The Philippines Startup Ecosystem: Living Up To Expectations

Even before taking office, Philippine President Rodrigo Duterte had placed a priority on initiatives that would assist and empower Filipino entrepreneurs. His focus was building micro to medium businesses in the hope of beating poverty. In August the President doubled-down on his commitment appointing a Presidential Consultant for Entrepreneurship, Jose Ma. “Joey” Concepcion III, Go Negosyo Founder. The advocacy of the Philippine Center for Entrepreneurship, Go Negosyo has spent the past 11 years enabling Filipinos. Concepcion’s appointment appeared to be a step in the right direction.

Now completing his sixth month in office, President Duterte has been named by Forbes magazine among the world’s most powerful people. While marred on the international stage for his anti-drug campaign, the 71-year-old former long-time mayor of Davao city enjoys widespread support among Filipinos fed up with government inaction on petty crime. But has his administration made equal strides empowering Filipino startups as pledged? Has Joey Concepcion lived up to expectations?

Naturally there were some early skeptics. “In the current state of the Philippine economy, I don’t think the tech ecosystem will really benefit people. Only the [transnational corporations] and local corporate elites will profit” said Lorelei Covero, a program officer at IBON International, an advocacy group based in Quezon City. “Unless science and technology answers to the real needs of the people – such as national industry, agrarian reform, basic social services – it will not be relevant to the present conditions” (Hynes, 2016).

Setting aside for the moment Covero’s opinion, the startup ecosystem in Asia is excelling and the Philippines in particular is in the game to win. According to statistics from KPMG and CB Insights, the region inked a total of 55 deals worth US$1.495 billion (Venture Pulse Q3, 2016). That’s a fairly hefty sum this early in the game, and would tend to reflect both entrepreneurial talent and investor interest alike.

Building on the region’s optimal conditions, Tech In Asia reported the Philippines set an ambitious target of 500 startups by 2020. And if that number doesn’t raise an eyebrow, they expect these startups to produce US$ 200 million in total investment funding with an evaluation of US$ 2 billion (Balea, 2015). Game on!

At the close of 2015, 17 startups caught the attention of Tech In Asia. In total, over US$ 18.75 million in funding was reported, with the majority of company investments going undisclosed. And while we wait for this past year’s results, a mid-year survey conducted by Stack (www.stack.com.ph), a thought leadership platform for science, technology and innovation, revealed that over 55 venture-capital backed startups were operating in the Philippines. Sure there is still a long way to go, but if the unique characteristics of Filipino startups is any indication the pace will only increase.

While a bit unscientific, Stack profiled today’s generation of local founders. The findings are rather interesting for both would-be entrepreneurs and investors. For example, a disproportionate amount (31%) of founders attended the University of the Philippines for their undergraduate degree. A considerable distance behind, were Ateneo de Manila University (10%) and De La Salle University (8%). Stack intimated the UP academic culture was the likely cause. However proximity and access to the startup ecosystem is a more logical conclusion, given the influence of things like technical support, social engagement and the overall community vibe that so often provides the impetus to jump into a startup and the energy to “suck it up” when the going gets tough.

Unlike Silicon Valley, founders have been working for an average of 10 years. Other sources like Tech In Asia tend to support the theory that regional founders may need a safety net before taking that leap of faith toward entrepreneurship. Where the average annual salary is roughly US$ 2,500, waiting to launch a startup provides Filipinos the capital, domain expertise and opportunity to build a business network. Stack’s survey further reflected that 60% of founders maintain a regular job while pursuing their startup – reinforcing the notion that making sure your piggy bank is filled remains a priority.

Stack’s evaluation came to a few additional conclusions about founders. Interestingly enough 86% are local, while only 14% come from abroad; 4 out of 10 have a Master’s degree; 77% are male; and the most common skill is program management. In the end, statistics can tell a story, but they are typically not the whole story. So where does this leave us? Right back to our earlier question of success for President Duterte and Covero’s staunch commentary.

It seems safe to say there is some level of affirmation to both. The Philippines has established a lofty goal, a number of startup successes and investor interest continues to rise. Joey Concepcion has several new programs planned for 2017, and along with the Department of Trade and Industry intends to create stronger partnerships with the public and private sector. Building on 2016 events like the 8th Filipino Entrepreneurs Summit, Mentor Me Innovation Forum via the Youth Entrepreneurship Development Workshop, KAPATID – a “Big Brother” initiative whereby medium and large corporations help micro and small enterprises, and the launch of Go Negosyo’s 11th book entitled “55 Inspiring Stories of Women Entrepreneurs,” this year looks very promising indeed.

