Chiang Mai’s Startup F**kups
When I first heard the word startup, I rolled my eyes thinking it was another digital nomad buzzword used to seek investment to fund their entitled nomadic lifestyle. My theory was that, like bitcoin (which I’m probably wrong about too), these startup bubbles would soon burst, leaving the big businesses to mop up the money, as usual. I had given into ‘the man’ and I was happy he was paying my wages. But in recent months, I’ve been witnessing a growing community brimming with exciting new ideas, innovative business models and intriguing opportunities that could, with the right community and the right investment, become the next leaders of the business world.
Startups are not just small and ubiquitous business ventures; they are designed to grow fast, expand exponentially and, for the first few years (if they are lucky enough) surf on the waves of investment that keep their startup growing and paying their bills — irrespective of whether they are making a profit. As attractive as that all sounds, the startup world is volatile, and according to Forbes.com, 90% fail within the first two years. In spite of these daunting numbers, there are thousands of people around the world who make a living off failed ideas; starting, failing, starting and failing over and over again in different guises and forms, all with one ultimate goal — to become the next multi-billion dollar company, something the industry likes to call a Unicorn.
Traditionally, to operate a business you don’t need a big market, just enough people who will pay for your services or goods. A startup on the other hand must sell to a big market, they must grow fast and have a global reach. “A startup is a business model that is designed to scale up from day one,” explained Dr. Paradorn Sureephong, Associate Dean at the College of Arts, Media and Technology (CAMT), Chiang Mai University. “They must grow indefinitely and rely on financial investment from angel investors or venture capital firms, unlike small businesses that rely on earned income and loans.” This is probably why most startups are tech startups as they are easy to scale”.
“The world is digitising and modernising, and startups are a perfect example of the new age we live in,” continued Dr. Paradorn. “If big companies don’t join the race they will eventually be out gunned by the new generation of quick-to-adapt professionals.”
A Very Thai Approach
According to startupblink.com, a website dedicated to mapping the growing startup ecosystems across the world, Chiang Mai sits at a disheartening 265 out of 938 listed cities. “Right now, Beijing is 13 on the list and Singapore is number 1 in Asia, but Thailand is not even close, with its first entry on the list being Bangkok coming it at 69,” explained Israeli startup entrepreneur Eli David who is also the owner of startupblink.com. “I know I don’t have every community or every startup listed on my website, but the proportions across the world give a good indication to where the best places to start a startup are.”
For a startup to succeed there needs to be a strong enough ecosystem to support them. Angel investors and venture capitalists should be abundant, all willing to throw cash in all directions, hoping something will stick to a future Unicorn. Thailand has none of these people, for several reasons.
“Thailand is a bit local when it comes to startups,” suggested Dr. Paradorn. “The term startup almost has a different meaning here — often aiming to conquer the country, not the world. In addition, our businesses owners are not in the venture capital mindset and people don’t have belief in small startup businesses, either due to inexperience or fear they will overtake their own businesses. We are stuck a good 20 years in the past and we need to modernise urgently if we are to survive the global market changes happening today.”
AIS was one of the first Thai big businesses to create an office specifically dedicated to startup investment back in 2011. “We saw potential in startups and were the first company that looked to invest in startups in Thailand,” explained Dr. Srihathai Pramanee, head of AIS The Startup.
“We were looking a good five years ahead and were keen to be the industry leader in digital development. Today Bangkok has a strong ecosystem but it is too small, which is why we are now looking towards Chiang Mai, to develop the ecosystem here.” Srihathai Pramanee.
“Chiang Mai is full of highly skilled and creative individuals but our laws and government are too obsessed with regulations,” explained Dr. Paradorn. “Crypto currency is still illegal, Airbnb is illegal, Uber is illegal; if I cooked at my home and served it to customers I would be fined for being an illegal restaurant. There are no laws to describe these new businesses which are appearing and foreigners are finding it harder and harder to work here and are being forced away. The truth is our lawmakers are the business owners that fear the change and fear the skills and growth of startups, so why would they let them exist, let alone thrive?”
According to Iglu, a local SME that offers work permits and visas to digital nomads in Chiang Mai, “the Thai government seems to want to make it more difficult rather than less difficult for foreigners to come in and invest in the country by starting up new businesses, even if it were to be considered a Thailand startup.” A company registration fee for a foreigner is a whopping $2000, compared to Singapore and China that both charge just $1. The cost of living is indeed attractive, but more often than not any successful startup is inevitably forced out. “Us Thais are not eager enough to speak up about what we want,” explained 28 year old Cholathit Khuneankaew, managing director of Artisan Digital, co-founder of several startups in Bangkok, a startup community driver and a representative of Google Business and Developer Groups. “We are often too complacent with our lifestyle and dislike change. Even in Bangkok, where people are more likely to take risks and make demands, we are still struggling to adapt. Our visa and foreign investment laws are designed to protect our country, but with this ongoing change to new business dynamic, they are causing more harm than good.”
