When I first started in the ecosystem back in 2016, startups were in their infancy stage. As a fresh grad, the usual setup is to join a multinational corporation, NGO or government sector.
Top talent continues to be mostly attracted to join multinationals and conglomerates due to long-standing perceptions of career safety and growth. Startups were yet to become mainstream, and there used to be mistrust in their ability to grow a young professional’s career.
The significant progress of the post-pandemic Philippine landscape
The narrative has now changed. Amidst growing innovation needs in recent years, incubators and accelerators emerged, nurturing budding entrepreneurs and fostering a startup ecosystem to mitigate high failure rates.
Talent is still the biggest asset of the Philippine ecosystem, and it has been further leveraged for community growth. Furthermore, the pandemic has altered the landscape, prompting an assessment of the Philippines’ recent development.
The startup ecosystem in the Philippines has been growing rapidly, driven by a combination of factors such as a large young population, increasing internet penetration, mobile-friendly infrastructure, and private-public support for entrepreneurship.
Based on Jelmer David Ikink, Founding partner of Foxmont Capital Partners, “If you look at the number of smartphones that Filipinos own, at the moment, it’s 75 million. That’s on par with Indonesia, which has double the population of the Philippines.”
Ikink adds, “And while on those phones, Filipinos use social media a lot and are very active in live streaming and purchasing goods and services through e-commerce platforms.”
Based on the Global Startup Genome Report in 2022, the Philippine startup ecosystem and Manila’s entrepreneurial ecosystem were among the top 20 Global Ecosystems and Top 10 Asian Ecosystems in Affordable Talent. The country also ranked among the top 25 Asian Ecosystems and top 15 Asian Emerging Ecosystems in Funding.
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Funding opportunities signal ecosystem expansion
To further highlight the point, Philippine startup Pickup Coffee, a home-grown coffee company focused on making premium beverages more accessible, has US$40 million in new funds; Go-Ventures, backed by Indonesia’s GoTo, leads the Series A1 investment round. This is not a unique case of fundraising, as reported by the annual Philippine Venture Capital Report.
As of February 2023, the country had already recorded 17 startup deals, putting the Philippines on track to reach 23 deals by the end of the first quarter of 2023. The figure would put Q1 startup investment at pre-COVID-19 levels, demonstrating investors’ bullishness in the prospect of technology and digital platforms in the nation.
Talent is the heart of the startup community
The past years have seen an exciting trajectory in the amount of capital funding being raised and invested in the Philippine startup ecosystem. However, local startups being built and grown continue to face the challenge of a lack of talent willing to take the leap into building startups.
Rene Cuartero, CEO of AHG Lab, equips, “This is why we at AHG Lab continue to find ways to engage universities, educational institutions, and internship partners to increase interest and change perception in startups. If we are able to attract more talent into the ecosystem, we also give more innovation to Philippine startups to succeed.”
He further adds, “Startups are born out of the need to innovate and solve pressing needs, and innovation brings the best of talent to the world stage. At the heart of the community is a multitude and diverse set of talent, and we plan to tap and grow that.”
At the same time, an alternative perception of the ecosystem plays an important role. While there are big players in the e-commerce, fintech, and mobile apps industry, nobody has managed to tap the whole of the Philippine market yet. Startups big in Metro Manila might not understand the needs of those in other cities and rural areas. The Philippines being an archipelago, is an opportunity to replicate a similar strategy that resolves localised issues in the market. This process is so dynamic that there is a lot of ground to cover.
Public-private support is the main catalyst for growth
The best way to foster this growth lies with ongoing public-private support from ecosystem players. The Philippines is now a booming digital economy, driven by tax incentives and support extended to founders cited as reasons a startup should consider moving to the Philippines.
The Department of Trade and Industry said that the country offers a 20 per cent corporate income tax (CIT) rate for startups as mandated under Republic Act 11534 or the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Law. At the same time, CREATE, through the Strategic Investment Priority Plan (SIPP), provides a more strategic tax incentive package for businesses and startups depending on tier, location, and market orientation.
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The Department of Science and Technology has also established local technology business incubators (TBIs) that focus on startups born in regions outside Metro Manila. A Technology Business Incubator (TBI) is a facility where startups are hosted, and business development services are provided. For would-be technology entrepreneurs and startups, DOST-funded TBIs offer office space as well as technical services and facilities to get their businesses established.
At the same time, the Department of Information and Communications Technology (DICT) has partnered with various private players to promote startups in the Philippines, including a roadshow that aims for attendees to digest startup basics and innovation to the existing curriculum.
Apart from the increased investment and government support, venture studios were also born out of the pandemic. In particular, Founders Launchpad, a recently launched incubation program by an independent venture studio, AHG Lab, and community ecosystem-focused Draper Startup House in partnership with DICT and QBO Innovation Hub, has expanded its application to talent outside Metro Manila.
Simon Bauer, Partner at AHG Lab and Program Lead of Founders Launchpad, quotes, “At Founders Launchpad, we believe that great ideas and passionate founders can be found all over the Philippines. That is why we build a hands-on support program that provides guaranteed funding, resources, guidance, as well as co-working and living space in the local startup capital in Metro Manila to kickstart their entrepreneurial journey and startup growth.”
It is crucial to bridge the gap between the abundance of support in the country’s capital and the entrepreneurial talent that exists outside of Metro Manila. Giving all founders equal access to the right foundations would cement the Philippines’ status as a hub for startups. While easier said than done, ecosystem players recognise its importance and are taking steps to ensure the availability of assistance anytime, anywhere.
While the startup ecosystem in the Philippines has made significant progress, challenges such as access to capital, infrastructure limitations, and bureaucratic processes still exist. However, with ongoing support from the government, growing investor interest, and a dynamic entrepreneurial community, the startup ecosystem in the Philippines continues to evolve and offer exciting opportunities for innovative ventures.
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