A new survey has found that startup founders in the Philippines are pessimistic about the funding environment due to the sharp 40 per cent decline in local startup investments in 2023.
The average optimism outlook on funding opportunities scores 2.65 out of 5, according to the findings of the 2024 Philippine Startup Founders’ Outlook. The study was conducted by startup-focused communications firm Uniquecorn Strategies and market research firm The Fourth Wall.
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The study paints a stark picture for Filipino startup founders heading into 2024 — a challenging funding environment and a strategic pivot towards profitability. This indicates a considerable shift in founder priorities driven by the current economic landscape.
The funding winter also influenced the lack of confidence of startup founders in their company valuations for 2024. Founders’ average valuation assessment score with their own startups stands at 2.65 out of 5, indicating expectations of lower valuations compared to 2023.
Given these conditions, 75 per cent of founders are now prioritising profitability over growth to reduce dependency on investor funding. For the next 12 months, 70 per cent have identified profitability as their top priority.
The necessity to ensure financial sustainability has forced founders to recalibrate their focus, underscoring profitability as a key objective. This is largely attributed to the dry funding climate and the short runway many startups face.
Meanwhile, improving customer experience and product development are also high on the agenda, garnering 55 per cent of responses each.
The survey, co-presented by The Fourth Wall, Bossjob, and Launchgarage, highlights that startup founders recognise two critical external factors impacting their funding prospects: the Philippines’s economic growth performance and government investment regulations.
Founders also weighed in on how helpful current government policies are for startups, rating them at 2.45 out of 5. Notably, 55 per cent say they could not identify any beneficial government policies, reflecting a negative perception of the government’s role in supporting the startup ecosystem.
When asked what the Philippine government could do to improve the funding environment, 70 per cent of the founders suggested an increase in investment in digital infrastructure.
Startup founders are moderately optimistic about the country’s economic prospects, with an average outlook score of 3.40 out of 5. Those who launched their startups during the COVID-19 pandemic (2019-2020) showed the least optimism. This group was particularly impacted by the economic downturns and uncertainties of the pandemic, which likely influenced their cautious outlook.
The survey also highlights the primary challenges facing founders in 2024. While profitability remains a significant concern for 55 per cent of them, raising funds is a close second at 50 per cent and 40 per cent struggle with talent acquisition. These challenges paint a picture of a startup community grappling with multiple fronts, from financial sustainability to operational growth.
Despite these challenges, there is a silver lining. A significant 55 per cent of founders expect their startups to become profitable within the next one to two years. Furthermore, 20 per cent of the respondents said they have already achieved it.
Looking towards long-term aspirations, most Filipino startup founders are setting their sights on international expansion, with 60 per cent of them particularly looking at neighbouring Southeast Asian countries as a new geographic market.
Dean Bernales, Founder and CEO of Uniquecorn Strategies, said: “While the immediate challenges in funding and valuation are evident, the founders’ focus on profitability and expansion indicates a proactive approach to navigating the complexities of the current economic climate.
The pandemic’s lingering economic impact continues to shape strategic decisions, with founders navigating a tightrope between growth aspirations and the harsh realities of funding. As 2024 unfolds, the Filipino startup ecosystem shows signs of balancing immediate pressures with long-term strategic goals,” he added.
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