Startup Act opens new growth frontier

The National Innovation Agency (NIA) expects the long-awaited Startup Act to help revitalise Thailand's startup ecosystem by enabling co-investment mechanisms to attract private capital, prepare high-potential startups for initial public offerings, and support their expansion into global markets.

The draft aims to create a legal framework for startups, designating NIA as a one-stop service agency and addressing long-standing legal and fundraising constraints that have limited the growth of Thai startups.

Krithpaka Boonfueng, executive director of NIA, said the draft is expected to seek cabinet approval within 1-2 weeks, before moving through parliament later in the year given support from political parties.

The primary goal of the draft is to remove legal barriers under the Thai Civil and Commercial Code that hinder the growth of limited companies and modern fundraising methods, she said. The regulation also addresses challenges related to funding, skilled labour, expert advice, and the lack of support from a central government agency, said Ms Krithpaka.

Under the new regulations, qualified startups will gain the right to offer shares to the public and issue debentures under the oversight of the Securities and Exchange Commission.

Furthermore, the law introduces robust mechanisms for talent retention and capital restructuring, allowing startups to buy back up to 20% of their own shares to support Employee Stock Ownership Plans. The act also permits them to directly allocate new shares to outside investors while allowing creditors to convert their debt into equity.

"Once enacted, the Startup Act is expected to bring significant changes, including making it easier for startups to list on the stock exchange and granting them specific exemptions," said Ms Krithpaka.

Ms Krithpaka said that after the third version of the royal decree governing the establishment of the NIA takes effect on June 30, the agency is laser-focused on addressing the capital shortage faced by startups, often referred to as the "missing middle" -- the highly vulnerable transition period between Seed Round funding and Series A round funding.

Funding is expected to prioritise strategic sectors that can form the bedrock of Thailand's future economy, such as agricultural technology, health and wellness, the circular economy, artificial intelligence and the creative economy.

The 2026 version of the legislation allows the NIA to hold shares, become a partner, or enter into joint ventures with individuals or legal entities in activities related to its objectives, provided that profit-making is not the main purpose.

The legislation further permits the agency to invest in trusts established for joint investment activities connected to its mission. All of these mark a strategic shift in the NIA's role from a grant provider to a co-investor that shares investment risks.

The NIA plans to introduce three funding models. The first and current model involves co-funding, with private businesses providing grants covering 75% of project value.

The second model involves the establishment of a private equity trust fund valued at 1 billion baht, of which at least 500 million baht will be initially contributed by the NIA and the Stock Exchange of Thailand, while the remainder will come from potential private partners.

This model focuses on enterprises with revenues ranging from 20-100 million baht.

The third model establishes a holding company and other holding firms founded by universities to co-invest in startups.

Under all these models, the NIA's shareholding in startups is limited to a maximum of 20%.

"We aim to have 50 startups that will receive funding under the new decree in this new fiscal year," Ms Krithpaka said.

She said the NIA is collaborating with Grab to enhance Thai innovation.

Grab will provide "problem statements" that local startups can try to solve. If a startup successfully addresses these challenges, Grab may invest in them or help scale their solutions, effectively creating a new market for Thai innovators.