At a recent Startup Grind event moderated by Tobias Endress, we had the privilege of participating in a fireside chat with Thomas Hundt, the Director of Thailand, Myanmar, Cambodia, and Laos for Germany Trade & Invest (GTAI). His extensive experience with the regional startup ecosystem and consultations with European investors provided invaluable insights into what foreign investors expect from Thai startups.

Introduction to Germany Trade & Invest (GTAI)

GTAI plays a pivotal role in facilitating business opportunities for German companies and promoting the local market economy. Hundt highlighted GTAI’s three primary goals:

1. Identifying business opportunities for German companies in foreign markets.
2. Reporting on local market conditions, including the startup landscape.
3. Providing support for foreign companies looking to invest in Germany.

These objectives illustrate the dual role of GTAI in both fostering outward German investment and facilitating inward foreign investment into Germany. Hundt’s insights provide a comprehensive understanding of how these goals intersect with the dynamic Thai startup ecosystem.

The Thai Startup Ecosystem: Access and Main Findings

Thomas Hundt’s insights into the Thai startup ecosystem are drawn from his interactions with the Thai Startup Association, TechSauce, and other direct contacts. He noted that Thailand ranks slightly below average in global startup rankings, despite having around 1,000 startups and a broad ecosystem. Each year, approximately 30 new startups emerge, supported by 400 investors. However, seed funding remains a significant challenge as investors tend to favor more mature ventures.

Thailand offers various grants and incubators, but there is a critical gap in funding for Minimum Viable Products (MVPs). While a well-presented idea with a solid foundation can attract financing, setting up a production line in Thailand is challenging due to stringent funding requirements. Banks often require a five-year track record, and venture capitalists are increasingly risk-averse. Moreover, large Thai corporations tend to protect their market share, making it harder for startups to thrive.

Sector Strengths and Innovation

Thailand has long established strong manufacturing sectors in automotive, agriculture, and food industries, characterized by high-value-added companies. The country also boasts a robust fintech sector and a well-developed electronics industry, including printed circuit boards, which have been thriving since the 1990s. These industries have formed the backbone of Thailand’s economy, driving significant economic growth and providing employment for millions. However, they now face various challenges, such as increased global competition, technological disruptions, and evolving consumer demands.

Startups play a crucial role in addressing these challenges by driving innovation across these sectors. In manufacturing, startups are introducing smart technologies and automation to streamline operations, reduce costs, and improve efficiency. This is especially vital in the automotive sector, where maintaining a competitive edge requires constant technological advancements. In agriculture and food industries, agtech startups are developing precision farming techniques and sustainable practices that optimize crop yields and enhance food quality, helping Thailand maintain its position as a leading food exporter.

The fintech sector benefits from startups that bring innovative financial solutions, improving financial inclusion and providing advanced digital payment systems. Similarly, in the electronics industry, startups are fostering advancements in areas such as printed circuit boards, ensuring that Thailand remains a key player in the global electronics supply chain. By injecting fresh ideas and cutting-edge technologies, startups are not only helping these traditional sectors to overcome their current challenges but also paving the way for future growth and sustainability in Thailand’s economy.

Navigating Thai Conglomerates

For startups dealing with Thai conglomerates, the strategy largely depends on their exit plans. Thai corporations are keen on acquiring competitors. Large Thai firms are also investing heavily abroad, such as PTT’s $4.75 billion investment in Allnex, a German coating company. This trend of outward investment surpasses the foreign direct investment flowing into Thailand.

Hundt emphasized the importance of understanding the competitive landscape. Thai conglomerates often have substantial resources and influence, which they use to maintain their market positions. For startups, navigating these dynamics requires a clear strategy, whether it’s positioning for a buyout or seeking strategic partnerships.

Remarkable Traits of the Thai Startup Ecosystem

One of the standout features of the Thai startup ecosystem is its constant evolution. Despite its dynamism, the ecosystem is not particularly welcoming to foreign startups. However, initiatives like the new startup visa program by the Board of Investment (BOI) are slowly changing this landscape, with 200 visas granted last year.

Thailand’s low global startup ranking reflects broader systemic issues, including a lack of venture capital and limited entrepreneurial knowledge. Thai universities rank poorly on a global scale, contributing to the skills gap. Overcoming these challenges is possible but often comes at a significant cost.

Investment Opportunities for Foreign Investors

Foreign investors looking at Thailand typically seek business partners and investment opportunities in sectors like manufacturing and technology. Labor costs and availability, office space, and operational costs are major considerations. Skilled sales and tech staff with language proficiency are highly sought after.

Ownership restrictions are a common concern, but exemptions and BOI incentives can mitigate these issues. Nonetheless, navigating Thailand’s bureaucratic landscape remains a challenge.

Supporting Thai Companies in Germany

Germany Trade & Invest provides comprehensive support for Thai companies looking to enter the German market, including setting up branches and participating in specialized fairs. However, mergers and acquisitions fall outside their purview. Thai delegations frequently visit Germany, reflecting strong bilateral trade relations.

Hundt emphasized that GTAI’s support extends beyond mere market entry. They provide ongoing assistance to help Thai companies navigate the complexities of the German market, from regulatory compliance to finding local partners. This comprehensive support framework is crucial for Thai companies aiming to establish a foothold in Europe.

Competitive Landscape in Asia

Singapore and Hong Kong have traditionally been the top choices for startups. However, the political situation in Hong Kong has driven many companies to relocate to Singapore, increasing operational costs there. Cities like Bangkok and Kuala Lumpur are positioning themselves as competitive alternatives.

Hundt noted that Bangkok’s strategic location and relatively lower costs make it an attractive option for startups and investors alike. While Singapore continues to dominate in terms of business environment and infrastructure, Bangkok is making significant strides to close the gap, offering a compelling value proposition for those looking to invest in Southeast Asia.

Conclusion

Thomas Hundt’s insights underscore the complexities and opportunities within the Thai startup ecosystem. While challenges remain, particularly in funding and bureaucratic hurdles, the potential for innovation and growth is significant. For foreign investors, understanding these dynamics is crucial for making informed investment decisions in Thailand’s evolving market. The Thai government’s initiatives, coupled with the entrepreneurial spirit of its startup community, indicate a promising future for those willing to navigate its unique landscape.