Dr. Paradorn agreed with this statement by adding that “nobody is willing to invest in startups here, both Thai and Foreign owned, thanks to impossible regulations and other risks that are too high. Industries need to change to keep up with the world and that requires a new mindset and a digital transformation that should have started years ago.”
Santiago, the capital of Chile can be used as an example of how a simple change in policy can instantly boost the startup scene and the local economy. “Start-Up Chile is a government funded seed accelerator that has already been replicated in over 50 countries,” explained David. “The government gave promising startup founders a free grant of at least 10 million Chilean Pesos (52,000 baht) and a year-long visa to work in their country.” In exchange, the country’s economy is boosted, and the businesses give back to the community by taking part in events or giving talks at universities. “We were planning on setting up a platform to bring digital nomads into Chiang Mai University to give one-off lectures but it failed due to work permit regulations,” added Dr. Paradorn. “That is our problem, we can never develop with the way things are right now.”
“One of the main things plaguing the potential of Chiang Mai is the lack of foreign-Thai interaction,” suggested David. “There are hundreds of co-working spaces, thousands of skilled foreigners here but the Thais are not using them.” Dr. Paradorn and Cholathit agree, suggesting things like the laws surrounding foreigners working in Thailand, cultural and language barriers as the main contributors.
“Thai education is holding our graduates back too,” Dr. Paradorn continued. “In other countries, laws and curriculums are changed almost daily to keep up with the ever growing trends of the moment, but Thailand takes an average two years to change a curriculum after the request is made. What we end up with is tech and industry graduates who come out of university with a wealth of outdated knowledge, leaving them with a degree that is almost useless.”
CAMT, where Dr. Paradorn is the associate dean, is the first university faculty in Thailand trying to combat this problem by lobbying the government to allow them to change their curriculum on a daily basis if necessary, to keep up to date with global trends. The faculty is already hailed as unique, as it supports a range of businesses and tech undergraduates by financially helping them develop their own businesses. CAMT even helps finds partners and investors for students while at university so that when they graduate they have a job, investor and a network already set up. The faculty also offers grants to startups and SMEs owned by graduates. If their plans are a success they will be the first faculty in the nation to be able to change their curriculum on-the-fly and offer full digital industry integration through programmes like education investment from businesses interested in talented students identified as early as Matayom 6.
However, some suggest it is the nomads themselves who are causing the divide. “The real problem is that the foreigners here often complain and refuse to adapt,” said Christopher Smith, a Thai-American founder of Rangbarang Gym, a community gym startup with multiple outreach programmes to help the local community. “Foreigners need to adapt to the Thai way, become more humble and put themselves on our level. Only then will we be able to interact properly and start working together on some great things. Growing up as an American, I had to leave that mindset behind when I moved back to Thailand in order to succeed.”
“Chiang Mai needs to see its ecosystem grow if we are to see any investment or interest in the startups born in our city,” said Cholathit. “The city needs a kindle, a startup that succeeds to set a good example to investors that our city is worth investing in. Right now the city is boring and is not active enough to keep these startups afloat, but I am trying to change that.”
David speculated that it would not surprise him if some of the world’s Unicorns began right here in Chiang Mai, before the founders moved away seeking a better ecosystem to support their ideas. Simply put, Thailand is missing out on millions of baht in revenue every month from businesses that are forced elsewhere. “It’s just the craft beer situation,” laughed Dr. Paradorn. “So many Thais are forced to make beer overseas because of the restrictive laws in place, boosting our neighbours’ economies instead of our own. It’s so illogical but we all know why it’s happening — the big businesses are scared of competition, and sadly they are the ones that dictate our laws.”
But despite all the negativity, Chiang Mai’s ecosystem is growing. AIS is investing more time and energy in the north through numerous community events every month, investors are slowly appearing and Cholathit and a group of locals are trying to help improve the ecosystem by building a community with both Thai and foreign professionals in a bid to increase the city’s value, therefore attracting more investors. “We do what we can with limited resources, but it is the Chiang Mai businesses which should take the lead and host events, bring the community together and show that our city is worth investing in,” Cholathit added. “We are trying to bridge that gap between foreigners and Thais to help bring cohesion and share ideas — Thais need to learn to be less lazy when it comes to business development and foreigners need to know that the city is full of local talent and creativity they can utilise. We must look towards working together.”
Dr. Paradorn added that “if businesses change their mindset and become interested in venture capitalism, then the city will boom.”
“The vast number of talented nomads, creative locals and skilled entrepreneurs in Chiang Mai means the city is poised to be one of the biggest hubs in Asia” said David at a recent startup meetup arranged by AIS. “A few years ago I thought it was going to become one of the best cities for startups, but sadly we are nowhere near that. There are only two ways out for startup entrepreneurs right now: Leave and relocate to a bigger ecosystem or lead your city by building an ecosystem where you are. Chiang Mai is ready to host that ecosystem, it just needs all parties to get on board.”