亚开行-菲律宾的科技创业生态系统

THEPHILIPPINES’ECOSYSTEM

FORTECHNOLOGYSTARTUPS

GaryTeves,HannahMuralla-Palustre,ChristopherMiguelSaulo,

JahjielPajutan,MarioJordanFetalinoIII,andPaulVandenberg

MAY2023

ASIANDEVELOPMENTBANK

THEPHILIPPINES’ECOSYSTEM

FORTECHNOLOGYSTARTUPS

GaryTeves,HannahMuralla-Palustre,ChristopherMiguelSaulo,JahjielPajutan,MarioJordanFetalinoIII,andPaulVandenberg

MAY2023

CountryReportNo.7

EcosystemsforTechnologyStartupsinAsiaandthePacific

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Contents

TablesandFigures iv

Foreword v

Acknowledgments vi

Abbreviations vii

ExecutiveSummary viii

1.

Introduction 1

1.1WhatIsaStartup? 2

1.2MappingtheEcosystem 2

1.3MethodologyandReportStructure 3

2.

OverviewofthePhilippineStartupSector 4

2.1HistoryandGrowth 4

2.2CompositionofPhilippineStartups 5

3.

ThePhilippineStartupEcosystem 8

3.1GovernmentProgramsandPolicies 8

3.2FinancingandInvestment 22

3.3IncubatorsandAccelerators 27

3.4HumanCapital 30

3.5DigitalInfrastructure 33

4.

Recommendations 39

4.1High-LevelActions 39

4.2ProgramsandRegulations 40

4.3IncubatorsandAccelerators 40

4.4DigitalInfrastructureandLiteracy 41

4.5ProcurementandEndorsement 41

4.6IncentivesforInvestors 42

4.7Talent 42

Appendix:OnlineSurveyforPhilippineStartups 43

References 46

iii

TablesandFigures

Tables

1PhilippineStartupsThatGainedFundingduringthePandemic,2020and2021 6

2PhilippineStartupsbyFundingStage 7

3PhilippineLawsinSupportoftheStartupSector 11

4DTIProgramstoSupportStartups 12

5DOSTProgramstoSupportStartups 15

6DICTProgramstoSupportStartups 18

7InvestmentsbyVentureCapitalFirmsintheLast5Years 25

8IncubatorandAcceleratorGraduates,2015–2022 28

Figures

1TopChallengesforStartupFounders 26

2StartupsThatJoinedanIncubatororAccelerator 28

3BenefitsofJoininganIncubatororAccelerator 30

4TelcoTowerDensity 34

54GAvailability,2020 34

6FixedBroadbandSubscriptions,2020 35

7MobileBroadbandSubscriptions,2020 35

8AverageCostofBroadbandperMonth,2022 36

9AveragePriceof1GBofMobileData,2022 36

10MobileInternetSpeed 37

11FixedBroadbandInternetSpeed 37

iv

Foreword

B

usinessmodelscontinuetoevolverapidly,spurredbynewdigitaltechnologiesandtheirdeploymentinprovidinggoodsandservicesininnovativeways.Wecannoworderfood,hailataxi,movemoney,arrangetravel,watchentertainment,shopforjustaboutanything,andeventakecoursesorconsultadoctorusingdigitalmethods.Atadeeperandoftenlessvisiblelevel,technologyisaffectingproductionprocessesintheformofIndustry4.0.Technology-basedstartupenterprises—ortechstartups,forshort—areanimportantpartoftheevolvingbusiness-to-businessandbusiness-to-consumerlandscapeinAsiaandthePacificaswellasglobally.

Startupsdevelopinanecosystemthatcansupport—orhinder—theirdevelopment.Thatecosysteminvolvesmanynationalelements,butregionalandinternationalfactorsalsoareimportant,especiallyinincreasinglyopenandglobalizedeconomies.Finance,oftenfromventurecapital,andskilledpersonnel,includingbothtechexpertsandentrepreneurs,areimportantpartsoftheecosystem.Gooddigitalinfrastructureandsupportivegovernmentpolicyarealsocritical.Startupsdevelopbestwhenthemarketsfortheirgoodsandservicesarelargeandactive.

