For the past two years, the Philippine startup community has consistently made developments, but despite all these, the country has yet to give birth to a startup ecosystem, said John Orrock, founder and CEO of Manila-based venture capital Future Now Ventures, during an interaction with DEALSTREETASIA.
Orrock described the Philippine startup ecosystem as still “very small” compared with those in other countries. This, despite the emergence of local startup groups, innovation hubs, investments by some VCs and angel investors, and a number of launched government initiatives, he said.
“It’s on a very early, mega earlier stage. It is so small. There is noise but it’s really very small,” Orrock said.
Originally from South Wales, Australia, Orrock is an entrepreneur with global experience both in developed and emerging markets. He does business advisory specialising in cloud computing, Software-as-a-Service (SaaS) business applications, private cloud solutions, Platform-as-a-Service (PaaS) application development, and Infrastructure-as-a-Service (IaaS) deployment.
Orrock founded Cloud Sherpas in the Philippines in 2007 which later became a global cloud computing advisory and technology services company and was recently acquired by Accenture. His other past companies were Okere LLC, and Headstrong.
In July 2014, he founded Future Now Ventures in the Philippines that established relationships with startups and fast growth companies developing cloud, mobile, and enterprise technologies and services.
Orrock, who is well aware of many of the investments happening in the local startup scene, and has witnessed the emergence of new innovation hubs and some government initiatives, still maintained that the ecosystem is yet to take off.
In 2015 for instance, the Philippines had its first startup roadmap that the government launched in collaboration with technology entrepreneurs, investors, and accelerators. It targets to reach 500 startups in 2020 with a valuation of $2 billion.
Several high-impact entrepreneurship programmes such as US-based Endeavor, startup accelerator 1337 Ventures, and incubator Make a Difference (MAD) Industries, both from Malaysia, all set shop in Philippines last year.
In the same year, Kickstart Ventures Inc and IdeaSpace Foundation, heightened their support to local startup ideas. Both are owned by rival mobile telco companies Globe Telecom Inc and Smart Communications Inc (Smart), respectively. Kickstart received its “Fund 2” or $50 million VC fund from Globe in March 2015, while IdeaSpace opted for equity-free funding just last January.
Orrock cited the major gaps in the local startup space such as difficulties in starting a new company, insufficent support from the government, and lack of participation among the country’s biggest companies, as barriers to the startup ecosystem taking off.
“On starting points, if you’re a startup you can’t open a bank account. There’s no one in the public sector helping them. You can’t even register your company easily,” Orrock said. “There is nothing easy for a startup here, for someone who wants to start a company, from point zero.”
He noted recent tax incentives for individual startups were futile since these new companies would anyway have to earn first before they can even pay taxes.
Tax break for bigger firms as solution
What Orrock suggests as a solution to improve the startup ecosystem is for the bigger corporations to have a tax break, and said the latter could then give away the money they save from tax breaks to fund smaller startups.
He believed there is enormous amount of monies from many companies in the Philippines that could be invested in local startups, and reiterated that single biggest step the government could take is to give large corporations some tax incentives.
“If the government would wanna spare it on, they must do some macro-level tax incentive or fund matching program to suck out some money from those players, to give them some at least incentive to help them everyday,” Orrock said.
“We do research, and there’s a lot of high-end first services that can go into the space. The government should do things like that,” he added.
Orrock said there are a lot of lucrative business opportunities in the Philippines pertaining to very simple things.
“There are some very large companies that are extremely profitable and there’s a massive economy and more backward in technology, more backward in everything. So the government can say like we wanna be the biggest fintech innovation country in Asia, then incent some company to dump into that,” he said.
The VC head also pointed out that there’s enough population to be serviced, particularly in healthtech, job recruitment and matching, transportation, digital services, among others.
“There’s actually simple things that are not too hard to achieve or get moving, but there’s just no one driving them,” Orrock said. “There’s a positive outlook but it’s a long road. So the [startup ecosystem] is not even born yet really. But if you think about it there is massive amount that can be done.”