Rightful place in global startup ecosystem

The numbers said it all. The Philippines is ripe to experience robust growth in the startup scene, even ready to take its rightful place in the global ecosystem despite the digital economic divide.

Indeed, the country is the darling of seeders and funders in the ASEAN region. The local startups raised P73.03 billion last year, 179 percent higher than P20.7 billion in 2020, data from the Philippine Venture Capital Report 2022 showed.

“The Philippines startups are getting plenty of attention and funding,” said Yani de Guzman, founder and CEO of marketing consultancy firm Ronin. “Compared to 2017, we were ranked 70 globally. But last year, our ranking improved to 52, and that’s a lot of improvement.”

Foxmont Capital Partners, which commissioned the Philippine Venture Report with Boston Consulting Group, described 2021 as the “watershed year for the Philippine startup ecosystem, with total deals hitting a record of 92. The Philippine startup ecosystem recorded a 41.5 percent jump in deals from the 65 closed in 2020.

Several factors contributed to the hospitable environment for the Philippine startups, De Guzman said. Domestic consumption is 90 percent of the gross domestic product when the regional average is 67 percent, and pre-pandemic income showed average annual growth of 4.5 percent.

The numbers strongly suggest an emerging middle class with growing purchasing power, which sets the Philippines as one of the most dynamic countries in the region.

“At the beginning of Covid-19, there was some paralysis. There was a halt in the activity because we were all treading on thin ice. But once systems were placed, especially with the rollout of the first batch of vaccines, things started to progress later. A lot of industries have boomed,” Yani noted.

Sunshine industries
Expectedly, the financial technology space received the biggest funding among startups, generating over P19.21 billion in the first half of 2021 alone.

But Yani said the winds of opportunity have shifted to other industries, mainly health services, buoyed by the Covid-19 pandemic.

According to her, many Filipinos opted to embrace the teleconsulting services offered by health service providers over the past two years for fear of visiting clinics and hospitals.

Another sunshine industry Yani looks at is the agriculture sector or agritech.

“Most of the agritech startups I’ve seen are focused on fertilizers and pesticides,” Yani explained. “We should look at the Indian model where the government heavily incentivizes investments in agriculture.”

Among the areas that need focus in agritech is the supply chain segment, including financing and removing unnecessary regulations and intermediaries or profit-oriented agents.

“Indian startups provide drones, weather forecasting, and soil irrigation services. I’ve even seen innovative packaging. I would encourage more hackathons that help the agricultural industry. But I think that it’s happening right now,” she added.

RISE Challenge
Ronin recently concluded its RISE (Resiliency Innovation Sustainability Entrepreneurship) Pitch Night, where eight qualified startups made their final pitch to investors to open new investment opportunities.

The startups were chosen from a field of 15 competitors, Yani explained. The eight also received a P500,000 equity-free grant from Makati City to sustain their development, while the founders attended a 12-week training program that will prepare them to pitch to qualified investors properly.

She explained that the funds were given to the startups in tranches, but they must complete certain milestones and attend the 12-week mentoring programs. “They are not just getting financial support, but also vast knowledge from a group of really qualified mentors, which is enough for them to go out into the startup world and raise funds. We will provide them the tools.”

But Yani advised startups to be patient and not give up if they don’t get funded immediately. In her experience, funding negotiations usually take four to six weeks up to one year.

“That’s not the most important part of this program. The critical part of this program is that startups have the support they need and the tools necessary to go out in the world and fundraise because investors have certain expectations. And we are here to prepare startups for these expectations,” she said.

The Philippine ecosystem startup landscape has dramatically changed over the last three years. The number of startups grew to 700 in 2021 from just 442 in 2019, with around 238 headquartered in Metro Manila.

The 2019 signing of the implementing rules and regulations for the Innovative Startup Act or Republic Act 11337 and the Revised Corporation Code provided the government’s support in promoting entrepreneurship.

“The startup landscape is rapidly growing compared to five years ago, and so many changes exist. Different organizers, venture capitalists, corporate venture funds, the government, and angel investors have teamed up to provide more structuring on the investment side.

“The government has provided several programs that help the founders. Stakeholders have also opened their eyes to see all of the opportunities not just here locally but also abroad,” Yani concluded.

Leave a Reply

Your email address will not be published. Required fields are marked *