ThisreportanalyzesthePhilippines’ecosystemandthesupportitgivestothegrowingnumberofstartups.Thereportfocusesonstartupsinfourareas:agritech,edtech,healthtech,andgreentech(alsoknownascleantech).Thesefourareasnotonlycontributetoeconomicactivitybutcanhaveadeeperimpactonsocioeconomicdevelopment.Edtechandhealthtechcontributetohumancapitalformationwhileagritechimprovesproductivityandraisesincomesintheruralsectorwheremanypoorpeoplework.Greentechadvancesenvironmentalsustainabilityandclimatechangemitigation.

TheanalysisofthePhilippines’ecosystemprovidesrecommendationsforpolicymakersbothinthePhilippinesandothercountriesinSoutheastAsia.Myhopeisthathigh-qualityecosystemscansupportstartupsthroughouttheAsiaandPacificregion.

AlbertPark

ChiefEconomist

AsianDevelopmentBank

v

Acknowledgments

T

hereportwaspreparedjointlybyThinkTank,Inc.(TTI)andtheAsianDevelopmentBank(ADB).LeadauthorsforTTIareGaryTeves,HannahMuralla-Palustre,JahjielPajutan,ChristopherMiguelSaulo,andMarioJordanFetalinoIII;andforADB,PaulVandenberg.AimeeHampel-MilagrosaprovidedguidanceonstudydesignandRanaHasanandLeiLeiSongofferedmanagementsupport.

Theauthorswouldliketothankkeyexpertsfromthegovernment,incubators,accelerators,developmentpartners,investors,academicinstitutions,andstartupswhoprovidedinvaluableinsightstotheresearchersthatinformedthepreparationofthisstudy.AdraftofthereportwasreviewedbytheDepartmentofScienceandTechnologyandsuggestionswereincorporated.

TuesdaySorianocopyeditedthereport,andGeeAnnCarolBuracprovidedadministrativesupportandcontractmanagement.

vi

Abbreviations

Agri-AquaTechnologyBusinessIncubation

DepartmentofInformationandCommunicationsTechnologyDepartmentofScienceandTechnology

DepartmentofTradeandIndustry

GlobalInnovationIndex

InnovativeStartupAct

localgovernmentunit

ManilaAngelInvestorsNetwork

megabitspersecond

NationalInnovationAgendaandStrategyDocument

NationalInnovationCouncil

PhilippineCouncilforAgriculture,AquaticandNaturalResourcesResearchandDevelopment

PhilippineCouncilforHealthResearchandDevelopment

PhilippineCouncilforIndustry,EnergyandEmergingTechnologyResearchandDevelopment

PhilippineGovernmentElectronicProcurementSystem

PhilippineInnovationAct

researchanddevelopment

researchscientistsandengineers

StartupGrantFund

science,technology,engineering,andmathematics

StartupVentureFund

TechnologyApplicationandPromotionInstitute

technologybusinessincubator

venturecapital

ATBI

DICT

DOST

DTI

GII

ISA

LGU

MAIN

Mbps

NIASD

NIC

PCAARRD

PCHRD

PCIEERD

PhilGEPS

PIA

R&D

RSEs

SGF

STEM

SVF

TAPI

TBI

VC

vii

ExecutiveSummary

T

hePhilippinestartupecosystemhasitsrootsintheearly2000s.Atthattime,theprivatesectorbeganofferingmentorshipstobuddingentrepreneursandorganizingincubatorprograms.ThePhilippinegovernmentlaidthefoundationforstartupsupportthroughenablingpoliciesstartingin2010,followedbythecreationoftheRoadmapforDigitalStartupsin2015.Morerecently,theInnovativeStartupAct(ISA)andthePhilippineInnovationAct(PIA),bothpassedin2019,providefurthergovernmentsupporttoimprovethestartupecosystem.

