Fresh from having $50 million venture capital fund from its parent company Globe Telecom, Kickstart Ventures Inc is scaling up its startup funding in emerging markets, both on investment figures and the kinds of businesses it funds.
In an interaction with DEALSTREETASIA, Kickstart president Minette Navarrete said the investment company will now be investing up to $5 million in growth-stage companies. Its typical early-stage deal is from $100,000 to $500,000 size, and it even does seed-stage deals at $30,000 for 15 per cent equity.
Founded in 2012, Kickstart’s portfolio has grown to 20 startups. Among its popular ones are the job matching platform Kalibrr, health-tech startup mClinica, financial services innovator Lenddo, smart sticker ZAP, and most recently the enterprise-grade Software-as-a-Service platform Cogito. Edited excerpts.
What is Kickstart’s main goal or focus at present?
We’re interested in solving real-life problems particularly in the emerging market. Two things are important. One is that I think emerging market is like an acid test, the pain is great but the payment options and the cash is very constrained. So if you can set up something that works well in an emerging market, like if it solves problems and it is financially viable in the long term, you would be ready for the world. It’s not the same the other way around if in case you do well in the first world.
The other thing is if you look at the demographics of the world, in about 16 to 20 years, most of the purchasing globally will come from the emerging markets because of population demographic growth and etc. So if we can position Philippine companies to be excellent, using emerging market models, solving real life problems, the Philippines can take a leading position. So that’s the business model.
But on the main point that we’re interested in are in digital businesses like FinTech, EduTech, HealthTech, eCommerce, SaaS, digital concierge, and social impact. For venture capital fund, this includes, energy efficiency and storage, data security, and also spectral efficiency.
How does Kickstart plan to spend its $50 million VC funds? And does your parent company, Globe Telecom, ask for like yearly startup targets?
The fund will go anywhere between five to 10 years but it depends on the opportunity.
Our metric is a long-term return on the portfolio, meaning in about seven to 10 years, like what kind of return on investment can we deliver. The earlier we invest, the more time startups have to evolve and grow and deliver. They just give us the cash. The pressure is on us to invest as quickly as we can but also to invest well in really good companies.
If you invest very quickly but badly, like – they’re not so great, or you give them too much cash or don’t give them enough cash- it cause problems. So what we do is we talk to them and understand the situation.
Sometimes companies come to us for cash and we look at their projections and say that we think you need more cash than you’re asking for, or sometimes we’ll say you don’t need that much. So we offer them some advice.
On a monthly basis we review on what we are doing as far as our portfolio is concerned. Like, are they delivering returns? Or is the value going up or down? And also on a monthly basis we talk to the companies and discuss their individual milestones.
Is investing in Philippine startups a priority?
We focus on quality startups but then there is this emotional desire. Like JAZA (Jaime Augusto Zobel de Ayala II), chairman of Globe, always reminds us that we’re not in this just for business but we also have responsibility for nation building. So it is very important for us that we develop a Filipino ecosystem.
We certainly do a lot more in the Philippines than we do overseas. As you can see we promote #StartupPH which is a Filipino community, not branded “Kickstart” but branded Philippines. So it’s important for us to build the Philippine brand for innovation. Because if we do that it carries all of us that bring value for innovation.
What do you think of the startup climate in the Philippines?
If you look back at the first Startup Weekend in 2011 – many pitches, ideas were a bit of a copycat. Every community goes through that phase. Over the time, we’ve seen people tweaking models. Sometimes it is the same core idea but different in terms of monetization or user acquisition. So now we see more original ideas. It is evolving and I think it’s gonna continue to evolve.
Is it really necessary for startups to have VCs or angel investors to succeed?
The best kind of funding is customer revenue. You only get fundings for specific reasons like to scale faster, or you want to get strategic partnerships. So we don’t think everybody necessarily needs funding. We think it’s a more level-playing field. If you’re a very good startup you choose who the investor is.
How do you find starting a business here in the Philippines?
It is hard but I think the government is trying to make it simpler and certainly the National Competitive Council are taking very specific measures along with very specific stages. Our hope is that in the next year or so there will be specific improvements that will make starting a business quicker.
Also read: Kickstart’s startups raise $8.6m in 2014
What do you think about the first Startup Roadmap plan that is being pushed by the Department of Science & Technology?
DOST is good. They’ve organized a series of roundtables that included investors, founders, mentors, and a university. It’s a big group. Kickstart is there as well as IdeaSpace, Spring.ph and many others. So we talk about what we can do together as public and private sectors.
What is the effective pitching strategy for you? And is it really necessary?
For me it’s important because it helps you crystallize what you’re doing and why you’re doing it. It is important for the startups to articulate what their core beliefs are, what are the assumptions versus what are the facts. The main thing is to be very honest. Think it through. Say what do you know and what do you not know. You have to understand that it’s a conversation of equals, like if you’re pitching for business or investments. We invest in startups because they do something special and they come to us because they think we can do something for them.
What is the right mindset for startup founders?
It is important to understand that this is a commitment. That you commit to a goal, not to a method. Grit is important to persevere through the difficulties and adversaries.
What is your advice to investors in investing in startups?
Be generous. When you were in business school and in the corporation, you were taught to negotiate hard. Never leave money on the table. But I think when you’re investing in innovation you have to be generous. Sometimes you have to give more than what you want to give because it is this generosity that creates room for innovation, inventiveness and creativity.
I think you have to operate on the sense of abundance and goodness. Not control, not dictatorship, not to make them lacking or wanting but to give a lot of room, a lot of support. Be generous with your funding, your time, your connections.