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TVCA Investors Survey 2018

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TVCA’s Investors Survey 2018, in collaboration with the National Innovation Agency and Kasikorn Research Center, explores the profile and opinion of local and international investors based in Thailand on various topics including the fund profile, fund deployment, evaluation metrics and their opinion on the Thailand ecosystem.

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TVCA Investors Survey 2018

  1. 1. 1 TVCA SURVEY Presentation for Startup Thailand 2018
  2. 2. 2 The majority of the investors surveyed were Thai or at least locally-based, with most of them being corporate venture capital firms (CVCs). VC Profile Source: TVCA survey. 93% 7% Nationality of Investor/Company Local Foreign 23% 60% 3% 10% 3% Corporate Structure for Investor VC CVC Angel Private Equity Government
  3. 3. 8 Exactly half of the sample CVCs fell into the Financial or Telecommunication industries, a fact which likely affect the direction of investment and technology development. VC Profile II Source: TVCA survey. 22% 28% 11% 17% 0% 6% 17% CVC Breakdown Financial Telco Energy Property Agro & Food Commerce Other 23% 60% 3% 10% 3% Corporate Structure VC CVC Angel Private Equity Government Predominant group of investors are CVCs, which may result in corporate culture clash with startups. Predominant groups of CVCs are those affiliated with Telco and Financial companies, respectively. This both reflects the corporate realities of such companies – success requires more technological integration than in other industries – and may also influence the direction of investments. The Agriculture industry was not represented in the sample.
  4. 4. 17 The total amount of Thai startup funding between 2011-17 is only one-fifth of the total amount of capital allocated amongst investors active in the Thai ecosystem. Fund Deployment Source: Techsauce; TVCA. 1.0 2.1 9.7 42.7 33.2 86.0 105.6 -50% 0% 50% 100% 150% 200% 250% 300% 350% 400% 0 20 40 60 80 100 120 2011 2012 2013 2014 2015 2016 2017 Thai Startup Funding 2011-17 (USD mn) Estimated total funds raised YoY growth 50.42 [Not to scale] 1,310.82 Total fund allocated (USDmn) Average fund size (USDmn)
  5. 5. 22 The average (mean) deployment of funds for each investing entity is limited, more so when two outliers are excluded. Moreover, the distribution is bottom-heavy and from the sample around one-fourth did not invest. 0% 50% 100% 150% 200% 250% 0 5 10 15 20 25 Percentage of Funds Deployed Fund Deployment II Source: Kasikorn Research; TVCA survey. Summary Statistics Adjusted Mean % of Fund Deployed 31% Median 25% Lower Quartile 5% Upper Quartile 52% Companies Investing 0% 5
  6. 6. 26 The limited number of companies that investors have allocated funds to suggests limited investment opportunities. Fund Deployment III Source: Kasikorn Research; TVCA survey. 0 5 10 15 20 25 30 Less than 1 1 to under 3 3 to under 5 5 to under 10 10 or greater 100 or more Investor Strategy: Average Investment Per Startup (Actual/Expected USDmn) How many companies have you invested in? Unadjusted Adjusted Total 179 95 Average per Investor 6.6 3.8 50.42 Average fund size (USDmn) An overwhelming 90% of investors surveyed (both having deployed funds and otherwise) intend to inject less than three million dollars into each startup. Given average fund size this would entail that the average-sized fund invests in more than 16 startups – more than four times the current adjusted mean*. USDmn average investment per startup (actual or expected)
  7. 7. 27 The limited number of companies that investors have allocated funds to suggests limited investment opportunities. Fund Deployment III Source: Kasikorn Research; TVCA survey. 0 5 10 15 20 25 30 Less than 1 1 to under 3 3 to under 5 5 to under 10 10 or greater 100 or more Investor Strategy: Average Investment Per Startup (Actual/Expected USDmn) How many companies have you invested in? Unadjusted Adjusted Total 179 95 Average per Investor 6.6 3.8 50.42 Average fund size (USDmn) An overwhelming 90% of investors surveyed (both having deployed funds and otherwise) intend to inject less than three million dollars into each startup. Given average fund size this would entail that the average-sized fund invests in more than 16 startups – more than four times the current adjusted mean*. USDmn average investment per startup (actual or expected) Number of investors in each range of investment strategy
