Thai startup bubble will burst, and only the best will survive

Thai startup bubble will burst, and only the best will survive

BangkokStartup 15, Jul 2013News 

After a long chat with Krating Poonpol from DTAC, a Thai telecom conglomerate, we learnt that there is indeed a Thai startup bubble. AIS, DTAC and True. It is evident that these large telecommunication companies in Thailand are committed to the startup community. AIS has run StartupWeekends since 2011 and recently sent NoonSwoon to Echelon. The second telco hopping on the startup train is DTAC. DTAC went for a full accelerator program right away, invited international speakers to their weekly events and even hosted Geeks on the Plane. While DTAC might not be the first to play the startup game, they definitely push hard. We spoke with Krating Poonpol and his team at the DTAC House to find out how, what and why they are doing what they are doing.Can you tell me a bit about DTAC accelerate?

We are in the bootcamp stage. It’s an eight-week bootcamp for the top 20 finalists of DTAC accelerate. We have a one-hour lecture and one mini pitch per team. Each speaker will provide feedback to the teams, so they can improve until we meet again. We already had Matt Monday, the editor of the Apple App Store and last week we had Fadi Bishara, and we had Geeks on a Plane as well. We also had Jeffrey Paine, who spoke about “Inside the mind of the VC”.

How a VC makes investment decisions, that kind of stuff. At the same time we have every team pitch to Jeff, and he will mingle with them. It will be in a safe environment. They can make mistakes. Next week we will then have business models and after that, we will have the final pitching for the top 20. We will select the top 10 and eventually have a demo day, where we will invite venture capital firms from Silicon Valley. We have Stephanie Palmeri confirmed, the principal of SoftTech VC. We will have other Venture Capitalist coming as well, and Angel Investors both from Thailand and in the region.

Afterwards DTAC will provide commercialization support. Marketing support, below the line, and so on. DTAC is developing a software delivery platform. Application developers will be able to just plug-in their applications and will be able to reach many customers, which will solve their distribution problem. In the future we will integrate billing, charging services, and business models to help them. In the past it was very difficult to charge customers and DTAC can provide these kinds of services as well. Our goal is to be their business partner.

You basically expand the DTAC business model through developing the platform, which will in return help the startups you are accelerating and vice versa?

Yes. DTAC is transforming itself into a mobile internet company. In this regard it is important for us to have an open ecosystem. We need to engage app developers, especially local developers to create an ecosystem. So far we have about 1,000 to 1,500 registered members. We had close to 1000 applications for DTAC accelerate and we only selected the top 20 teams.

We covered the names first when we selected the DTAC accelerate participants so that we are not biased. You can say that Thailand is a totally different country compared to last year. I am glad that we are part of the spearhead that pushes this ecosystem. It’s a very exciting program. Actually, among the top 20 the best teams are already emerging and the VCs that came here decided to mentor those startups. You can see that there is already a top five and they are already on par with the rest of the region, even though the ecosystem is so new.

What do you think is the major problem your teams face at this very stage?

I think they face some basic education problems. That is what we try to solve with the lessons and also Disrupt University. Basically, Lean Startup and all those things are kind of new to them. How to run a lean startup cycle, validated learning, and then Lean UX of course. They are still learning that kind of things. Even, basic workflows. The second big thing is fundraising and pitching. Among the top 20 some teams are very strong. They develop really awesome apps. They have huge assets, like a TV station with about three million users, but they don’t know how to pitch.

So it’s not the English, it’s how to present?

Exactly. You won’t believe, in the first session some teams read from their script. But they pick up things very fast. They have a very obvious strength in terms of application design and product design. Some teams also have the problem that they think too small. They just think about Thailand only. The consensus among the VCs and experts is that they need to think regional, at least. We try to broaden their horizon and perspective. That is the reason we fly all these experts in. They give often very straight forward advice.

Matt Monday said for example right away, that this was a bad pitch. The teams face reality quickly and that is good education. In general, media like you or Thumbs Up can provide education to Thai startups, as well as events. These are good for knowledge exchange and sharing, just to learn the basics quickly.