Thereareabout700activestartupsinthePhilippinestoday,asignificantincrease

fromonly100in2015.Mostareactiveinfintech,mediaandentertainment,and

e-commerce.Othermarketsegmentsareemergingbutstillintheearlystagesof

development.Theseincludesectorsinwhichstartupsarenotonlymakingan

economicimpactbutalsopromotinghumanandsustainabledevelopment.Four

suchsectorsarethefocusofthisreport:agritech(agriculture),edtech(education),

cleantech(environment),andhealthtech(healthcare).Startupinnovationsinthese

sectorssupporthumancapitaldevelopmentbyimprovinghealthandeducation,

assistpoorpeopleinruralareasbyincreasingfarmproductivity,andhelpcreatea

cleanerenvironmentthroughmitigationandadaptationtoclimatechange.

PromotinginnovationisseenasakeystrategyforthePhilippinestorecoverfromthe

pandemic,accelerateitsgrowth,andachievehigh-incomestatusby2040.Through

theirinnovativecapabilities,startupscanplayanimportantroleintheseprocesses.

Thestartupecosystemconsistsofinstitutions,individuals,programs,and

processesthatinteractwitheachothertosupportstartupsbycreatinganenabling

environment.Thekeycomponentsaregovernmentprogramsandpolicies,

financialinstitutions,incubatorsandaccelerators,humancapital(talent),and

digitalinfrastructure.

viii

ExecutiveSummary

GovernmentProgramsandPolicies

ThePIAsetthepolicydirectionforinnovationandcreatedtheinteragencyNational

InnovationCouncil,whichdraftedthe10-yearNationalInnovationAgendaand

Strategydocument.ThelawalsocreatedtheInnovationFund,whichawardsgrants

toenterprisesthatdevelopinnovativesolutionsin10prioritysectors.

Meanwhile,theISAcreatedprogramsandincentivestosupportthedevelopment

ofstartups,whichareimplementedbyvariousdepartments.TheStartupVenture

FundismanagedbytheDepartmentofTradeandIndustry.TheDepartmentof

ScienceandTechnology(DOST)hasthreeaffiliatedagencieswithrespective

startupprogramsinagriculture,health,andindustry,andhaslaunchedaStartup

GrantFundprogram.TheDepartmentofInformationandCommunications

Technology,whichisresponsibleforimprovingthecountry’sdigitalinfrastructure,

isdevelopingthenationalstartupportalandworkingcloselywithprivateincubators

andaccelerators.IthasalsolaunchedaStartupGrantFundprogram.

Thescopeandqualityofgovernmentsupportforstartupshasimproved

significantlyinthelastfewyears.

FinanceandInvestment

Statebanksandprivatebanksofferavarietyoffinancingprogramsforsmall

enterprises,butloansarenothighonthelistoffundingoptionsconsideredby

startupfounders.Loansareconsideredriskybecausemanystartupslackarevenue

streamtomakeservicepayments.However,theDevelopmentBankofthe

PhilippinesandtheLandBankofthePhilippines,amongotherfinancialinstitutions,

dooffercredittofinanceinnovativeenterprises.

Startupspreferventurecapital(VC)overbankfinancing,evenifitmeansgiving

upsomecontrolbysharingequity.VCunderstandsthestartupmodelwell,can

identifyastartup’sweaknessesandproposesolutions,andcanprovidementoring

inadditiontofinancing.

CorporateVCwastheearliestinvestorintechstartupsandremainstheprimary

sourceoffundingtoday.TheseconglomerateseitherhavetheirownVCarmsor

investdirectlyinstartupsthatfittheircorebusiness.Thereareatleast40VCfirms

inthecountry,withinvestmentsconcentratedindigitalsectorssuchasfintech,

mediaandentertainment,ande-commerce.Thereisaneedtoattractinvestors

foragritech,cleantech,edtech,andhealthtechtogivethesesectorsagreater

chanceofdevelopment.

ix

ExecutiveSummary

IncubatorsandAccelerators

ThePhilippineshasalargenumberofincubatorsandacceleratorssponsoredby

thegovernment,universities,Philippineconglomerates,andglobalcompanieslike

AlibabaandGoogle.MostarelocatedinMetroManila.DOSTalonefundsmore

than50technologybusinessincubators.

