Deal values on the rise as private funding surges

Thailand saw private funding of US$300 million in the first half of 2022, a jump from $200 million in the same period a year earlier, according to an Asean internet economy report by Google, Temasek and Bain & Company.

The “e-Conomy SEA 2022” report, however, showed 42 deals were completed in the first half, as opposed to 59 in the same period a year earlier.

The report indicated that deal values were on the rise, driven by several large Series-C investments in digital financial service (DFS) and e-commerce segments.

According to the report, Asean continues to see robust tech funding, despite investors becoming more cautious in the macroeconomic environment, with average ticket sizes increasing by 13% year-on-year in the first half of 2022.

The report shows venture capital (VC) funds remain vested in the region, with $15 billion in investments in 2021.

Early-stage investments are flourishing but late-stage investments are on a downward trend, affected by dim initial public offering prospects.

The report shows Singapore and Indonesia remain primary investment destinations in 2022, while Vietnam and the Philippines are seeing rising long-term interest from investors.

In the first half of this year, DFS overtook e-commerce as the region’s top investment sector.

DFS saw a private funding value of $4 billion in the first half, with payments retaining the lion’s share of deal activities.

The report showed that more than 80% of VCs surveyed expect to increase their focus on healthtech, software-as-a-service (SaaS) and Web 3.0, while enthusiasm for edtech cools down.

Meanwhile, according to Techsauce Startup Directory, as of Oct 26 Thai startups had seen $530 million in funding in 35 deals in 2022, which already surpasses last year, when $312 million was invested in 60 deals. In 2020, some $484 million was poured into 36 deals.

Sarun Sutuntivorakoon, president of the Thai Venture Capital Association, said the upgrading of food delivery operator Line Man Wongnai to become a unicorn with fresh funding, alongside other large deals, showed Thailand was still an attractive investment destination despite economic headwinds.

Startups now need to focus on boosting revenues and cutting expenses, rather than putting an emphasis on cash-burning growth.

“We are seeing business-to-business firms and startups that have the potential to scale on the international stage,” Mr Sarun said.

Yutthana Srisavat, president of the Thai Startup Trade Association, said a survey conducted by the association showed 70% of the local startups questioned regarded access to capital as the greatest concern, followed by a lack of tech talent (40%), the lack of a business model that can generate income (35%), and insufficient time to develop themselves during the scale period (34%).

In Young Chung, chief financial officer at Line Man Wongnai, said local startups may endure a tough time over the next 18 months as investors become more selective, with the focus shifting to startups that have profitability plans.

Nuttapon Nimmanphatcharin, president of the Digital Economy Promotion Agency (Depa), said numerous Thai startups have the potential to scale up on the international stage, but they still lack enough support.

The government has to be proactive, adapt to changing markets, and collaborate with the private sector to propel these potential startups, he noted.

Depa and its VC partners recently invested 90 million baht in Series A+ funding for Globish Academia (Thailand), a local edtech startup, which is the largest direct investment by a government agency, Mr Nuttapon added.