Plans are underway for startups appear on stock exchange boards alongside publicly listed companies... [+] at the Stock Exchange of Thailand. (NICOLAS ASFOURI/AFP/GettyImages) Thailand is a lively and thriving country to start a small business. However, in my assessment of startups from Bangkok and Bangkok’s startup ecosystem, there needs to be better exit channels for startups in Thailand. Just one week after returning from a visit there, I have already heard of a proposed platform that may address this. The Stock Exchange of Thailand (SET) is planning to set up a new exchange for listing startups in 2017. Like traditional stock exchanges, the underlying intention is fund raising and liquidity, so startups can list and issue products on this new exchange. Up to now, back door listings or reverse listings have been the only ways startups have been able to list on stock exchanges. With this exciting news by Kesara Manchusree, president of the SET, this could be a "zero to hero" opportunity for many startups. Listing strategies for 3Q17 The new exchange is planned for the latter half of 2017. However, details such as licenses, Securities Exchange Commission requirements and listing criteria are still not established. Despite this, startup founders are excited and have already begun to brainstorm listing strategies. According to Kesara, companies will be able to list on the day they are established, further exciting founders of startups with little to no revenue. There is no explicit confirmation yet whether startups would require having revenues or earnings before listing but Kesara said in her interview with Nikkei Asian Review that the new bourse will operate under completely different regulations as compared to Thailand’s existing platforms. Will regulators make it too challenging to navigate? Launching a stock exchange specifically for startups has been attempted before. Dividends and liquidity for investors and more direct paths of fundraising for founders are all attractive justifications for such an exchange. In 2011, Dutch company the Startup Stock Exchange also attempted to launch a similar platform but resulted to operating more like a crowdfunding platform. It has since been acquired earlier this year by a London-based company still believing in early stage stock exchanges. In 2013, Hong Kong-based Bigcolors, an early stage investor in startups, included a similar trading platform. “In a highly-regulated environment, the idea of a stock exchange for startups in Hong Kong was too new," said Jackie Lam, managing partner of Bigcolors. "It is a landmine that is very challenging to navigate and both regulators and us struggled to reach a balance point.” “I hope that the plan from the SET will be strong enough to serve as a guideline for the industry as a whole.” she concluded. What aspects are worth focusing on? As this new exchange is on its way, the SET needs to strike a balance between the new bourse’s popularity, that is, the number of startups listed and the quality of startups in it. The SET has already imposed stricter criteria for their two existing exchanges. Since January 2016, companies on the main index are required to have paid up capital of 50 million baht ($1.4 million). This is up from its original 20 million baht ($560,000). While there is a premise that this new startup stock exchange can aid startups who need funding, it may be that startups of a "lower" quality are encouraged to list on the new platform. I am eagerly awaiting to see how the SET sets their rules so that more startups are attracted yet and at the same time, ensuring that there is quality in the startups on the platform. How about investor protection? “This bourse is no guarantee, meaning if you invest you might get zero or two times, three times the principal," said Kesara in her interview. Although the same could apply to any stock market, it is highly likely that the volatility of this new bourse could be much higher than traditional stock exchanges. This is due to the general lack of financial stability and relative low liquidity of startups when compared to blue-chip stocks. In my view, investor protection is a key concern for this new bourse – a concept that has been a long struggle for the Hong Kong government. It is not difficult to imagine that startups would be required to disclose more information if they want to get listed. The more they disclose, the better the investor protection is. However there is a balance to be struck as administration and strict disclosure requirements -- typical of stock exchanges -- may turn startups away. Lastly, due to the high risk involved, it is likely that the platform may be limited to accredited investors. The definition of “accredited investor” may vary from jurisdiction to jurisdiction. Already in my overview of Southeast Asian countries, accredited investors are not like for like. Therefore, how the SET defines the negligible investor is also worth noting as it will directly affect how liquid the new bourse is versus most exchanges. This, again, is one of the major problems that the SET would like to solve for startups. So, while details are lacking for me to draw any conclusion of success at this moment, I am looking forward to seeing how the SET serves both the startup and the investor communities. James Giancotti, CEO and co-founder of Oddup.
The Stock Exchange of Thailand (SET) is planning to create an entirely new bourse devoted to start-ups, according to SET president, Q3 2017. The new exchange will operate under different regulations to traditional exchanges, and is being created with a view to fundraising and liquidity, allowing companies to be listed the day they are formed. Expected to be up and running by Kesara Manchusree, the bourse is being seen as a "zero to hero" opportunity for new business.