When one thinks of the countries driving Southeast Asia’s tech ecosystem, the obvious ones that come to mind are – Singapore (where more than 80% of Southeast Asia’s startups are registered), Indonesia (home to four unicorns), and to a lesser extent, Vietnam (a fast-growing and evolving tech ecosystem). The one that gets overlooked more often than not is Thailand.
However, that may soon change, given the massive opportunity at play.
Home to a population of roughly 70 million, Thailand has a 82% internet penetration rate, with most of the young population technologically literate.
The country ranks in the global top ten in terms of social media usage, and its e-Commerce activity through B2B and B2C channels ranks as high as the other Southeast Asia regions.
This rapid rise in digitization has seen the country’s startup ecosystem benefit from an increase in funding as well. As recent as 2012, funding was in single digits, which has now risen to close to 100 times that in 2020.
This funding has gone to sectors looking to capitalizing on the digital savviness of Thai consumers.
e-Commerce/Marketplaces – The likes of Priceza, GoWabi and Fastwork have continued to see positive tailwinds over the years, which only amplified during the pandemic. Revenue growth rates of e-Commerce have been growing at ~17% year-on-year over the last 3 years.
Fintech – Deep Pocket, Bitkub, Peak, Omise and others have benefited from a lending/payments boom, similar to other countries in Southeast Asia. Digital payment users are expected to amount to 48 million by 2023.
Logistics – Driven by the growth in e-Commerce, logistics and enablement companies such as aCommerce and others have benefited greatly from catering to the requirements of brands and marketplaces.
Agritech/F&B – 40% of the Thai populations works in agriculture and is one of the largest net food exporters globally. This has given birth to a number of companies such as Foodstory, Freshket, and Cookly.
Apart from the above (which are probably the usual sectors shared across the Southeast Asia), there are a couple more that benefit from Thailand’s unique culture and consumer habits –
Tourism/Travel tech – Thailand is the ninth most popular tourist destination (or at least was, when tourism was a thing), which has given rise to players like Favstay, Tourkrub and others who have capitalized on this boom.
Fashion – Due to its unique cultural identity, and large base of talented women artisans, Thailand has given birth to the likes of fast-fashion company Pomelo and B2B marketplace Zilingo (technically not Thailand incorporated, but had its early success digitizing sellers in Bangkok’s Chatuchak market). Both of these found early adoption in the country despite playing in crowded spaces, now having a footprint that extends across Southeast Asia.
While a lot of these sectors have attracted a lot of capital, the major source of these, rather than pure venture capitals, are actually corporate venture arms.
Role of corporate venture capital and the government
Thailand has historically seen a greater participation of venture capital funding coming from venture arms of large corporates. – Popular examples include Siri Ventures, Digital Ventures, and AddVentures amongst others.
Together, these CVCs have an aggregate investment corpus exceeding US$600 million dollars, an amount that is only growing in number as these funds were mostly set up in 2016-2017, not too long ago.
While initially, the premise was for these CVCs to look for companies that would fit the bill from a strategic perspective, that is now increasingly changing. CVCs have now expanded their mandate, both geographically, as well as from a sectoral perspective, allowing them to behave more like pure-play financial investors as well.
On top of this, the government has laid out a number of initiatives to spur innovation in the country – these include tax exemptions, easier licensing for tech startups, and easier listing regulations for later stage companies.
A combination of these factors certainly indicate that Thailand could be the hidden gem of Southeast Asia’s ecosystem, and one that is poised to see exciting growth ahead.