#startupPH: Inventing the future together

The Department of Tourism’s campaign, “More Fun in the Philippines,” is one of the most successful promotional initiatives for the country. Campaign photos and videos of azure skies, pristine white beaches, colourful fiestas, and warm, smiling locals have gone viral, drawing increasing benefits for the country. International arrivals increased at a CAGR of 6.8% from 2011-2014, with tourism receipts growing more than 7% last year, to reach nearly $4Bn – burnishing the Philippines’ image, and creating jobs, businesses, and greater pride in what we have and do in these 7,107 islands.

Less well-known is the Philippines’ nascent but vibrant startup movement, developing in a number of cities in the country. Branded #startupPH after a piece of advice given by Pollenizer Chief Startup Scientist Phil Morle, speaking at one of Kickstart’s Raid the Fridge evenings in 2013, the local community has grown by leaps and bounds – in terms of the number of new startups emerging each year, the number of startups funded, and the milestones achieved by these intrepid souls.

Consider these milestones in the last few years:

  • Kalibrr, founded by Paul Rivera and Dexter Ligot-Gordon, became the first Philippine startup to make it into the globally coveted Y Combinator program; and their online assessment and recruitment platform has been signing up a number of corporations in their business development drive;
  • Lenddo, of Jeff Stewart and Richard Eldridge, successfully raised their Series “A” and have expanded from the Philippines to Latin America. They have proven their algorithm works; and the social scoring technology is now usable by banks and other financial institutions;
  • Sulit, now called OLX, is probably one of the best-known trade sale exits in recent memory; and over the past few years, c0-founder and managing director, RJ David, has continued to sharpen the company’s strategic focus, and refine its execution;
  • Xurpas, the mobile content company founded by Nix Nolledo, Raymond Racaza and Fernando Garcia, listed on the Philippine Stock Exchange, and became the first mobile content tech startup to do an IPO;
  • and just today, Judah Hirsch happily shared that his accounting and human resource software company Salarium was selected as the best startup in the Seedstars World 2014 competition.

We estimate that close to 100 startups have been funded or given grants by institutional investors in the last three years, with maybe the same number supported by the various angels who are supporting entrepreneurs in a private capacity. A number of these funded startups have received follow-on funding (about 40% of Kickstart portfolio companies have gotten third-party follow-on funding), and reputable investors from overseas have started to participate in these early funding rounds.

Bootstrapped startups are also making progress, demonstrating that external funding is a boost, but not a necessity, for success.

The good news is rolling in, with each achievement pushing the entire Philippine community forward. And whether or not Kickstart is invested in these startups, we are thrilled to see the progress each one achieves. A win for any startup here is a win for the entire community. Not just for the emotional pride thing (and there is admittedly tons of that), but also because, pragmatically, each achievement helps the rest of the world reconsider what a Philippine startup is and does.

As Lifebit founder, Eric Clark Su, enthused when Paul and Dexter shared their YC news, “Great! That means that startups from here will be viewed with a better lens each time we apply for any global program.”

It’s good momentum, and it’s momentum we need.

For many years, the Philippines has been a source of creative and technical talent. The liberalisation and privatisation of a number of industries in the 1990’s has allowed that talent to flourish, yielding positive results for the country. By breaking the monopolies held by historically entrenched interests in power, water, and telecommunications, consumers have enjoyed improvements in the service quality, cost efficiency, pricing, and usage; and innovation is picking up. Of economic significance, we are seeing new businesses with specialised capabilities starting up and participating in the value chain, whether as enabling platforms, as complementary services that run over the existing infrastructure, and even as competing alternatives to traditional industry leaders.

The mobile content industry – with Information Gateway (IG), Entertainment Gateway Group (EGG: now Yondu), Wolfpac, Chikka, and of course Xurpas, and about 100 other companies of varying size – exemplifies the rise of an entirely new industry, built upon the mass adoption of mobile phones here. And they illustrate the kinds of exits that this market has seen in the last decade.

