging signs for the future of the Thailand startup scene. For one, Techsauce has been a constant presence in the Thai ecosystem since 2014, reporting on activities across the tech community launching events, and bringing awareness to startups. Many of the Thai unicorns and soonicorns are ready to exit, including Line Man Wongnai and Amity, which would provide a needed boost for the Thai ecosystem as capital and experienced talent gets recycled into the local community to launch new startups.

The government is also recognizing the role it can play to be a better partner to startups. Through the National Innovation Agency, Thailand has announced an ambitious plan to cultivate 10,000 startups by the end of 2027. The government will provide $138 million in grants supporting 1,500 new projects in agriculture, medicine, tourism, soft power, energy, and electric vehicles.

Lastly, providers such as AWS are making a significant commitment to Thailand. In 2022, AWS announced plans to open a region in Thailand and invest more than $5 billion in Thailand over 15 years. This level of committment and the ongoing work of the local AWS team to support Thai startups through credits, workshops, technical guidance, and programs has gone a long way in helping startups to thrive, especially during COVID and the current the funding downturn.

The opportunity for Thailand to become a prominent startup hub in ASEAN is achievable. Despite the many challenges, the growing adoption of technology to transform work and consumer experiences is inevitable, providing an opening for Thai-based startups to lead the charge in digitizing the economy. That moment for Thai entrepreneurs is now!

Do you agree with the insights shared about the Thai startup ecosystem? How much was shared mirrors your own startup ecosystem in terms of challenges and opportunities?

Mark & Basil

Acknowledgements

This post was inspired by the many folks in the Thai startup community that contributed to our knowledge of the country and ecosystem. Thank you Kris Supavatanakul, Pietro Borsano, Phuvadol Thongthavorn, Ankit Upadhyay, Timothée Grassin, Nicolas El Baze, Amit Majumder, Tharin Sethi, Pascal Paemelaere, and Natcha (Lyn) Thawesaengskulthai. Also a special thanks to Amarit (Aim) Charoenphan and Nicha Suebwonglee (of the AWS team) who have been our awesome guides over the past few years in helping us connect with Thai founders & investors.

What makes for a good startup idea? We already tackled this before in one of our very first editions of this newsletter, a post called “Where do startups ideas come from?”

However we neglected to include one obvious place where you can find good startup ideas from. People just tell you! Ok, maybe having your co-worker suggest a “Jump to Conclusions mat” is not in the “good” category of ideas. Who is telling you the ideas is an important consideration.

Corporations are often publicly sharing things they need built, usually through hackathons or corporate challenges. There are also many investors that throw out ideas every so often. But when Y Combinator suggests startup ideas, it is worth listening to.

We included the full-list below and links to the Y Combinator partner explaining the idea in more detail. Many of these also align closely to our 6 tech trends in 2024 for startups post from last month. Time to start building!

• Applying machine learning to robotics

• Using machine learning to simulate the physical world

• New defense technology

• Bring manufacturing back to America

• New space companies

• Climate tech

• Commercial open source companies

• Spatial computing

• New enterprise resource planning software (ERPs)

• Developer tools inspired by existing internal tools

• Explainable AI

• LLMs for manual back office processes in legacy enterprises

• AI to build enterprise software

• Stablecoin finance

• A way to end cancer

• Foundation models for biological systems

• The managed service organization model for healthcare

• Eliminating middlemen in healthcare

• Better enterprise glue

• Small fine-tuned models as an alternative to giant generic ones

Well, it finally happened. Basil and Mark were in the same location and no tears in the universe or time-space continuum happened 😂 😂 😂

We met last week in Dubai to plan out some content for the year, interview a couple of startup founders at the AWS offices, and participate in an all-day event for founders on helping them raise their Series A!

It was spectacular to see how Dubai is thriving as a startup ecosystem. This week is the start of Step Conference that will bring founders and investors from across MENA to meet, pitch, and connect. Soon after that will be LEAP 2024 in Saudi Arabia, one of the biggest innovation conferences in the region. If you are attending either, definitely catch up with Basil and the AWS team.

Meanwhile Mark will be in the NYC region for the next few weeks catching up on AWS content projects, including the launch of our AWS Startup Show on LinkedIn Live. That’s right, we are going live video and inviting startup founders on to share what they are building and how they are doing it on AWS.

Next month, Mark will be back out on the road in Singapore and Thailand (again) to speak at a few events, including being a judge for the FACE startup pitch event on March 21. Till then, let us know what you are up to and the awesome events you are attend over the next few months!