Understanding the Thailand startup ecosystem, with Matt Walters of Ardent Capital
We recently caught up with Matt Walters, Principal at Adrent Capital, which is a prominent seed stage fund in Thailand. Ardent Capital was founded by a group of serial entrepreneurs from the region, who have all had successful exits in the past. The founding team of the fund had previously started South-East Asia’s largest ad network Admax (which coincidentally was acquired by India’s Komli Media), and also the region’s largest daily deals site, Ensogo & Dealkeren, that was later acquired by LivingSocial. After significant exits, the fund’s founders have come together to help grow the Thai startup ecosystem.
Ardent invests amounts between 100,000 - 200,000 USD in startups. The fund was started in 2011 with founders' internal capital and has made 6 investments so far. They recently closed their first round of external funding (total size of the fund is undisclosed)
Matt joined Ardent Capital a year back. He brings with him a strong entrepreneurial experience. He was part of the founding team at Topicmarks which was acquired by Tagged. At Ardent, Matt focuses on e-commerce, which according to him presents a huge opportunity for entrepreneurs in the Thai region.
Read on, as we delve deeper into the Thai startup ecosystem with Matt Walters. Here are edited excerpts from our conversation with Matt:
On the Thailand startup ecosystem - 30 million internet users, expected to reach 75% penetration soon
The last report that came out on internet penetration in Thailand, in 2012 stated that it has 30 million internet users. We are seeing reports from ICT(a Government authority on internet and communications) that the numbers are going to hit 52 million by end of 2013, which is nearly 75% internet penetration. That makes me very optimistic. We are also seeing an increased prevalence of smart-phones in the country, which is giving more and more consumers access to the internet.
The startup scene is just exploding in Thailand right now. Two years ago a lot of individuals had aspirations to start companies, but not many jumped into it. Today you see that there are a lot of good, smart engineers who are starting up companies with great business models in place, and have the potential to fare very well. AIS, the largest telecommunications player in the market, has opened up a venture arm and is looking at backing startups. Some of the Thai startups that we meet are expanding to other South-East Asian markets like Indonesia and Philippines. Two years ago all of this looked impossible, but now mindsets are changing. Thai startups are actually talking expansion and scale.
At Ardent, all of us have been entrepreneurs and have had exits in the region. Our team has been early on in identifying opportunities in Thailand, and we are very bullish about the startup space in Thailand.
Angel investors and networks - are there any?
We do not see much of that in the Thai ecosystem yet. The truth is that, all the funds for this region are in Singapore. Significant amount of that money is coming from Japan. So if you are in South East Asia, and you want to raise Series A or Series B, you need to be talking to Japanese VCs who are looking at investing in South East Asia, and the majority of these funds have offices in Singapore.
However, there are some startup entrepreneurs who have had exits in the past, and are now becoming angel investors in Thailand. For example, Khailee Ng, a serial entrepreneur, who sold his last two companies to Groupon and Catcha Media, has now joined 500 Startups as a Venture Partner from the region. I am sure in future there will be more and more entrepreneurs who will become angel investors and also have understanding of the startup scene. Otherwise, you will just have HNIs who are investing from a totally different, old school paradigm with no understanding of the startup scene.
In fact, we at Ardent try to focus a lot of our time on educating the market. We conduct a lot of events at our office and we speak at various events. We want to see the whole ecosystem in Thailand develop, as it is so young. There is so much promise!
Two shared office spaces, no incubators and accelerators
There are two shared office spaces in all of Thailand. One is called Hubba, and the other one is called LaunchPad. These spaces sort of serve as hubs for talent and create a lot of events to nurture the startup talent.
Venture Capital - make a pilgrimage to Singapore
Venture Capital in Thailand is in a very nascent stage. If you have to raise Series A and above, you have to go to Singapore. As investors here, we facilitate those introductions for our entrepreneurs. However, the venture capital scene is just beginning to blossom. Expara IDM Ventures has set up offices in Thailand recently. It was also in news that Japan’s Cyberagent Ventures has hired a guy here who is covering the space for them. So the times are exciting for Thai entrepreneurs, I would say!
Challenges - lack of basic knowledge
There are many entrepreneurs in Thailand willing to take big bets, but many skill-sets are lacking. What we are seeing from last couple of years to now, is that there is willingness to do things, but people lack fundamentals and basic understanding of what it takes to build a venture. For example if you are starting a tech company, how do you take care of customer acquisition, marketing, things like building a team, navigating team dynamics, cash management, things like prioritizing revenue growth over funding, and cash flows and how is that different from revenues. None of these things are about the mental capability of the entrepreneurs, but it comes down to having adequate experience.
Opportunities - E-commerce is going to be huge!
For us right now, we are focused on things around e-commerce – are there good payment solutions, reliable logistics networks - which is a big challenge across the region for growth of e-commerce as an industry; not just in Thailand but even in countries like Indonesia where it is very hard to get logistics networks setup, Indonesia being Archipelago type of region. As a fund, we have specifically chosen to tackle those problems. We want to help create companies that solve these major problems.
One of the biggest projects we are working on right now is called A-commerce. For example a large brand like L'oreal wants enter the region and says, I want to be able to set up a website; I want to be able to transact here. Doing things like warehousing, figuring out Thailand’s complicated transportation environment, you need to have an intimate understanding of the roads. You just cannot use Google Maps here. We are partnering with entrepreneurs that will help large brands navigate these problems by building these solutions already. E-commerce and the infrastructure around it is probably the most interesting challenge! Amazon and eBay do not exist here, hence there is a real opportunity to plant your flag and own the customer in Thailand.
Setting up operations in different regions where there are local languages and different regulatory conditions is not plug-and-play. In fact, I was recently talking to Square’s co-founder, and asked when they will setup operations in Thailand; and he replied that for the next 5 years it is the last thing on their mind. So when an entrepreneur has figured out all these things locally, and large players come in to the market at a later stage, hopefully it could lead to a lucrative exit.
Developer ecosystem - lot of expat hackers
It is not quite like most other areas. There is tremendous talent here, but lot of them still prefer working for large companies -- they feel secure working for large companies. For most there is a lot of risk involved in starting your own company. But what you are seeing now is a lot of entrepreneurial, international hackers, who are coming to Thailand(as everyone likes the country for its hospitality). Looking at these international developers who are their own bosses and make good money as well, Thai developers are getting inspired and taking mentorship from them to become more entrepreneurial - which is a good thing.
Interesting titbit - people are transacting on Facebook
Right now, a lot of transactions are happening via Facebook. People display their products as listing on Facebook pages, if you want the product you can message the person offering the product, transfer the money in their bank account, and after receiving the money, they will courier you the product. This fact is both exciting and frustrating. Exciting because people are using the already existing technologies entrepreneurially, but you also ponder about lack of more professional ways of doing things.
Why should you startup in Thailand?
It is certainly a good decision to set up a company in Thailand. The regulatory environment here is pretty good, it is ranked 18th in the world for doing business. The expenses are very low here; it is a very affordable place. I think it is a wonderful place and people here are warm, open and receptive. There is a lot of talent that is waiting to be leveraged. I was pleasantly surprised by working with the developers here and seeing just how good the talent is. The kind of teamwork and camaraderie that you see among teams here is commendable. I think Thailand has a lot to teach in this regard to the rest of the world.
It was great catching up with Matt and understanding some of the nuances of Thai startup ecosystem. Though nascent, with efforts from the team at Ardent and many passionate individuals, we are sure Thailand is a place to watch out for.
Read more about Ardent Capital here http://www.ardentcap.com/ Stay tuned, as we will bring you many more entrepreneurial stories from Thai startup ecosystem soon.