Anincubatorhelpsastartupdevelopitsideasintoaviablebusinessbyproviding

advice,training,accesstomarkets,andlinkstoprospectiveinvestors.Anaccelerator

providesmentoring,accesstofunding,andnetworkstoacceleratethegrowth

ofstartupsthathavedemonstratedgoodproduct-marketfit.Bothincubatorand

acceleratorprogramslast3–6monthsandconcludewithademodaywherefounders

pitchtheirventurestopotentialinvestors.

Mostofthetechstartupfoundersinterviewedforthisreporthavejoinedatleastone

incubatorprogram.Theycitedaccesstomentorsandtraining,aswellasreaching

customersandpartners,asbenefits.Accesstofunding,whichistypicallyhighlighted

asanincentiveforjoiningincubators,rankedthirdamongthetopbenefits.Incubators

alsogivefoundersasenseofcommunitythatservesasasupportsystem.Thosewho

havenotjoinedanincubatororacceleratorcitedtheone-size-fits-allnatureofthe

programsthatbenefitearly-stagestartups.Advanced-stagestartupsseekmore

customizedmentorshipandsupport.InthePhilippines,thereiscurrentlynomature

acceleratorthatofferssuchacustomizedapproach.

HumanCapital

Thestartupsectorbenefitsfromaworkforcewithhigherlevelsofknowledgeand

advancedskillstoproducetechnologyinnovations.InthePhilippines,thereareabout

708researchscientistsandengineers(RSEs)permillionpopulation.Thisismore

thanthenumber(380)thattheUnitedNationsEducational,ScientificandCultural

Organization(UNESCO)prescribesforacountrytopursueitsdevelopmentand

industrializationgoals.However,thenumberinthePhilippinesislowerthaninsimilar

SoutheastAsiancountries.

ThegovernmenthassoughttopromoteRSEsthroughtheBalikScientistProgram,

whichencouragesFilipinoscientistsandtechnologistseducatedortrainedabroadto

returnandapplytheirexpertisedomestically.Theprogramoffersgenerousfinancial

incentives.Between1986and2019,526Filipinoscientistswerepersuadedtoreturn.

x

ExecutiveSummary

Therewasastrongcallamongtechstartupfoundersforthedevelopmentofmore

homegrowntechtalent.Thiscanbeachievedbyimprovingthescience,technology,

engineering,andmathematics(STEM)curriculuminbasicandhighereducation,

andbypromotingentrepreneurshipandmultidisciplinaryacademicprograms.

Startupswouldbenefitfrommoretalent,andgovernmentagencieswouldalso

benefitfromemployingpersonnelwiththetechnicalskillstoassessandaccredit

techstartups’productsandservices.

DigitalInfrastructure

Adoptionofdigitalinnovationsisaffectedbythehighcostandandaccesstothe

internet,aswellasdigitalliteracyamongthepopulation.Thegovernmentcan

continueitseffortstoimprovedigitalinfrastructureandacceleratetheshiftto

onlinetransactions.

Connectivityinruralareasisimportantfortechstartupstoattractcustomersand

expandintonewmarkets.Digitalliteracyamongfarmersisanissue,astheyareolder

andfinditdifficulttolearnthedigitaltechnologiesofferedbyagritechfirms.

Thegovernment’stransitiontodigitalizationallowstechstartupstoaccess

governmentservices.Thenationalgovernmentcanfullydigitalizeservicesand

otherformsofsupportsothattechstartupscanobtainpermitsandaccessother

supportmorequickly.

Recommendations

Thelastsectionofthereportoffersrecommendationsforimprovingtheecosystem.

Theyarebrieflylistedhere.

Dimensions

Recommendations

•Conductanannualreviewofkeylaws:InnovativeStartupActandPhilippineInnovationAct.

•AppointstartupchampionstotheNationalInnovationCouncil.

•Streamlinerequirementsforgrantprograms.

•Createacofinancingschemeforthenationalgovernmenttosupportlocalgovernmentinbuildingecosystems.

