Tech startup funds forecast to double on tax incentives

New tax exemptions targeting the technology sector should result in a doubling of venture capital available to local tech startups and an increase in the number of startups next year, the Thai Tech Startup Association said last week, as a new report from an entrepreneurs group in Bangkok said Thailand is hosting more accelerators, incubators and venture capital firms than ever before.

“The tax incentives will help to increase the source of start-up funding that will also boost local innovation, a major factor that can drive productivity and business performance,” Patai Padungtin, president of the Thailand Tech Startup Association, told the Bangkok Post. “We expect to see double the number of local venture capital firms next year.”

Thai policy is to promote industries that will drive a shift from a manufacturing assembly line economy to a knowledge-based or creative economy. Facilitating that shift is essential for Thailand to escape the ‘middle-income trap’ as its neighbors and others in the region become more competitive.

Last week, the cabinet of Prime Minister Prayut Chan-o-cha approved changes to the tax code that will exempt companies from corporate income tax and dividend tax for 10 years on venture capital funding startups in specific industries.

The 10 industries are: food and agriculture; energy saving and clean energy; textiles; advanced materials; biotechnology; health and medical; tourism and creativity; automobiles and auto parts; electronics and computer software; and research and innovation.

Investment in tech startups in Thailand has been small so far. Through the first nine months of this year, roughly $40 million was invested in tech startups, although that represents a 40 percent increase over the same period last year.

The majority of funding came from four countries: Singapore, China, Japan and the United States.

“The tax incentives will definitely be a positive momentum for the local tech start-up industry,” Natavudh Pungchaoroenpong, a partner in the Tuktuk Fund, a local venture capital group, told the Post. Tuktuk Fund is under the umbrella of 500 Startups Company, a Silicon Valley-based venture capital firm.

Other local tech experts voiced concern, however, about the cabinet’s requirement that the venture capital firms must have paid-up capital of $570,000, as it might discourage small but highly creative groups just starting out.

Thai tech firms are making gains as far as drawing venture capital, according to a new report by the Bangkok Entrepreneurs business group entitled Thailand Startup Ecosystem Q4 2015 Report.

The report noted that Thailand has already had several successful startups that were acquired by larger players overseas. They include Agoda, the online hotel booking company bought by American Priceline, and Ensogo, the daily deal website acquired by another American company, Living Social.

Less famous names include Think of Living, the real estate portal absorbed by Malaysia’s iProperty or Tarad.com, the eCommerce platform taken over by Japan’s Rakuten.

“Bangkok is also hosting more and more venture capital firms, accelerators and incubators, and even the local government is developing tools and services for the Tech industry,’’ the report said.

 

 

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Thailand Focus Week of October 26, 2015
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