  8. 8. 28 0.0 20.0 40.0 60.0 80.0 Manager/Startup team Strategy/Business model Market size/Opportunity Synergy Technology/Innovation Other Revenue/Traction Business partners Social responsibility/develop. What are the most important evaluation metrics for investment decisions? A tested business model is an important metric – with exactly half the investors stating that revenue generation is a prerequisite for investment. However, it is not the most important deciding factor. Evaluation Metrics Source: TVCA survey. 50%50% Is Revenue Generation Necessary? Yes No
  9. 9. 41 Lack of entrepreneurship, and lack of tech talent, cited as the biggest challenges for the development of the Thai startup ecosystem. Challenges facing Thai Startups Source: INSEAD for Global Innovation Index and Global Talent Competitive Index; TVCA survey. 0.0 20.0 40.0 60.0 Lack of entrepreneurship Lack of tech talent Regulatory Lack of differentiation Market size Other Market readiness Capital Gains Tax/Dividend Tax Visa/ Work Permit Corporate/Personal Income Tax Competition from foreigner What are the greatest challenges to the development of the startup ecosystem in Thailand? Global Innovation Index 2017 51 – Thailand 7 – Singapore 47 – Vietnam Global Talent Competitive Index 2018 87 – Vietnam 2 – Singapore 70 – Thailand [Illustrative] Entrepreneur-led
  10. 10. 55 Almost all the investors plan to deploy more capital within the next three years, with almost two-third willing to venture outside Thailand for new investment opportunities. Looking Ahead – Future Investment Plans Source: TVCA survey. [Illustrative only] The geographically disparate nature of responses reflects borderless nature of startups and their funding – Thai startups are actually competing with startups everywhere. Local competition comes from both incumbent Singapore and newcomer Vietnam. No Yes Do you have plans for further investments over the next 1-3 years? 97% 3% Do you currently have plans to invest outside of Thailand? Yes No 37% 63% 26% 18% 16% 8% 5% 0% 5% 10% 15% 20% 25% 30% USA Singapore Israel China Vietnam Countries investors most interested in for investments abroad
  11. 11. 59 Agritech, AI/Big Data, and Financial innovation were the sectors investors specified as those they were most interested in. However, funding into those sectors remain limited. Looking Ahead II – Key Sector and Issues Source: Techsauce; TVCA. Despite their popularities amongst respondents, actual investments in all sectors have been limited, with the most funded sector having been Fintech*, which attracted a mere 5.5% of funding in 2017. 33% 33% 22% 0% 5% 10% 15% 20% 25% 30% 35% Agritech/F… AI/BigD ata Fintech Technology sectors the investors are most interested in 0.00 50.00 100.00 150.00 2011 2012 2013 2014 2015 2016 2017 Fintech Funding as Proportion of Total Startup Financing in Thailand (USDmn) Fintech 5.5%
  12. 12. 66 Even though several notable structural issues exist, they are not insurmountable, but they require consideration in both the short and medium-long terms. Looking Ahead III – Key Considerations Source: [Illustrative only] Difficulty in attracting funding for startups in general Structural Issues Underdeveloped entrepreneurship Insufficient supply of skilled tech talent Low rural technology literacy Development Roadblocks Countermeasures While issues such as lack of entrepreneurship would be naturally alleviated over time and with experience, others such as the lack of tech talent need intervention in both the short and medium to long terms. Short-Term Accelerator/incubator programs CVC-injected expertise Tax incentives and work permits for local and foreign skilled tech workers Medium-Long Term Computer science education initiatives in secondary school Government-led initiatives to promote general tech literacy Limited local market (e.g. for agritech, micro-financing etc.)
  13. 13. 71 What lessons have we learned from the survey? What could a startup do to attract funding? Startup Troubleshooting Source: [Illustrative only] Startup • Test business model out early in limited market. • Speak to/study established industry players and even incumbents both local and regional. • Get to know experienced investors even before funding round. Discuss your business plans. • Recruit a strong tech-team, avoid outsourcing. • Have revenue generation as a key medium-term goal so project eligible for post- seed funding. • Reach out to investors, particularly CVCs – they want to give you their money!

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