Programsandregulations

High-levelactions

xi

ExecutiveSummary

Dimensions

Recommendations

•Improvethequalityandmanagementofnewincubators.

•Promotetheestablishmentofaccelerators.

•Improvedigitalinfrastructure.

•Promotedigitalliteracy.

•Ensurestartupsareawareofpublicprocurementopportunities.

•Encouragegovernmenttodigitalizebyadoptingstartupsolutions.

•Promoteendorsementofhealthtechstartups.

•Createataxcreditsystemforinvestorsinstartups.

•Reducetheneedforforeignregistrationofstartupstoattractventurecapital.

•Createavouchersystemtoencouragestudentstochoosescience,technology,engineering,andmathematics(STEM)pathways.

•IncreaseSTEMelementsinagriculturecourses.

IncubatorsandacceleratorsDigitalinfrastructureandliteracy

Procurementandendorsement

Incentivesforinvestors

Talent

xii

Introduction1

I

n2020,governmentsaroundtheworldimposedlockdownstolimitthespreadofthecoronavirusdisease(COVID-19)pandemic.Stay-at-homeregulationsreducedmobility,promptingconsumerstoshoponline,studentstotakeupremotelearning,andofficeworkerstoworkfromhome.Thesechangestoanewnormalacceleratedtheadoptionoftechnologiesthatotherwisewouldhavetakenyears.

Againstthisbackdrop,thePhilippinestartupindustry,whilestillnascent,came

intothespotlight.Startupsenabledpeopletoquicklyadoptarangeofdigital

technologies,frome-commerceandfintechtomedicalconsultationandonline

entertainment.Existingstartupsadaptedandexpandedtheirservices,whilenew

startupsemergedtotakeadvantageofnewopportunitiesandmeetnewneeds.

Startupscouldeasethestressofthelockdownandhelpsustaineconomicactivity

becauseofpriorinitiativestobuildtheecosystem.Adecadebeforethepandemic,

policymakersbegantorecognizetheimportanceofinnovationandtechnologyto

economicgrowth.Theyalsounderstoodthecatalyticrolethatstartupscould—

andshould—playinthisprocess.Publicpoliciesandprogramsweretherefore

adoptedtocreateandstrengthenthestartupecosystem.Privatesectorplayers—

fromconglomeratestofinancialinstitutions—alsobegantoadapttothenew

phenomenonofstartups.

ThePhilippinestartupecosystemcontinuestogrowandevolve.Thenumberand

sophisticationofstartupscanalsoincrease.Thisreportprovidesareviewand

assessmentoftheecosystemandhowitsupportsthegrowingbutnascentstartup

community.Morestartups,andthosethatarelargerandofferdeeptechsolutions,

cancontributetothepost-pandemicrecoveryofthePhilippineeconomy.Theycan

alsobetheenginetoachievethelonger-termgoalsofinnovation,technological

advancement,andsustainableeconomicgrowth.

1

Introduction

Thisreportfindsthatgovernmentpoliciesandothercomponentsoftheecosystem

aresupportiveofstartups.However,startupsfacechallengesinsecuringfunding

andgettingthesupporttheyneed.Otherkeyconstraintsincludealackoflocal

talentandtechmentors,digitalinfrastructure,anddigitalliteracy.

Thisreportfocusesondomesticstartupsinagritech,cleantech,edtech,and

healthtech.Startupsinthesefourfieldshavethepotentialtoimpacthumanand

sustainabledevelopmentwhileprovidingeconomicbenefitsthatapplytostartupsin

allsectors.Agritechcanincreasefarmproductivityandincome,reducingpoverty

inruralareasandincreasingfoodsecurity.Cleantechpromotesgreentechnologies

andenvironmentalsustainabilityinacountryseverelyaffectedbyclimatechange.

Edtechandhealthtech,ontheotherhand,develophumancapital,increaselabor

productivity,andraiseincomeandhumanwell-being.

1.3MethodologyandReportStructure

Thereportisbasedinpartondataandinformationcollectedthroughkeyinformant

interviewswithstakeholders.Overtwodozentechstartupswereinterviewed,

comprisingnineinagritech,sevenincleantech,fiveinedtech,andfiveinhealthtech.

