Startup capital-raising dipped in 2023, but trend still ‘bullish’

MANILA, Philippines — The amount of venture capital raised by Philippine startups shrank in 2023, falling below the $1-billion mark for the first time in two years, even as the country continued to attract a larger share than other Southeast Asian economies.

According to the “Philippine Venture Capital Report 2024” launched on Wednesday by the Boston Consulting Group and the founder-focused venture capital fund Foxmont Capital Partners, a total of $956 million was raised by local business ventures in 2023. This was lower than the $1.11 billion raised in 2022 and $1.03 billion in 2021.

“The Philippines has also not been spared from inflationary pressures. And so, a lot of investors, particularly regional and global investors, have taken a little bit of a wait and see approach until, hopefully by the end of this year,” Foxmont founding partner Jelmer Ikink said at a media briefing in Taguig, when asked about the contraction last year.

But he noted that last year’s startup fundraising was still the third highest ever in the Philippines. “So, I think it (2023) is still a very healthy performance,” he also said, highlighting the country’s resilience amid the seeming decline in capital flows.

In the same report, overall deal value in Southeast Asia suffered a 62-percent decline, with Indonesia and Singapore feeling the largest drop of 68 percent and 73 percent, respectively.

Fintech firms main recipient

In contrast to the decline in total deal value, 2023 saw a record year in number of deals, which climbed to 96 from 83 in the past year and 92 in 2021.

The Philippines’ share of these venture capital funds also increased to 13 percent, nearly doubling from just 7 percent in 2022 and 5 percent in 2021.

“This, on top of the record high deal volume in 2023, underscores the sustained interest in Philippine startups,” read the report.

The financial technology sector was the recipient of the largest number of venture capital deals, numbering 22 last year. This was followed by business-to-business and the software-as-a-service sectors with 14 deals, and e-commerce with 13.

Other local sectors that benefited included health, media, agriculture, food and beverage technology, education technology, property technology, artificial intelligence and Web 3.

Asked for their outlook this year, Ikink said it’s unlikely that the US Federal Exchange would tweak interest rates during the first half of the year. But once the interest rates go down, “[private equity] firms can leverage their deals again,” said Ikink.