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A Regional Perspective On The
Philippine Landscape

November 23, 2020

  •   3 min read

“Venture capital is an apprenticeship business. For a startup ecosystem to grow, the new breed of entrepreneurs must apprentice under people who have achieved what they set out to do, and set out to do even more."

JEFFREY CHUA
Senior Associate
Golden Gate Ventures


Jeffrey is a Senior Associate at Golden Gate Ventures. He handles on-ground work in various Southeast Asian countries and across different VC functions, from sourcing deals in Vietnam to mentoring promising founders in the Philippines.

THE INTERVIEW

How would you describe the Philippine startup ecosystem relative to other Southeast Asian countries?

The Philippine startup ecosystem is young compared to its neighbours. I’d say it is five years behind Indonesia and three years behind Vietnam. While the tech boom has occurred in other neighbouring countries, it’s strange why it hasn’t yet happened in the Philippines especially when one can leverage the population’s proficiency in the English language and its innate technology affinity.

One interesting theory I’ve come across recently is that the slower technological adoption may be due to the relative verticality of conglomerates in the Philippines compared to countries like Indonesia. Wider conglomerates abroad may have invested in tech earlier resulting to their applications spreading faster. Today, we are seeing Filipino conglomerates diversifying more, as well as investing in tech. Interestingly, COVID-19 has positively accelerated adoption of technology among corporates.

Another explanation may be drawn from the limited growth opportunity of startups in the Philippines. In the past, a typical Filipino founder’s promise would be a 2-3x multiple in five years. This multiple is not as attractive as compared to other SEA neighbors. VCs are dependent on tail-end returns, investing in startups having a 50-60% failure rate, and holding just a 15-20% stake across companies. For that multiple to increase, we need Filipino entrepreneurs to think bigger. Thankfully, we’re seeing more entrepreneurs dreaming beyond Metro Manila. We need more of these entrepreneurs who can say “I want to create something that will fundamentally impact business and society, not just in the Philippines, but in the world.”

What does the Philippine startup ecosystem need to take it to the next level?

What the Philippines needs is strong mentorship and guidance. It needs more role model entrepreneurs building hero products and creating success stories to pave the way for the next batch of entrepreneurs.

Once you have these success stories, you start to have the financial capacity to hire world-class talent to allow experience to get passed on from there. Venture capital is an apprenticeship business. For a startup ecosystem to grow, the next breed of entrepreneurs must apprentice under people who have already achieved what they are setting out to do, and then set out to do even more from there.

What advice can you share with venture capital investors in the Philippines?

First, remember that we are dealing with disruptions that have yet to happen. The innovation industry is built on mistakes and mistakes are bound to happen. We are creating history and one cannot be perfect. We just have to pick up the pieces and move ourselves forward.

Second, we venture capital investors are lucky to learn from two sets of people. We learn from investor mentors in the firm on one side and founder entrepreneurs on the other. It is a journey of consistently absorbing knowledge and improving step-by-step.

Finally, be less stringent with targets and deal terms when negotiating with startup entrepreneurs. Try to follow the norms of the region because, more likely than not, subsequent rounds of financing will come from regional investors. Give support where you can add value and allow the founders to grow. Remember that at the end of the day, we are investing in a team because we trust their capacity to execute well and create disruptive products.

Golden Gate Ventures is a venture capital firm with over 30 investments across seven Southeast Asian countries. They primarily invest in early-stage, tech-leveraged startups spanning different sectors, including E-commerce, Fintech, and SaaS platforms, among others. Some of their notable portfolio companies include GoJek, Carousell, and Ayannah Global.

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