Theinterviewersaskedthestartupsaboutthechallengestheyfacedandthequality

andrelevanceofthesupportprovidedbythevariousplayersoftheecosystem.

Startupswereaskedaboutgapsintheecosystemthatmightbefilledorareasthat

mightbeimproved.Fromthestandardinitialquestions,theinterviewersthenused

theresponsesreceivedtodelvemoredeeplyintospecificissues.Theinformation

obtainedisembeddedintheanalysisofthereportandtherecommendations.

Theyalsocompletedanonlinesurveyofbasicinformation.Acopyofthesurvey

questionnairecanbefoundintheAppendix.Thegovernmentagenciesconsultedare

themainimplementingagenciesoftheinnovationlawsinthePhilippinesandtheir

relatedagencies.Financialinstitutionsandregulatoryagencieswerealsointerviewed.

Incubatorsandacceleratorswereselectedprimarilythroughrecommendationsfrom

industrygroupsandindividualsworkinginthesector.Funderswerealsoselected

throughreferrals.Secondarydataandinformationweregatheredfromreports,

mediasites,andothersources.

Thereporthasfourmainsections.Followingthisintroduction,Chapter2provides

anoverviewofthePhilippinestartupsectoranditsevolution.Chapter3providesan

analysisofthecomponentsoftheecosystem,incorporatingtheviewsofstartups

andotherplayers.Chapter4providesrecommendationsforpolicymakersand

otheractorsinthestartupcommunity.

3

2

OverviewofthePhilippine

StartupSector

2.1HistoryandGrowth

ThePhilippinestartupecosystembegantodevelopintheearly2000swiththe

emergenceofmentorshipsandthefirstprivatesectorincubators.Startingaround

2010,thegovernmenttookamoreactiverolebyintroducingnewpoliciesand

programstoaidstartups.Thelocalstartupsceneexperiencedabreakthrough

yearin2012,whencorporateincubatorsKickstartandIdeaspacebeganfunding

startupssuchasthee-commercewebsiteSulitandtheinstantmessagingplatform

Chikka(IbrahimandLi2015).

In2015,thegovernmentlaunchedthePhilippineRoadmapforDigitalStartups

tosupportinternet-relatedinnovationsandencourageventuresthatwouldspur

economicgrowth.Startupswerealsoexpectedtoprovidesolutionstopressing

issues,suchassocialinequality,financialilliteracy,andinadequatehealth-care

coveragefordisadvantagedgroups.

Theroadmapdefinesastartupas“anybusinessentitythatislessthanfiveyears

old,registeredwiththefinancialregulatoryauthoritiesofanycountry,provided

thatmajorityofitsteamisoperatingandresidinginthePhilippines”(Ibrahimand

Li2015).Internetstartupscandevelopproductsorservicesinallsectors,including

agriculture,businessprocessoutsourcing,communications,disastermanagement,

education,energy,foodtechnology,government,health,infrastructure,social

entrepreneurship,andtourism.

Thestartupcommunityhasbeensupportedbytheeffortsofthreekeydepartments:

theDepartmentofScienceandTechnology(DOST),theDepartmentofTrade

andIndustry(DTI),andtheDepartmentofInformationandCommunications

Technology(DICT).Theysignedamemorandumofunderstandingonstartups

assistancein2018.1Thememorandumledtoincreasedinterdepartmental

cooperation,includingoneventssuchasthe5thPhilippineStartupChallenge,

1Itwassignedduringthe2ndNationalTBISummitinDecember2018.

4

OverviewofthePhilippineStartupSector

theRISEconferenceinHongKong,China(28startupsreceivedfundingto

attend),andtheFirstPhilippineStartupWeek,amongothers.2Theseeventswere

allheldin2019.Thelatterhasbecomeanannualeventforthethreedepartments,

inpartnershipwithQBOInnovationHub.

Severalimportantlawshavebeenpassedtocreateasupportiveecosystemfor

enterprisesingeneral,startupsinparticular,andforinnovationanduseoftheinter