“Startup is the new hipster.”

From where we sit, we can see how the term “startup” is becoming mainstream. Large corporations use the buzzword to try and infect bureaucracies with more innovation and entrepreneurial energy; and they make acquisitions in the interest of accessing new technology and creative talent. Government policy-makers are trying to understand how to support a potential platform for job creation and economic development. Harvard Business Review has featured articles on startups and startup culture in enterprise. Consultants are coming around, event organisers are running startup-themed events, and new startup interest groups are sprouting everyday. Heck, even Dilbert is having startup fantasies from the confines of his cubicle.

There’s a lot of hype, and a lot of hipness.

But beyond the cool factor, there is a lot of work involved, and numerous challenges to overcome.

We need infrastructure that supports startup enterprises: modes of communication and transportation that can help connect startup founders to each other, and to the rest of the world.

We need more talent to develop, mature, and participate: the technical geeks, the cultural creatives, the business mavens — all have a place in the community.

Beyond talent, we need a hardcore work ethic, integrity, and generous spirits. We need a culture that values performance above personalities, and offers results rather than excuses.

We need mentors with current, pragmatic, relevant real-world experience. We need them to be patient, and present.

We need investors of all kinds – angels, super-angels, institutional. We need the investment networks that connect sources of capital with appropriately-matched founders. And we need them to be generous with their time as well as their funding.

Most importantly, we need results. Traction. User numbers. Usage. Business relationships. Revenues. And we need ambition: startups that want to solve people’s big problems. And who want to operate at a regional and global level. Solve the world’s wicked problems, create lasting value. Serve the emerging markets, engage the customers of the future.

Oh, and ideally, demonstrate a return on investment.

From an investor standpoint, it is tempting to fire and forget. Some startups have made it without our help in the past; others can do the same, for sure. The mentoring and market access that we provide consumes more than 50% of our time, and no hardcore VC will understand why we would choose to be quite so inefficient, especially as the returns are most obviously created by deal-making. Mentoring, after all, is by definition one-on-one: it isn’t a scalable activity. And market access puts our company and personal reputations on the line: we have made high-level introductions for startups to large corporations, and pushed our corporate contacts to engage with startups for business development. Some startups deliver shining performance; others flake and fizzle out.

It’s also difficult to quantify the contribution of community development and ecosystem promotion to ROI. Large corporations tend to look at this as “the cute stuff” of our work: there is little depth of understanding about how critical it is to build the underlying foundations of the innovation ecosystem today – culture and norms, depth of thought, opportunities for collaboration – these are not typical in the large-scale industries whose experience of collaboration is founded upon trade associations and lobby groups, and for whom market-making is executed via massive marketing budgets.

So why do community development and ecosystem promotion at all? Why do things that don’t scale?

We do it because the community needs it, and the country would benefit. There are too many hurdles that startup founders need to overcome, and too many gaps they live with. Collaboration helps overcome some of these hurdles.

We do it because we need a favourable environment for startups: a longer runway, more corporate allies, more talent on the ground, more mentors, more investors, a more supportive policy environment. The right conversations help shape a more favourable environment.

We do it because we believe that building bridges is as important as breaking down barriers: and that disruptive innovation requires mass adoption and scale to have real impact. Opening our networks builds a broader base of support to help startups scale.

We do it because we recognise that value can be created, one startup at a time. For the Philippine startup community to get to the landmark exit that propels the country further than it’s gone before, we all need to pull together. It’s a long road, and a lot of roadblocks: but there, in the distance, is the ROI.

We want the startup equivalent of the “More Fun” campaign: the catchy materials on the surface, as well as the improvements in infrastructure, culture and capabilities underneath. We want to drive the country’s startup-related stats upwards, faster and further than they’ve ever gone before. We want to support groundbreaking innovation, and record-breaking exits.

#startupPH – it’s a thing. We’re happy to be part of it, and to be with everyone else.