But while there is growth in business, direct impact to the nation’s most austere challenges remains widely unanswered. A sliver of hope in the right direction does exist. Take for example Aisa Mijeno, a Filipino scientist who in 2011 invented the SALt (Sustainable Alternative Lighting) Lamp. During a first-hand experience immersed with the Butbut tribe in Buscalan, Kalinga, Aisa recognized the need for a stable commodity to illuminate the darkest communities in the Philippines. In many cases like the Butbut, people don’t have electricity and use kerosene lanterns as the main source of lighting. This approach seems viable until you realize the need for them to travel down the mountains every other day to purchase kerosene for their lamp. Her invention was so inspiring, that almost four years later she found herself standing on stage at the Asia-Pacific Economic Cooperation (APEC) summit in Manila. Next to her, none other than U.S. President Barack Obama and Chinese business magnate Jack Ma – founder and CEO of Alibaba. Today, along with her co-founder Raphael Mijeno, she manages her startup under the watchful eye and funding of Idea Space, a Philippines incubator.

While SALt does not solve the world’s problems, it is a reflection of how not just innovation, but socially minded startups can induce positive change in society. In Aisa’s case, her mission and advocacy is to address the light inequality gap and end the use of combustion based light sources (kerosene lamps and candles) for the 16 million Filipinos and 1.4 billion people across the world. An admirable objective that amplifies how fostering target-specific startups can improve the quality of life.

Covero’s concerns were also taken to heart. I2A Philippines created a new breed of incubation, integrating the efforts of government agencies, academic institutions and private companies to “accelerate” emerging businesses across Asia. Working together in harmony, it’s not just about an entrepreneur’s ability to be agile and disrupt. I2AP fosters innovation to discover and build, creating a win-win-win environment for the startup, investor and community. As blogger Greg Satell put it in his recent post “2020 Tipping Point: A new era of innovation”, we are entering new territory and the central challenge is to bridge the gap – unaffectionately known in the scientific world as the “Valley of Death” – between discovery and commercialization.

One aspect of accomplishing this is I2AP’s initiative to introduce Additive Manufacturing (AM) to the Philippines. In doing so, I2AP directly impacts a core development process that is often prohibitive to local entrepreneurs due to time, labor, cost and risk. AM is a very different business model than traditional manufacturing. Instead of looking at economies of scale – mass production, AM uses economies of “ones, twos and threes.” It very precisely layers materials, placing it where needed; creating designs that previously could not be achieved due to limitations. No longer are engineers limited in their designs by fabrication equipment. With AM the only design limitation is the imagination of the engineer! (Cossler, 2016).

In contrast to traditional incubators, I2AP is influencing the technology ecosystem well beyond the infusion of venture capital. Collaborating with government, academic and private sector partners, the nation’s challenges and requirements are identified. I2AP then works to inspire entrepreneurs to solve the problem and provide the requisite training and equipment. AM is a prime example of influencing national industry. Other issues like agrarian reform, fisheries and aquatic management, environmental protection and even basic social services, are equally tackled, ensuring the ability to deliver solutions relevant to present conditions.

Would-be entrepreneurs may visit I2AP’s website to view some of the challenges the Philippines faces. Whether you are seeking validation of an existing concept or lack inspiration, end-user input can be of great value. And regardless of what stage you are in, I2AP is always ready to listen to that next great idea.

Investors are equally encouraged to get involved in the process early. Whether you are socially conscious, have a specific portfolio in mind, or simply curious of I2AP’s programs, the platform is open to everyone interested in fostering technology innovation.

Michael Goldsmith is a prolific author, speaker, instructor and advisor to governments, non-governmental organizations and multinational companies, on such topics as international development, business optimization, technology innovation, critical infrastructure protection, and governance, risk and compliance. A U.S. citizen residing in the Philippines, he currently serves as I2AP’s CEO In-Residence and Chief Evangelist. He may be reached directly at mgoldsmith@I2A-Philippines.com.

References:

• Hynes, C. (2016) The Philippines’ shaky startup future: profits or progress. Forbes magazine
• (2016) Global analysis of venture funding. Venture Pulse Q3 2016
• Balea, J. (2015) Here are the Philippine startups that raised funding in 2015. www.techinasia.com
• Cossler, J.W., (2016) www.ybi.org

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