Are Thai VCs absorbing all oxygen?

Thailand has a plethora of innovative startups, from artificial intelligence to agricultural technology, but their progress is stymied by a huge problem that threatens the nation’s economic development: Big Business.
Corporate-linked investors dominate the nation’s funding scene, said Charle Charoenphan, co-founder of Techsauce, a Bangkok-based startup accelerator and organiser of an annual summit bearing the same name. That’s hurting the startup ecosystem, from funding through to the founders trying to build something new and unique.
Corporate VCs are “all about numbers” and care less about innovation, he told me recently.
Throughout the world, young companies are most often financed and guided by venture capitalists: teams of investors who are keen to support new businesses — and make lots of money. The most common structure is for VC firms to be founded by entrepreneurs or finance specialists who raise money from private investors — known as limited partners.
Numerous innovative companies, from Nvidia Corp. to Uber Technologies Inc., have been able to grow and prosper because VCs put in money and give guidance, yet largely leave them alone to do their thing.
There are numerous flaws in this model, including VCs incredible ability to turn a blind eye to misdeeds at their portfolio companies, and to act like sheep chasing the same investments as everyone else because they have a fear of missing out. But by and large, it works.
Thailand is different. Venture capitalists and startup founders who chatted with me recently told a similar tale: Corporate VCs are sucking up all the oxygen and stifling innovation. They spoke on the condition of anonymity because they either worked for, or were funded by, a corporate VC.
Whereas classic VCs are funded by largely silent, hands-off investors, corporate VCs are born out of and financed by established companies. In Thailand, these big pots of money — from banks, agriculture conglomerates, retail groups and telecom providers — come with strings attached, which makes it difficult for fund managers and founders to move fast and build new products.
The two most active investors in Thailand, and six of the top 10, are corporate VCs, according to Techsauce data. By contrast, the top eight VCs globally are classic LP-funded firms, with only the 9th and 10th being corporate, data from CB Insights show.
Because the Thai economy is dominated by such conglomerates and state-linked businesses, these same companies have an outsize share of funds available, as well as the powerful business connections needed for startups to land clients or form partnerships.
That’s not to say high-valued businesses can’t be born in such an environment. Logistics company Flash Express and fintech Ascend Money are notable Thai unicorns with corporate VCs as backers.
They’re among the rare breed that survived, and thrived, through the pandemic even as the Southeast Asian nation emerged at a slower pace than regional neighbours. The economy climbed 2.5% in the June quarter, less than estimated as inflation fears offset
gains from a resumption in tourism.
Yet the story is invariably the same across both VCs and the firms they back. The parent company hires a team to start a VC fund, then promises plenty of money and complete autonomy. That pledge lasts a few months to a year before head office decides it wants to get involved and tell the fund’s managers what to invest in, what to avoid, and whom it can do business with.

—Bloomberg