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3 big problems with the Thai startup ecosystem

problems-258x300When talking about the startup ecosystem in Thailand, it can’t be denied that, besides the normal key players like VCs, business sectors, or co-working spaces, telecom operators are one of the most active players in this ecosystem. They each have their own incubator programs. More over, True and AIS also have their own VCs under their umbrellas. This trend of a telco’s involvement in startups is something I’ve seen in other countries such as Singapore’s SingtelIndonesia’s Telkomsel, and Philippine’s Globe Telecom. Glad to see it’s happening in Thailand.

I wonder what telcos think are the problems in the startup ecosystem and why they want their incubator programs (and VCs) to be part of the solutions.

A Bangkok-based newspaper, Telecom Journal and Innovation, talked to the head of the three incubator programs – AIS’s Prattana Leelapanang, True’s Punnamas Vichitkulwonsa, and Dtac’s Sigvart Voss Eriksen. It turns out they see three main problems:

1. Financing

Finding funds to survive is a classic problem. All three agreed that the source of funding for a startup in Thailand should be from venture capitalists willing to invest in exchange for a stake in the company. However, they all also shared the same concern that a startup needs a clear and realistic business model, which many do not have.

2. Product Differentiation

I can’t emphasize enough how just creating a product or an app does not mean it’s a successful startup. Yes, you may have an app in either the Apple App Store or Google Play. But what’s next? There were more than 900,000 apps as of June of this year in Apple App Store alone and over 1 million apps in Google Play. So where do you belong? How will your startup differentiate itself? Differentiation is really important. We’re talking everything from partnerships with other service providers, quality, and unique positioning. Not to be discouraging, but we all know it’s a “winners-take-all” kind of market.

Golden Gate Ventures stated its reason for investing in Noonswoon was because “the company model is unique”. Builk is a rising star among the Thai (and Asian) startups because it tackles an industry startups don’t normally consider – construction.

team-2-2apgww83. Personnel

It’s not just about competing to take market share or being chosen by the customers. In the Thai startup ecosystem, a good staff is also something companies have to compete for.

Yod Chinsupakul, Wongnai’s CEO and co-founder also believes personnel is definitely a key issue in Thailand:

Building a team is one of the most challenging things. We want efficiency and not just adding to the number of people to the company. It’s not just about finding a developer. You have to find one that believes in the project.

The three aforementioned issues are familiar to those who follow the startup industry. I don’t claim to be a startup expert. But allow me to interject my two cents from closely observing the startup ecosystem in Thailand for months: I think all three points are interconnected. The third problem is the root of the second problem, while the second problem is the cause of the first problem.

How?

First, let’s talk about personnel. In Thailand, there’s a lack of skilled ICT talent. The demand far outstrips the supply. That includes everything from developers to big data analysts to engineers. A survey by the IMC institute showed that 76.4 percent of respondents from 100 IT-related companies saw a shortage of qualified employees as a big challenge to their catching up with new technologies.

To me, this points to problems in our education system’s incapability to train skilled ICT workers. Poorly trained labor leads to poor products and services, lack of business skills, and lack of creativity and innovation.These problems make many Thai startups unattractive to VCs.

We can also take a look at the Thai public sector. The Software Industry Promotion Agency (SIPA) also does an incubator called “Angel in the city”. Personally, I believe this is the wrong approach. As a public sector entity, SIPA shouldn’t walk the same path as the private incubators. Why? Simply because the marginal benefit is not as high. SIPA should first develop a better education system. SIPA can walk into a university on the ministry of education’s behalf and partner with them to help improve startup-related education. This is something telcos cannot do. Besides not repeating the same step, it’s also a way to tackle the problem at its root.

startupIn addition to financing, I believe telecom operators only look at half of the problem. They only focus on seeding and funding when startups already have a product or service. But many have good ideas, but have trouble obtaining the first $100,000. It would be such a shame to only see people with mommy and daddy’s money allowed to participate in the incubator programs and get attention, while those that work out of a garage are forced to forget their dreams.

When looking at the Thai ecosystem, many organisations have good intentions, but I believe they either don’t see the problems or the big picture. Communication is the most important factor. Decision makers need to communicate so they don’t repeat each other’s work. This way, they can provide solutions to problems without overlooking any.

I really hope to see the Thai startup ecosystem getting stronger. I’ve seen so many interesting ideas and I can’t wait for them to shine. Now my only hope is that we get it together and becoming a strong ecosystem, at least before 2015, the start of the ASEAN Economic Community (AEC). When the free market begins, I can only imagine it will get harder if the foundation of our Thai ecosystem is not strong enough.


Full disclosure: The Telecom Journal and Innovation newspaper cited above is owned by a relative of Saiyai (the author of this post).

(Image credit: magicalexperiments.com, janetvanegas.edublogs.org, and blonde20.com)

(Editing by Paul Bischoff and Charlie Custer)


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