Globe helps create ideal ecosystem for local technology startups

A new breed of Filipino entrepreneurs is rising, eager to take on the challenge and lead the way to global competitiveness.

These are the forward-thinking people behind the local technology startup companies, whose values are centered on innovation and dynamism, and which are expected to drive bigger business opportunities for the Philippine economy.

Even government officials like Trade Secretary Gregory L. Domingo admitted that tech startups can significantly contribute to the economies in which they work through the product and process innovations that they introduce to the market—and more so for a country like the Philippines.

Domingo further believes that the Philippines itself can carve a niche in this emerging industry, such that within the next three to five years, there will be a number of local startup companies with valuation of a hundred, two, or three hundred million dollars, while at least one or two firms would have valuations exceeding a billion dollars.

And hence the reason why the Department of Trade and Industry, in partnership with the Philippine startup community, had decided to organize the recently concluded SlingshotMNL 2015, a conference that provided a platform for local firms to meet up with potential mentors, investors, and partners.

Creating startup ecosystem

SlingshotMNL 2015, the official tech startup conference of the Asia-Pacific Economic Cooperation (APEC), formed part of the Philippines’ initiatives under the “Boracay Action Agenda to Globalize Micro, Small and Medium Enterprises.”

This two-day conference held at the Philippine International Convention Center earlier this month, served as an avenue for startup companies, investment firms, and representatives of government to network and share best practices on how a startup model can drive economies in the Asia-Pacific region and around the world.

This event was expected to create new connections and enable the Philippines to create the ecosystem needed to boost the local tech startup industry.

Plenary sessions and workshops at SlingshotMNL 2015 covered a variety of topics including understanding hubs of innovation, opportunities in tech startup investing, redefining scale in the global market place, impact entrepreneurship; and startup ecosystem support.

It likewise featured three pitching competitions, networking receptions, and an exhibition of more than 100 startups from Asia and the Philippines, and saw over 1,000 delegates and other participants attending the conference. These included heads and representatives of the startup industry, startup incubators, business accelerators, investment and venture capital firms from the United States, Latin America, and Asia, as well as successful startup businesses across the globe.

Private sector contribution

The conference also saw the country’s private sector chipping in whether in terms of resources or expertise to help create that ecosystem for local tech startups.

Companies like Kickstart Ventures Inc., for instance, puts in big company resources (capital, facilities, expertise, and business connections) behind these startups, so investees can launch faster, and achieve scale and profitability sooner.

Kickstart is a wholly-owned venture capital subsidiary of Globe Telecom, backed by SingTel and the Ayala Corporation.

Kickstart Ventures Co-Founder and President Minette Navarrete, who was one of the moderators at SlingshotMNL, noted that the success of startups will be defined largely by how conducive the regulatory environment is to the industry, and the kind of support, such as funding, education or training, that will be contributed by both the government and large corporations.

“If we want the local technology startup industry to become a true engine of economic growth, then it is absolutely important for the Philippine government and the private sector (corporations as well as individuals), as well as non-government organizations, the academe, and media to collaborate in boosting the industry,” Navarrete said.

Globe and Kickstart, for one, have been among those that have been actively supporting the creation of the ecosystem.

Among local institutional investors, Kickstart offers the most generous seed or idea stage terms—$30,000 for a 15 percent equity—precisely because it understands that startups will need more time to accomplish the early business registration processes, and start making the revenues it needs to be financially viable.

“Globe Telecom and Ayala Corporation affiliates have supported our portfolio companies, doing sponsorship, distribution, product development and marketing deals, and generally opening their doors to commercial deals with startups. Singtel Innov8 has hosted our startup founders in their facilities when founders have traveled to Singapore or San Francisco,” she related.

“Kickstart nurtures relationships with great mentors from various countries, and these provide much-needed advice and coaching for entrepreneurs, based on real-world startup experience. We also provide quite a bit of tough love, our due diligence process and regular business checkpoints are direct, pragmatic and a fairly rigorous. They prepare startups for the real world and they reassure other investors that the teams we invest in are good bets for follow-on funding,” Navarrete added.

