I rarely do this: but a facebook thread just really piqued my interest and I think this bit of info is a valid article in itself.

The problem?
Most places in the world trying to build innovative knowledge-based economies are struggling with the actual understanding of what those economies look like.
(I'll give you a hint: it doesnt look like this)

I'm going to use 3 scenarios to prove a point here:
Luxembourg - which will act as the extreme case of basically all of western Europe. (All of western Europe is similar enough - so read Luxembourg as Europe if you want.)
Thailand - which is one of the only places now in SE Asia without a startup scene. (Even Vietnam, Indonesia, and Malaysia are sprouting - and of course the local 800-lb gorilla Singapore is way ahead: one of the top 6 spots in the world.)
And India - which has a HUGE tech industry, LOTS of engineers, and enormous amount of capital and connections.

So whats the problem? Why are these places - which are as I said simply examples out of hundreds of places in the world - who are trying to build innovative knowledge-based economies, not succeeding in doing so?

First I'll tell you why NOT...
Its not a financial issue - as I saw in Luxembourg a few months ago (highest GDP country in the world, people still live in Chateau's and Castles, it's a private banking haven)...Thailand has investor permanent residency visas for foreigners who want to enjoy one of the highest qualities of life that Thailand currently offers, and all they have to do is invest. Theres lots of em here from Chinese to Americans and Europeans. India has some of the wealthiest people/families in the world - and especially in Asia, who also have some of the widest range of funds and capital available.

It's also not a technical ability issue - Luxembourg is in the middle of a cradle of the best scientific and engineering schools in Europe - Bangkok has close to a dozen technical universities pumping out 100,000 skilled engineers per year - India? yea dont even get me started.

It's not either a legal issue - Luxembourg has the "best IP model in the west", and very efficient tax and business reforms. Thailand has very easy laws to work around if you have only a minimal amount of solid backing. India...they dont even make copies of the paperwork. (OK - not literally, but I know companies operating there for close to 10 years who dont actually exist on paper in India. Theyre doing fine. Never had a problem.)

So why is it that startups simply - dont exist (for the most part) in these environments which are actually incredibly supportive for them?

I answered this discussion thread on facebook as such:
I read a very good article by Dr Jay Chunsuparerk last night concerning this topic exactly - which I actually am glad to hear because this is why I moved our company out here.
The potential and eagerness to do something *BIG* and meaningful - not just outsourced consulting or web-dev shops - but actual PRODUCT companies - is where we need to drive things in order for a true startup scene to flourish here.

It is a very wide misunderstanding here (and I've seen it all over the world - its not unique to Thailand) that starting up a business, filing for a tax number, and selling your SKILLS or SERVICES = a startup.

That is not at all what a startup is - that is a services company.
A startup, by definition and purpose, is NOT a services company.
An entrepreneur, likewise, is NOT someone who builds a company that sells services (at whatever scale: large or small). An entrepreneur is someone who INNOVATES a new kind of business model, and VALIDATES it.

Taken from Paul Graham himself:
A *startup* is a TEMPORARY human organization that is actively SEARCHING for a SCALABLE, REPEATABLE, business model.
A *company* is a DEFINED human organization that has already FOUND, and is EXECUTING it's repeatable business model.
...and I'll add one of my own which I've used for awhile now:
A *consultancy* is a TEMPORARY human organization that provides SERVICES and SKILLS to a startup or company - but has no business model of its own - a consultancy's business model is created by the market - not itself.

What we are actually seeing in Thailand - is service companies or consultancies (whichever you like to call them).
Service companies are selling SKILLS, and ABILITIES - these are intangible, non-physical products which are only put to use by OTHER organizations who actually come up with the INNOVATION to building new products.
Service companies are outsourced labour.
Consultant/service companies are therefor very crucial - as there is always going to be holes in companies that need filling; and there will DEFINITELY always be holes in startups that need filling.
Consultancies fill these holes.

However, it is completely wrong to call a consultancy or service company a startup. Likewise just as wrong to call the people behind it entrepreneurs. Entrepreneurs = innovators. Service companies are not.
I - for example - outsource my financial services as long as I can when I build a startup. I outsource CFO roles completely. I am currently using E&Y to take care of all my financial needs. I wont hire an internal CFO until we absolutely have to - or until a great opportunity crosses our path to do so.
E&Y cannot be called a startup however. (Even if it was a smaller, newer, firm that I used instead)
It is a services company.

Likewise - a website dev shop cannot be called a startup.
If I'm a business and I need a website, hiring a company to build it is the exact same thing as hiring E&Y to do my books as a tech business.
They are both service companies.
They are not startups.

Service companies are very needed, of course - startups cannot survive without them! They are the first crucial part of building a startup ecosystem. So - would-be-entrepreneurs, take this lesson to heart: treat your service companies well! They deserve our respect.

I've been training budding entrepreneurs for a long time. Either directly involved in their startups investing/advising/mentoring (sometimes even coding) or even just by academic means..... But it never ceases to amaze me that everytime I go somewhere new - I have to repeat myself all over again. "Service companies are not startups"

Here in SEA the very definition of a startup is still something that needs to be grasped.
That is why there are, just like Adrian stated: not very many actual startups to invest in.
Its not about substance - its about actually understanding what a startup is.
So many people dont understand that yet - and therefor, their companies appear to be "not so substantial".
It's because they arent really startups to begin with.
(...and they shouldnt be needing investment anyway unless their services are simply so bad that nobody will hire their labour!)

Of course - there is also the problem of helping those few startups who are innovating something new - to understand how to build products for a global market.
Thailand is in a very good position right now though. I am excited to be here. I am fairly positive I will build my company here. Because the people here are respectful, willing to learn, and easy to work with.

So - lets get busy and fill these holes.
bangkok.3daystartup.org and many other things we are rolling out are here to do just that. They work. Lets get busy.

Labels: 3DS, Asia, education, Europe, leanstartup, startup, workshop