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Startups and the Philippine Business Scene

Startups have been in the headlines around the world in recent years, especially after the tremendous success of startup tech companies like Facebook, Amazon, and Google.

While most startups are in the information technology (IT) sector, there are also non-IT startups dealing in consumer products. These have also been gaining ground, but at a slower growth trajectory than tech startups.

In the Philippines, the Business Process Outsourcing (BPO) boom has opened the doors for many startup possibilities in the IT sector. Success in BPOs has focused the spotlight on the country’s wealth of IT talents, and their ability to develop products and services with a good potential for growth.

In addition to this, the many challenges facing millions of Filipinos every day present a load of opportunities for non-IT startups. As the old adage goes, necessity is the mother of invention. The right motivation and support help encourage ingenious Filipinos to come up with innovative products or services that will respond to Filipinos’ needs.

Definition of “startup”

A “startup” has been broadly defined by Merriam-Webster as a “fledging business enterprise.” Those in the market have identified startups as companies that present fresh solutions to common problems to help improve people’s lives. These solutions are borne out of ideas that may or may not succeed.

With this in mind, not all startups make it to “exit,” or the point when the venture’s initial investors sell their stake at a profit (or loss) to an acquiring company, or when the startup goes public. Startups that don’t get off the ground are not uncommon.

Present Philippine startup conditions – tech sector

A Philippine “startup” has been defined by the Department of Science and Technology – Information and Communications Technology Office (DOST-ICTO) as:

“any business entity that is less than five (5) years old, registered with the financial regulatory authorities of any country, provided that majority of its team is operating and residing in the Philippines. The startup should have at least one (1) founder who is working full time.”

In 2015, the ICTO was tasked to generate internet-related startups in the country that will help spur economic growth and “find solutions to the society’s most pressing and pervasive issues.” It has identified 100 Philippine startups as of 2015.

The ICTO also lists down classifications of common internet startups, including:

  • e-Commerce (eBay, Amazon)

  • Search tools or engines (Google)

  • Communication (Facebook, Skype)

  • Disruptive services (Uber)

  • Sharing economy (Airbnb)

  • Gaming

  • Media and entertainment (YouTube, Snapchat)

  • Food technology

  • Education technology (Coursera)

Philippine startups in the non-tech sector

In the non-tech sector, the lead agency tasked to promote startups is the Department of Trade and Industry (DTI). The DTI notes that the country has improved its rankings in the World Intellectual Property Organization (WIPO) Global Innovation Index, from #100 in 2014 to #83 in 2015. About 30 Filipino inventors hold 23 patents that have been assigned to 12 foreign companies.

Leading Philippine startups

Some of the leading tech and non-tech startups in the country todate are as follows (according to Forbes Magazine May 2016 edition):

  • Sulit.com.ph – an e-Commerce site which exited in 2013

  • Xurpass – a consumer technology company offering a broad range of products and services, which went public in 2014

  • Galleon – an e-Commerce site offering products not found in the Philippines

  • Carmudi – online vehicle marketplace

  • Lifetrack Medical Systems Inc. – a software company that offers RIS PACS

Where the Philippine startup sector is heading

Both the DTI and the ICTO are developing the groundwork for a thriving startup ecosystem. This is a community of startups, mentors, incubators, investors, and organizations like legal and financial service providers,all working together to nurture startups until their maturity.

The DTI’s and the ICTO’s goal is to grow the startup sector to a US $2billion industry by 2020. The goal includes funding of US$200 million for 500 startups, generating at least 8,500 high-skilled jobs for Filipinos.

All startups need funding, mentoring, and support in various areas of growing a business. In the past, individual startups worked on their own to find the support and funding they needed. With the government’s recognition of startups’ significant potential to contribute to the economy, officially sponsored support systems can help more startups achieve success in the future.