Thai startups are struggling to make it in an ultra-competitive market, with many still unable to find their way to seed funding from venture capitalists, according to a recent report by global consulting firm Deloitte’s Thai division.
The number of seed-stage funding rounds in the country halved to 15 in 2022 from 2019, Deloitte reported citing Innovation Club Thailand data. This was largely due to the dearth of early-stage accelerators and the market dominance of corporate venture capital firms (CVCs) focusing on late-stage deals.
“The struggles that Thai startups face are part of a chicken-and-egg conundrum. Startups need capital to grow and become unicorns, but many venture capital firms see this ecosystem as too nascent. They are not comfortable providing capital without proven ecosystem success stories,” said Metinee Jongsaliswang, country consulting leader at Deloitte Thailand.
“They say it takes a village to raise a startup. But first we need to build that innovation village in Thailand,” she said.
The report also pointed to limited support from the government, saying early-stage startups typically need a minimum of $500,000 to operate within 1-2 years, while these programmes normally provide around $20,000 to $150,000.
“These programmes often require paper-based applications and receipt-based reimbursements, with slow or delayed disbursement processes — putting undue strains on applicants’ operating cashflow, as startups are typically cash strapped,” it added.
With limited success stories from entrepreneurs and mentors, Thai founders also find it difficult to venture into the startup universe while managing risks and developing a mindset for the global market.
Deloitte maps out three key strategies for the Thai government to address the challenges and develop the ecosystem — an equity matching programme, bigger grants and better grant processing, and a centralised government organisation to focus on startups and venture capital programmes.
“Based on our research, we quickly realised that there is no one-size-fit-all approach that any government can deploy to successfully develop an innovation ecosystem. In fact, each country has implemented its own bespoke initiatives to tackle their unique challenges, and it’s worth studying the practices from each country and adapting them to Thailand’s context,” said Kenneth Tay, consulting director for financial services at Deloitte Southeast Asia.
“Innovation ecosystems require years, if not decades, to build. Entrepreneurial talent, a risk-taking mindset, and breakthrough ideas do not materialise overnight but only after long-term, consistent effort,” Tay added.
Launched on Wednesday, the report is based on findings from over interviewees in the startup ecosystem, including founders, venture capitalists, and relevant government bodies in Thailand and the region.