Having set up five companies in the region since 2001, Arup Maity – current president and CEO of BlastAsia Inc and co-founder of Philippine startup incubation group Spring.PH – says he has found Philippines to be a suitable “runway for startups” wanting recognition in the market.
According to him, the risk of startup failure in the Philippines, is slightly lower, compared with other well-established countries due to lower costs and sufficient supply of talent. Investors or founders have “a longer runway” to make a startup fly in this market, unlike the Silicon Valley (US) or Singapore, where the cost of running operations are much higher, he said during a detailed interaction with DEALSTREETASIA.
His company BlastAsia is a Philippine-based software service company specialising in outsourced product engineering that began in August 2000. Among the other local firms he founded are Xamun Inc, myConcierge, RxBuyersClub, LandExcel Consulting Inc, and got2find.me.
Excerpts of the interview:
What is your view about investing in the Philippines?
If we talk about opportunities, products, and quality of products, I would say the Philippine industry is growing much faster than most other established areas but there has not been much investment. So if someone from outside is looking for opportunity, Philippines is probably one of the most attractive in terms of investment opportunities because the cost valuations are low;and there is not much funding so the market is not that heated.
The same level of deal in India, will cost two or three times more ( compared to the Philippines). It may not be that way forever. Once the deals are visible and IPOs, investments, buyouts start happening, everyone will have higher expectations. It’s actually a great time for anyone looking at investing in the startup scene over here.
What made you decide to come here in the Philippines?
I was working here with the Metro Pacific Investment Corporation group, then when we decided to do a startup. We tried considering India, Singapore and the Philippines. India was quite saturated, there were too many companies. Then we considered and incorporated in Singapore but the cost of running a new business in Singapore is too high. In the Philippines, there’s a sizable local market that, we felt, would allow us to survive the initial years before we start exporting products; we also saw a lot of talent here.
Are you satisfied so far in doing business in the Philippines?
I think Philippines is still one of the best locations to set up especially for product R&D and building your own startup. Philippines is a good choice because you have sophisticated users, many people with a lot of cellphones and gadgets. Internet service is still a pain and should improve. Also, Philippines has one of the youngest population and so they are all quite eager and fast to get into the social and mobile space.
The risk of startup failure in the Philippine is a little lower. It is counted as the number two destination for software outsourcing, next to India. So if you build something and test something in the Philippines, you can easily bring it to anywhere in the world. It is like an ideal lab scenario where you can keep your costs low and keep experimenting and building things and then sell it locally and globally.
What are the pain points of setting up a company in the Philippines?
I have set up five companies already, and three of those are in here. For me, it’s not as hard to set up a company here as it is to close one. We’re recommending that government should give startups some form of legal entity but not the full incorporation yet because most startups don’t survive the first three years.
What we found difficult was dealing with LGUs (local government units) for the various permits needed. Incorporating a company is quite easy but it’s not like Singapore where you can have a company at the end of the day or in the US in less than a week. Again, I don’t see that to be a major factor.
I’ve incorporated companies in the US, Singapore and India; and India was the hardest, while Singapore was the easiest to start and close a company. But in the Philippines, I won’t complain about the incorporation process, not even in the LGU level. I don’t classify that as a deterrent; if you can’t deal with that part, how the you going deal with market and product, which is much harder part in a startup.
What should be done to convince people with money to invest more in startups?
We need success stories. Once people see others making money, they want to get a piece of the action. So with Xurpas being the first local startup to get an IPO listing in the Philippine Stock Exchange, it is a good start.
There is lack of knowledge about high tech investment or how it is different from investing in traditional business like franchising, real estate, among others. Perhaps interested investors can be trained on how to handle this on a portfolio level.
What are the things that Filipinos need to improve, to succeed in the startup space?
What we lack here is talent in terms of startup sales, growth hacking, and customer development because there hasn’t been a lot of companies that have done much in this space. But when it comes to tech, I don’t think there is an issue.
I think we need younger people to take the startup risk. In the Asian culture, parents will often tell their kids to just get a corporate job. We need more of the graduating tech and business students to enter the startup scene.