Philippine-based tech startup incubator and accelerator IdeaSpace Foundation has opted for equity-free funding, as it opened the fourth edition of its annual startup contest or 2016 startup competition.
IdeaSpace executive director Diane Eustaquio said they will no longer have the 20 per cent equity in each of the startups that will undergo its incubation and acceleration process in order to further help founders in pursuing their innovative ideas.
Equity-free funding is a new, yet bold trend among accelerators and incubators. Just last week, 23 startups from Indonesia, India, and Brazil set off to Google HQ in Mountain View in California, for the first round of the Launchpad Accelerator Program – a six-month course that offers mentorship, training, support with equity-free funding. Google will extend this programme to other countries in the future.
According to IdeaSpace’ executive director, the new equity-free funding structure will help strengthen its commitment to the local startup ecosytem and help bring out the most socially relevant innovations, relevant to emerging economies such as the Philippines.
Initially, IdeaSpace was taking a 20 per cent equity stake with an aim of making the incubator more sustainable but later realised that it would take much longer for these startups to realize the return of the 20 per cent equity.
“It is not fair to the founder to continue developing the product while we get 20 per cent equity. So every year we have to provide what that 20 per cent means,” Eustaquio said.
“The objective in the beginning was a CSR (corporate social responsibility) effort, so let us keep it that way,” Eustaquio said. “So it is equity fund free. We will not dilute, or decrease the kind of support. It will still be up to P1 million but it will be tough for all the startups.”
The IdeaSpace chief also disclosed plans of selling back the shares of founders to other investors and companies within the MVP Group may be interested in such shares.
“It is reallly up to the startup to decide if they want us to sell the shares, let’s say in a bigger fund and that would be more beneficial to them,” Eustaquio said.
Founded four years ago as a non-profit foundation, IdeaSpace received P500 million fund from the MVP Group of companies to conduct a five-year commitment towards growing the local startup ecosystem.
Among the companies supporting IdeaSpace are First Pacific, First Pacific Leadership Academy, Metro Pacific Investments Corp (MPIC), Metro Pacific Tollways Corporation (MPTC), MPIC hospital group, PLDT, Meralco, Smart Communications, Digitel Mobile Philippines Inc (DMPI), and its mobile brand Sun Cellular, SPI Global, ePLDT, Indofood, Philex Mining, Maynilad, MediaQuest, and TV5.
“The IdeaSpace funding will still be the same until 2017, and after that we will be on our own, self-sustaining,” Eustaquio said, adding IdeaSpace still has a significant amount of budget since it did not made too much investment last year.
IdeaSpace is inviting interested groups and individuals, both local and foreign startups in Southeast Asia, to submit their startup ideas via its website for evaluation until March 18, 2016.
The top 20 ideas from this pool will be screened by an esteemed panel of judges, and the top 20 early-stage startups that will enter incubation will be announced by July 5, 2016. At least 10 of these startups, meanwhile, will enter the acceleration phase beginning August 1, 2016.
Those who enter the acceleration phase will have access to up to P1 million funding which will include up to P500,000 in cash, while non-cash benefits such as housing, transportation, incorporation, office space, communication, software support, trainings and classes, as well as mentoring from executives of companies under First Pacific.
IdeaSpace has helped incubate about 38 startups as part of its half a billion-peso funding since it was instituted in year 2012.
Some of the program’s most notable alumni include: SALt, a startup that has developed an innovative saltwater lamp and was featured during the recent APEC Summit 2015 in Manila; PinoyTravel, a startup which helps solve provincial bus reservation woes of commuters; Mobkard, which helps consumers save on purchases through discounts and promos; and Tactiles, which developed an educational toy that helps children learn electronics while playing, among many others.