Startups stoked for 2020 funding boost

26-Feb-2020 Intellasia | BangkokPost | 6:02 AM Print This Post

Despite the government’s bluster about building the country into a startup nation as part of the Thailand 4.0 scheme, startup funding has been lacklustre the past few years as Thailand remains bereft of the unicorns found in Asean competitors Singapore and Indonesia.

The funding dearth seems to be turning around this year as some large multimillion-dollar funding rounds see Thai startups moving past Series A and B rounds with enough capital to start competing regionally.

For the first half of 2019, Thai startups only raised $50 million (one of the lowest figures in Asia, behind Singapore, Indonesia, Malaysia, Vietnam and the Philippines), according to a Google Temasek study.

In the first two months of 2020 alone, Thai startups have already raised over $50 million in high-profile funding deals, with other deals announced this year not yet disclosing funding amounts.

While it may be a tough year ahead with the coronavirus disrupting supply chains in Asia and kneecapping its largest economy, these figures represent a stark turnaround for Thailand, where startups have traditionally struggled to attract the attention of venture capital.

BUILD IT OR BUY IT?

Paul Srivorakul, group chief executive and co-founder of e-commerce logistics provider aCommerce, said some of Thailand’s funding woes come from large corporations preferring to build their own digital operations instead of seeking collaborations with startups.

“Startups tend to underestimate the aggressiveness of traditional companies to digitally transform in order to protect their core business,” Paul said. “Some firms acquire startups to do this, but in Thailand many firms would rather build [digital transformations] themselves.”

Legacy companies like True Corporation or Kasikornbank have built massive and effective digital operations in-house through True Digital Group and Kasikornbank Technology Group, while supporting and incubating some startups.

In general, Thai firms tend to want to do much of the digital transformation themselves.

aCommerce, on the other hand, has been incredibly effective at raising funds. In January, the company closed Series D round fundraising with $15 million.

Since 2013 aCommerce has raised over $100 million, making it possibly the most well-funded startup in Thailand.

Paul said this round of funding will likely be the last for aCommerce as it intends to use the money to achieve profitability by the end of this year, then after a year of profitability, launch an initial public offering (IPO).

He said aCommerce’s success comes from adopting a regional strategy. The company essentially acts as the glue holding e-commerce logistics networks together.

Through its network, global brands can choose from all available sales channels, warehousing options and delivery providers to ensure products are shipped to the final point of sale in the most cost-effective and efficient manner possible.

Much of the company’s funding comes from outside Thailand, from large venture capital (VC) and investment funds from Tokyo, the US and Indonesia.

“By focusing on Southeast Asia, we’ve been able to attract global and regional VCs,” said Paul. “Because of high growth, global VCs want in on Southeast Asia.”

CAUTIOUS OPTIMISM

This month, crowdfunded bonds startup Peerpower raised an undisclosed amount in pre-Series A funding from Invent, the VC arm of Intouch Holdings. Peerpower’s founder Vorapon Ponvanit said the deal took about six months to close after talks with around 10-15 VCs before landing on InVent.

“It’s kind of like dating,” he said.

“You have to get to know them like a courtship, meet the stakeholders, meet the board members. But it goes both ways. We wanted to select one that is aligned with us and how we see where our business and the sector is going.”

Vorapon believes this year should be better for funding than 2019, when investors became more conservative and cautious after WeWork’s failed IPO left investors scrambling. The international co-working giant saw far less of a valuation than expected before its IPO in early 2019, which led to the company almost imploding, firing its founder and requiring a multi billion-dollar bailout by Softbank Vision Fund.

He contended this created a ripple effect across VCs, making them risk averse, looking to only invest in startups with proven business models and paths to profitability.

Another trend Vorapon noticed is VCs in Thailand moving to later funding rounds like A and B and eschewing early seed funding altogether, leaving untested young startups to fight it out.

“We’ve been around for four years or so and have been able to show our viability by getting the licence and opening our market,” he said.

“This has been helpful in attracting investment.”

Peerpower’s business could help some startups get funded as well. The startup’s platform allows institutional and retail investors to invest in small businesses through a crowdfunding bond, otherwise known as peer-to-peer lending. This offers a more flexible and accessible funding source amid this relative surge in funding.

https://www.bangkokpost.com/business/1865194/startups-stoked-for-2020-funding-boost#cxrecs_s

 


Category: Thailand

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