PH startup ecosystem ready to deliver, likely to produce unicorn soon

Mars Mosqueda Jr., Philippine correspondent, DealStreetAsia, in conversation with Franco Varona of Foxmont Capital Partners (upper right), Lawrence Chu of Oriente (lower left), and Minette Navarrete of Kickstart Ventures.

The Philippine startup ecosystem is bustling with activity with entrepreneurs and investors betting big on factors such as the rapid rise of the country’s digital consumer base and the large unbanked population.

“[Philippine] startups are scaling, they’re demonstrating the ability to monetise, to go commercial, and investors, local and global, are taking notice,” said Minette Navarrete, vice-chairman and president of corporate venture capital firm Kickstart Ventures, at DealStreetAsia’s Asia PE-VC Summit 2021.

Navarrete pointed out to the growing angel investor activity in the country, which goes on to signal how local startups are now supported at every stage of their development.

“That matters because the experience at every stage can make or break startups and fundamentally that is what builds a successful startup ecosystem,” she added.

Navarrete was one of the panelists in the session titled “The Philippines catching investors’ attention but can it deliver?” She was joined by Franco Varona, founding partner of Philippine-focused venture investor Foxmont Capital Partners, and Lawrence Chu, co-founder of fintech firm Oriente.

Riding on opportunities

Varona, whose VC firm has been actively investing in Filipino-focused and Filipino-founded startups, cited various factors that are working to the country’s advantage.

According to him, this is the right time for local startups to gear up their business activity as a slew of regional venture capital firms that are active in other markets such as Indonesia, are scouting for opportunities in emerging Southeast Asian markets.

“Investors are starting to look at the Philippines as more and more of a viable consumer market on its own,” Varona stressed.

Echoing the same sentiment, Chu added how fintech as a sector is increasingly gaining traction. Oriente is a Hong Kong-based fintech firm co-founded by Chu.

The firm’s Cashalo app in the Philippines claims to have has grown its user base to a couple of million customers to become of the country’s top fintech platforms.

The Philippines, which is now the most important market for Oriente, has also become a testing ground for one of the most interesting developments in fintech revolving around decentralised finance.

Cashalo, added Chu, will be launching a new product category in the Philippines because of the growing maturity and opportunity that Oriente sees in the country.

“There are a lot of catalysts, including the pandemic, that allow for this opportunity to happen and we see, in the Philippines, there’s a very big opportunity for fintech investors and fintech startups,” Chu added.

However, he said talent and government regulations continue to be a challenge for fintech operators, not just in the Philippines but in most of the countries that Oriente works with.

Projections, Valuations

Going forward, venture activity in the Philippines is expected to go up, said Varona, noting the $437.5 million that went into startups in the first nine months of the year. The figure, he said, was way higher than the $18 million pumped in 2017 and the $183.8 million in 2020.

The trend, however, is not unheard of nor unprecedented, he stressed, because this also happened in Indonesia 10 years ago, when the market first saw $44 million in investments and then grew dramatically to what it is now.

In terms of valuation, Navarrete expressed confidence that the much-talked-about “Philippine discount” will go away once local startups start demonstrating that they can scale and become profitable.

Pure financial players, she added, will then deploy more capital rapidly, giving startups the option to pick the appropriate investors for themselves and get a good value.

“We’ve been in the market for quite a while so we feel positive about the valuation of high-performing startups breaking $100 million to start. That’s what we want. Just get them to $100 million,” Navarrete said.

Joining the unicorn bandwagon

At the rate at which the Philippine ecosystem is currently growing, the country is likely to produce its own unicorn in the next 18 months or sooner, said Varona.

The only company in the country that is currently nearing unicorn status is fintech player Mynt.

The Ant Group-backed payment provider aims to more than double its valuation to $2 billion in its future fundraising, after raising $175 million in January in a round that valued the company at nearly $1 billion.

A tech company of such size will validate the country’s progressing ecosystem, which was previously overshadowed by the controversy involving Revolution Precrafted, the startup that claimed to be the country’s first unicorn.

Navarrete , however, expressed confidence that the case of Revolution Precrafted will become just another company that tried and did not make it.

“As more news comes out of companies that are doing well, over time, that piece of bad news is going to be just one story amongst many and there will be many other stories, good and bad, that the ecosystem will have,” she added.

Chu, on the other hand, said that while fintech has a deep impact on a lot of consumers and can take in huge investments, regulations will always play an important role in the sector’s development.

“Startups fail for a variety of different reasons… It’s very important to learn from them and also make sure that regulators put a framework around what is really designed to weed out bad actors, but not designed to set up failure and create barriers to growth,” Chu stressed.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.