Startup Weekend is a good example, it’s like a simulation and you learn the basics, but it’s not the real world. In the real world you have to make decisions about the daily workflow, keep it running every day is different. Even the small things. People say “no” to you all the time, for example if you want to partner with a big company.

How do the teams react when they are faced with direct, negative feedback?

They improve. In the first day with Matt Monday, only three teams were good. Now we have around six teams that are very good and the others are improving a lot as well. When we give them feedback, they act up on it. All the top 20 teams have the startup spirit, they learn and improve every single time. Some teams learn fast, some learn slow, but they learn.

What are the assessment criteria you go through to select the teams for the next stage?

At the end they have to have at least a working prototype so that they can demonstrate that they can execute the concept. Working prototype, application design, value proposition and business model. We look if the Business Model is sound, sustainable and scalable and if the startup is fundable.

Is it important for you that DTAC can invest in it as well, or do you go for quality in general – even if it is not within the DTAC scope?

The top teams are not relevant to DTAC’s business at all, but we want to help push the boundaries of the startup ecosystem. Teams will be judged on their own merit. Another criteria, I forgot, is the team. It has to be a kickass team.

What do you think makes a kickass team?

I strongly believe they have to have complementary skills. Fadi Bishara says a good team has three complementary skills. The first one is a business hacker, a business person, a visionary. The second one is a kickass designer. The third one is a kickass developer. Two skills can coexist in one person, but you have to have these three complementary skills. They have to have a track record of working together.

If they have only worked together for a short period of time it’s much more difficult. The team might break down and they don’t know how to resolve conflict. They also have to have one outstanding talent in one area. One team here is extremely strong in terms of design. They designed a product that is even used by the winner of the Formula One.

They should also have a strength that is aligned with the market. Attitude is really important. If you get knocked down, you need to get up again. That makes a kickass team.

How big are the teams in the accelerator program?

Less than five people. That is a requirement. More than five people is more like a business already.

In terms of nationality, do you have only Thai participants?

Yes. One team has a Korean member.

So you don’t restrict it to Thai nationalities?

Actually this year we restrict it to Thai nationalities only. To be frank, we do this for the Thai community. We had a lot of interest from foreigners, so we will probably open it up next year. Set aside the DTAC accelerate program, we are very open to form partnerships with foreigners. We have a lot of foreign content and application partner.

How did the idea of starting an accelerator program started within DTAC?

We are turning ourselves in a mobile internet company and last year we lacked behind in terms of local application ecosystem. We are very strong when it comes to global partners. We are the exclusive Facebook partner in Thailand, which was announced at the Mobile World Congress.

We will announce something very cool with them, keep watching. But for local applications we had nothing. We wanted to engage and kickstart this kind of effort. We think that even though the Thai startup ecosystem is very young but so ripe. It’s prime time. We want to push and one of the players that help. We think that these two objectives are aligned and we decided to jump into this game.

How many people are working on this initiative?

Myself, Khun Napat and Khun Charoenchai, but only part time. Khun Napat alone managed the Geeks on the Plane event. Khun Charoenchai basically runs the whole program. We don’t teach ourselves, we just facilitate the learning. We noticed that our top 20 teams are highly qualified. Rather than doing a 99 day or 4 day bootcamp we have a once a week workshop. The people in the program are a bit more mature.

Do you only look for a good idea or also search for a bit of experience in the team? People that can execute?

Exactly. Some of them have developed a couple of applications already. Applications that were top five in the app store. They have a track record.

That makes it easier for you because participants know the basics already. How do the workshops work? Are they full day workshops or half day?

No it’s only three hours a week. We have a one hour lecture, then Q&A and then they pitch to the speakers. Every Friday.

Are the teams working full time on their products or are part time, next to their official work?

Some of them have full-time jobs. Some of them are more like full-time startups, some work only on the weekend. You can see on their Facebook timeline that they work all the time, like at 3am. Tomorrow they have a pitch, so they have no choice. Every week they have to pitch on a totally different topic, from Design to Venture Capital. So they have to change and adapt every time. We had about 1000 applicants and we estimated that there are about 2000 startups in Thailand.

