By ASINA PORNWASIN
THE START-UP INDUSTRY is seeing healthy growth through a synergy of the new firms and corporate venture capital (CVC). Start-ups offer more support to corporates in real sectors to benefit from their developments. This is because there are a lot more CVCs established across real industry sectors like finance, real estate, and oil and gas, not just telecom anymore.
The trend is for more CVCs to come to the market to seek development of start-ups to support the CVC's core business. Currently, more than US$200 million from 10 local CVCs' investment budgets are ready for injection in start-ups. This trend is leading to start-ups developing products and services to serve business-to-business and business-to-customers, said Thanapong na Ranong, managing director of Beacon Venture Capital Co Ltd, an investment arm of Kasikornbank.
He said in 2016 investment value from (both local and regional and international) venture capitalists in local start-ups amounted to $100 million, excluded CVC investment. This year is expected to see more CVCs invest in Thai start-ups in series B and beyond.
Now, mostly start-ups are in seed-round funding stage, and some are in series A round funding stage. A series A round is the name typically given to a company's first significant round of venture capital financing. The name refers to the class of preferred stock sold to investors in exchange for their investment. There is less of series B, and after series B stage. Series B financing is the second round of financing through private equity investors and venture capitalists. It usually happens when the company has achieved certain milestones in its business.
The main reason is that there are fewer numbers of start-ups suitable for raising series B funding and less CVCs. But from now on, more CVCs will enter the market to encourage greater synergy with start-ups.
Thanapong does not see start-ups as a bubble business, but there seem to be a valuation bubble, as Thai start-ups are overvalued. This can cause start-ups to be stuck at series A and unable to proceed to series B. Start-ups need to have real revenue while they keep growing the revenue rather than focus on the growth of users, traction, and marketing since the trend of investing is shifting to focus on monetisation [of start-ups' products and service].
"We really hope to see the exit story of Thai start-ups acquired by CVCs. This will inspire more VCs to invest in Thai start-ups," said Thanapong.
This year will see the investment of CVCs from different industries in the same start-up. As Beacon VC plays a role as a CVC, its focus is not only on financial returns but focused on synergy strategic return. Since the role of Beacon VC is as a corporate venture capitalist, Beacon VC's priority is fintech start-up.
Beacon VC's two main roles are to invest in start-ups and fund of funds; and as incubator of KGBT's internal development through synergy strategy. The investment concept of Beacon VC is to be lead investors and not only inject money into start-ups but also focus on helping start-ups grow with support such as open APIs, marketing support, and market approach.
Beacon VC aims to create value promotion for the bank's products and services and to reduce times and cost in inventing and developing innovation, he said. And it also to leverage the innovation to the banks and to develop expertise of the bank's resources.
"Our focus is how to bring start-ups' products and services to support KBank's customers, especially SMEs. We do not focus on an accelerating programme, but we focus on the start-ups who have ready products and services for the market, so we will invest in series A, series B, and after. Our distinguishing feature is we focus on investing and building the products with start-ups," said Thanapong.
Beacon VC has set aside Bt1 billion for investment over 10 years, in start-ups and fund of fund. It has invested in Dymon Asia, a Sing-aporean VC Fund, which focuses on investing in fintech start-ups, and Flow Account. It has two more start-ups in the due diligence process. It has start-ups in the pipeline until the end of this year. Normally, a 10-year venture capital's money will be spent in the first five years.
In 2017, Beacon plans 4 to 6 direct investments while investing in around 2 to 3 fund of funds. This year, it aims to spend over Bt200 million.
The Beacon VC's role is an active investor and hence needs a seat on the board. So, it will invest at least US$1 million (Bt34 million) in each start-up. But it might be less than this if there is over-subscription and if there are other investors capable of benefiting the start-ups.
Fintech is the challenge, Thanapong said, and the challenge is to deal with the new growing industry sector. Beacon VC now has five people in the team, including himself. It will increase the numbers to 7 people this year.
He added that the logo of Beacon VC is a lighthouse to shine the way ahead for fintech and start-ups.
With integration and collaboration between Kasikorn Business Technology Group and Beacon VC and, it will help the bank have the ability to create and launch new digital services to serve the bank's 14.2 million customers.