The Philippine Startup Ecosystem Report: Founder’s Edition
November 20, 2023
The Phillipines-based venture capital firm, Gobi-Core Philippines is proud to announce the launch of its Gobi-Core Philippine Startup Ecosystem Report: Founders’ Edition Report 2023 today. The report is a testament to the firm’s continued commitment in capturing the evolving narrative of The Philippine technology ecosystem following the firm’s previous report which covered the Startup Ecosystem Growth Flywheelearlier in 2023.
The report provides an in-depth analysis of the Philippine startup landscape based on insights from a survey conducted with several of the ecosystem’s established founders. It highlights the nation's strengths, including its large English-proficient consumer market, increasing digital adoption, passionate founders, and government initiatives aimed at supporting startups.
Among the ASEAN six countries, The Philippines ranks as the second most populous after Indonesia, boasting a population of 117 million. Significantly, the country also holds the second-highest number of college graduates, trailing only behind Singapore. A considerable portion of the population owns mobile phones, with a subscription rate of 138.2%, and approximately 83% of adults utilize the widely-used e-wallet Gcash.
Given the favorable macroeconomic conditions for adopting technology and establishing businesses, the years marked by low-interest rates—implemented globally by central banks to enhance liquidity amid the pandemic—resulted in substantial inflows of venture capital funding for founders between 2020 and 2022. Given such low borrowing costs, lower returns from debt investments, and stock market uncertainty, global investors took notice of private markets and circled in on the venture capital space, delivering US$209 to the Philippine tech space in 2020 followed up by US$921 million in 2021 and US$791 million in 2022.
We are actively tempering our expectations for VC inflows in 2023, acknowledging both the further increased interest rates and the exacerbated geopolitical tensions currently creating global uncertainty and terrible suffering for numerous countries. This creates an environment for founders where optimistic projections are shunned in favor of understandable unit economics and clear pathways to profitability. It will likely increase the number of surveyed founders bootstrapping, that is self-funding, from its current 24.24%. The same survey conducted yielded that 34.85% of founders received angel investor funding while only 15.15% received venture capital money, indicating that local individual high net worth investors are actively exploring Philippine private markets while foreign and local venture capital firms are moderating their investment appetites.
Source of funding alone doesn’t give you a clear picture of what a founder is up against. Founders, operating with a runway — i.e. the number of months worth of cash they have given current operations — are deeply conscious of how long it takes to fundraise at each stage of funding. Our survey reveals a gap around the pre-series A stage whereby founders take an average of 14 months to raise the round.
The report’s temperature reading suggests that this is a long average length of time to raise a round. 57% ofthe founders we surveyed believe the Philippines ”greatly lacks” funding opportunities while 74% of them believe that the country greatly lacks in government support. Aside from the mere availability of funding both from the private sector and the public sector, our surveyed founders also voice difficulties vaulting regulatory hurdles, suggesting that addressing these would take government coordination, regulatory clarity, and a more supportive environment for startups. They also highlight a lack of educational and learning opportunities within the country, with the education system yet to fully align with the needs of the startup industry.
Entrepreneurs have used the difficulties present in their operating environment as a crucible for developing creativity when it comes to both operating and fundraising. Many founders choose to incorporate outside the country, with 51% of them doing so for regulatory ease and 26% with the hope of winning investor confidence to secure funding.
The entrepreneurs find ways and means to make their businesses work out of an industry-wide belief that The Philippines both deserves and is capable of building a dynamic startup ecosystem. Gobi-Core takes this same proud belief to heart and apprehends the slew of data reinforcing the potential for the ecosystem to succeed at scale.
Diversity in the industry is a positive step forward with 45.5% of the surveyed startups having female founders. 70% of the founders were raised in the country while 30% were raised abroad, creating a mix of working styles, experiences, and best practices which we take as enriching for the ecosystem. Through the report, this same diverse set of founders provides its collective take on: advice it would give ecosystem players, challenges seen operating in the country, the gaps in local infrastructure, as well as the biggest opportunities they see ahead for local startups.
The entrepreneurs find ways and means to make their businesses work out of an industry-wide belief that The Philippines both deserves and is capable of building a dynamic startup ecosystem. Gobi-Core takes this same proud belief to heart and apprehends the slew of data reinforcing the potential for the ecosystem to succeed at scale.
Diversity in the industry is a positive step forward with 45.5% of the surveyed startups having female founders. 70% of the founders were raised in the country while 30% were raised abroad, creating a mix of working styles, experiences, and best practices which we take as enriching for the ecosystem. Through the report, this same diverse set of founders provides its collective take on: advice it would give ecosystem players, challenges seen operating in the country, the gaps in local infrastructure, as well as the biggest opportunities they see ahead for local startups.
Gobi-Core is thrilled to share this well of founder experiences with industry stakeholders, aware that the entire ecosystem is constructed around a similar passion for problem solving and impact, as well as national pride–both answers of our founders to the question of why they set up shop in The Philippines in the first place. We have previously written that the life-blood of the ecosystem is our talent, and doubling down on that belief, we release this report to most brightly illuminate the challenges our founders are facing, especially now while capital on a global scale is tightly held in order to better understand how else to support and grow our startup ecosystem.
