musings & critique about hi-tech, academia, building startups, and a journal to building eKita
Friday, July 20, 2012
There's a very interesting thing going on in Bangkok right now.

With the establishment of the governmental MICT department in recent years, since the Thai government realized it had missed the Technology Wave, huge amounts of investment have gone into IT technology and infrastructure.
In addition to that, a whole plethora of additional technical schools and universities have popped up, pumping out thousands of skilled Thai engineers every year.

The problem however is that there are no Thai startups to absorb all these fresh new talented locals. Instead, Japanese and Chinese companies have setup shop here - in fact they started doing so already many decades ago. These foreign companies are the predominant force that takes in every top talented local engineer or skilled professional that they want. In recent years, there have even been a plethora of European and even American built companies here - entire R&D divisions of foreign companies in fact - that have setup here in Thailand to take advantage of this great market.

Whats the draw? Low cost of living, high quality of life, and strong company loyalty are all part of it. It's not necessarily a new kind of outsourcing - but is quickly becoming the most effective one: where instead of selling R&D to Indian/Russian companies or development teams - an R&D branch is simply setup, relocating the top management with it, to run development from places like this where many foreigners are already eager to enjoy the higher quality and more luxurious lifestyle anyway.

There are a few very harsh hurdles however:
One is the Thai government's protectionism.
A company cannot be incorporated here without Thai national(s) owning a minimum of 51% of the shares in the company. This means that any startup company with any foreigners in the team would be minimalized.
It also means that Thailand is very unnatractive for foreigners to incorporate and setup here.

Two is the Thai labor and employment laws...
...which state that any company - branch, local company, or otherwise - must employ at least 4 Thais for every 1 foreigner.
This is absolutely crippling to a startup, obviously. A startup that typically will have 3 to 5 founders or "core team members" - all of whom are probably not going to be Thai (if lucky - maybe 1 or 2 of them will be). This of course also means that such a startup is not going to be able to hire a team of 20 people to match the team of 5 founding foreigners.
Simply - not possible.

Three is the lack of know-how, experience, and cultural initiative to build a new company.
The current situation is that Thais simply do not know how to build startups - the very concept of a startup is still hard for the majority to grasp. The expertise and experience in building startups is very much needed here, but the current law structure is purposefully pushing that very same expertise and experience away.
Add on to that - Thais as a culture are very focused on structure, tradition, following suit. I can tell you this personally as I am engaged to one! It is an extremely hard cultural mentality to break through for someone who wants to be an entrepreneur - an innovator. The only real type of "startup" that exists here are service companies - or better phrased: companies that build your website, mobile or facebook app for you. These are not real startups, of course. They are small versions of normal companies. Which is, as we all know, the #1 most incorrect definition of a startup.

Now - let me state one more thing clearly before continuing here.
Thais are absolutely hungry to building their own startups!
Meetups are filling up on the same day they are posted. More people are coming than there is room at the venue anyway. When foreigner entrepreneurs enter the room we are almost celebritized simply because we've already done it before and they want to know how. The attention aside (which I actually dont really like - as a foreigner here you already get too much of it, and its never the right kind), the good thing here is that there are a dozen or more startups that have made the jump. So far most startups I've seen are being built by Thais who have lived in other countries (or are dual-citizens) - or are in fact built by foreigners who have either incorporated elsewhere (Hong Kong, Singapore) and tried to cope with the Thai employment laws by finding Thai partners.
There have been a few successes.
Its a budding startup scene. It definitely is - but without a very strong push from something big, it wont get beyond this.

Additionally - so far from what I've learned here regarding the investment scene - is also that there are a huge amount of investors here. There are investors here simply because there is an investment residency visa that is available - quite easily - only for someone who comes to invest here. Thereby being able to permanently live here (which many foreigners want to do).
Aside from that, Thailand is the biggest southeast-asian market. There is an enormous amount of interest in investing here from both inside and out.
What I have ironically found in the tech scene is that there are more investors than startups. I have been told by a few VCs and angel investors already that their most challenging task as an investor here is actually finding projects to invest in.
So that obviously couldn't be better for the task of creating alot of new Thai startups!

There can of course be a few fixes for this:
1) Implement programs here that help Thais learn how to build their own startups. Such as 3 Day Startup, Founders Institute, and so on.
2) Create service and consulting companies based in another law zone (such as Hong Kong, Singapore - which are common alternatives for foreigners working here) that cater to startups.

So far I have seen quite a few of #2 - but none yet that cater to startups. The lot that exist now are targeted towards structured companies. Which is an obvious choice - as startups here dont really exist enough yet for there to be a viable market for such consultancies.

So that leads me to believe that #1 is the best choice to fixing this problem.
Enter 3 Day Startup, and myself. Via 3DS, successful international serial entrepreneurs like myself can help Thais learn how to build their own startups, thus opening the door to a thriving startup scene which can spearhead the rest of the support network that is generally needed for startups to thrive.
Doing it this way will cater to the protectionism mentality of Thailand, allowing them to create things on their own with local ownership.



Here's some pics of a recent meetup this past week where I was invited to present 3DS regarding just these topics I've written about above - creating Thai startups, and pushing for a more prosperous and open international startup scene.
The Thai government has spent all this money into building the IT support industry, the infrastructure, and the skilled workers - isn't it time that they fix the last mistake that they yet reluctantly wont let go of, and open their market to new businesses?
I for one, definitely believe it is. And I am probably a perfect example of why: I myself am here to build my startup. However, without these issues being resolved, it isn't going to be attractive for me to do it here when I have much better nearby options such as Singapore.

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