Policy measures

On the part of the government, the trade chief admitted that the government is currently lagging in its understanding and support for this emerging local industry.

This is why Domingo had committed to participants of the Slingshot MNL 2015 conference that the Philippine government would  take a “very serious look on how to support this sector by improving the policy, changing some of the laws required to be able to support this better, providing more training, setting up more financing for startup ventures, and so forth.”

Navarrete noted that the country, so far, has been off to a great start, as she lauded the National Competitiveness Council for doing a “fantastic job of working with the Department of Trade and Industry and other government sectors” to help ease doing business in the country, and help facilitate the entry into business of small companies like the tech startups. Much more, however, needs to be done to ensure the viability of these companies.

“Success for startups are those whose products and/or services are used by millions of happy customers. Ideally, these startups would have found a way to derive revenues and profits; and their growth returns value to the founders and investors, and to their employees and the community to which they belong,” Navarrete explained. “But to make success a reality, certain policies need to be put in place. A few that are top of mind are significantly improved national competitiveness, especially around the ease of doing business, good governance, and the reliability or consistent application of laws.”

She noted that critical concerns must be addressed and these issues center mostly on the overall policy environment; the general business and investment climate; talent diversity and mobility; and national competitiveness.

More specifically, Navarrete further proposed a number of measures deemed to be most needed by tech startups such as streamlining and standardizing local government unit (LGU) processes for business permits and annual renewals; talent diversity; easing up on immigration requirements; recognizing a new class of global nomads such as startup talent, founders and investors who are not employed, and are keen to set up in the Philippines because of favorable market conditions; bringing in new skills and entrepreneurial mindsets; investment incentives, recognition of investment instruments; clarity around investment restrictions.

“Beyond these, I would look for improvements in the educational system. We need to better prepare our youth for the future, and one way is to present them a range of career options that should include entrepreneurship. We cannot have an education system that only prepares students to be employees,” Navarrete said.

Also critical is the need for a broad cultural change, a mindset that is both more ambitious and seeking to conquer the world, but also more hands-on and rigorous in-market execution. There is a need to care more about the results produced, and less about the self-promotion and popularity, or vanity metrics, she further stressed.

“I’m sure there are others, but these come to mind quickly, as they are the most frequently mentioned friction points from Kickstart’s experience of working with startup teams. Remember that these are high-risk endeavors, and globally, only about 1 in 20 startups will succeed. But these policy improvements will remove major non-value-adding obstacles encountered by most startups in the early stages of development. The bill proposing tax relief is good too, but it is something that only some startups would avail of as not all startups achieve profitability in the first two or three years of existence,” Navarrete claimed.

Meanwhile, asked of the Philippines’ capacity of building its own Silicon Valley of the United States, Singapore’s Block 71, and Malaysia’s MaGIC, Navarrete only has this to say: “At Kickstart, we avoid using the ‘Silicon Valley of the Philippines’ descriptor because we believe that while there is much to learn from Silicon Valley, there is also much that needs to be locally developed. The Philippine context today is very different from the US forty years ago: the underlying performance drivers and sources of competitive advantage are not the same; and the risk is that people buy into the superficial, cosmetic aspects of the Silicon Valley reference, without making the fundamental changes needed to build a better-performing Philippine ecosystem.”

“Now, should we build our own Silicon Valley? The answer to that depends upon your objective, and your success with it depends upon your execution. There are already a number of innovation hubs in the Philippines run by different private enterprises, each of which offers a combination of features commonly associated with classic innovation hubs. They serve a purpose, so building more innovation hubs isn’t new or unique, but it isn’t necessarily a bad idea. The more important thing to remember, though, is that we live in a more interconnected world. Physical spaces for interaction matter; but authentic human relationships collaborating for shared goals are the real glue that will drive us forward,” Navarrete concluded.