Do you additionally seek for startups in the community?

We do not actively seek, yet. We had about 1000 applicants and we estimated that there are about 2,000 startups in Thailand. So we have seen almost half of them. They come from all over Thailand. Kon Khaen has an IT cluster and also Chiang Mai, and the Maehongson IT Cluster. We don’t really work closely with the IT people.

Do you collaborate with universities?

No. We saw a lot of applications from university students but the quality was different. Only one team from a university made it to the Top 20. If we evaluate the applications, we would say yes to programming, but a startup is more like that. It’s about design, about business model and so on. If you evaluate against all the startup criteria they don’t measure up.

How old are the participants on average?

They are in the mid-end twenties. After the program we will do an evaluation and will see if we can open up, or try to reach out wider to work more with universities. We don’t want to limit this initiative.

Can you leverage your Stanford network? Are there graduates from DTAC accelerate that went, or will go, to the US as well?

Yes. The winner of DTAC accelerate will be send to attend Blackbox Connect. It’s a program to help international startups to explore, engage and immerse in the Silicon Valley ecosystem. They will meet people like Tim Draper from DFJ and Forest Baskett the general partner of NEA, the largest Venture Capital Firm in the world. The team will be one of the 10 teams that pitch to these people and learn from them. It’s only two weeks but very intense and awesome.

The program actually just helped m.dot, a small company from Croatia. They came to the Valley and didn’t know anybody. They got rejected by Paul Graham’s Y-Combinator. They went to Blackbox instead. Fadi helped them to connect and they [received] around US$14 million. We want to see something similar. Blackbox Connect also partners with Google’s entrepreneurship program and they partner with Google Venture.

A partner of Google Venture is my ex-boss at Google. I think we will let them visit as well, because we hosted Dave and so on. It’s an opportunity. We cannot guarantee that they will get an exit, but we will open as many doors as possible. We create a runway for those who are ready for the global level. Our goal for this program that in the next year or the next two years an application as popular as LINE will appear. LINE has Naver as a partner and we hope that the winner of DTAC accelerate will be as famous as line, with DTAC as a partner.

Do you think that a big exit will make this ecosystem more sustainable? Kind of like a lighthouse effect for the whole ecosystem?

Right now we are missing very early stage investment. That is number one. However, I tell my students or the participants in DTAC accelerate, that money is no problem at all, period. There are other things that you need. There is currently no connector. I help my students to go and raise funds. There are so many angel investors, active and no-active, but angel investors need some education as well. They have about US$600 million under their management. There are quite a few that are ready to invest, but there is not a good enough deal. Some of them don’t understand startups.

From an investor side the problem is not that we don’t have the money, we just don’t have the right investors yet. We need to educate investors and at the same time we need to connect investors to startups. The other part I see is the exit potential. That is why we are connecting a runway up to regional and global level. It will open the opportunities at the very end. And third, basic education! What we lack most in the education part are mentors. We don’t have enough mentors.

To sum up: It’s about education on the side of the investors, startups and probably universities as well.

Yes, universities still teach things like competitive advantage, concepts that were developed twenty years ago and are more relevant for big companies. That’s why I am happy that Bangkok University hosted Startup Weekend. I think universities are moving slowly into the right direction. Hopefully everything will come together. Next year will be even better. We might have a few exits and successes before the bubble bursts.

You think this is a bubble?

Yes,  this is a bubble. It’s so clear. It will burst, but after the burst we will see the best survive.

What is your favorite startup in Thailand right now?

Builk, I love Builk by Patai. I love it a lot. It is targeting a so unsexy industry that everybody overlooked. At the same time; he is the right guy to tackle it. He used to work in the construction industry, as a construction engineer. He has so much passion for this business. This is such a huge industry and it is just ready for disruption. If we throw out the head in terms of business model we think about Khun Moo and Ookbee. DDProperty is good as well, very strong, but they just had their exit, they are not really a startup anymore. Ookbee is actually not a startup anymore either. So forget about that.