For this month’s edition of Raid The Fridge, the monthly startup networking mixer of Kickstart Ventures, we can look forward another fantastic evening with guest speaker Ron Hose, Founder & CEO of Coins.ph.
Ron is keen to share knowledge on what worked and what didn’t work building Coins.ph from seed funding to acquisition, setting strong company culture, and competing with incumbent players backed by two of Philippine’s largest conglomerates. Recently, a majority stake acquisition in Coins.ph was announced by the Indonesian tech company GO-JEK, a strategic move that will allow both companies to build something bigger and better for their customers. This acquisition has also allowed its investors to make an exit, which incidentally, makes Coins.ph the first exit for Kickstart Ventures — we’re a corporate venture capital investing in Pre-A to Series Cdigital startups globally.
So: we’re re-stocking our fridge with beers for the #startupPH community to enjoy while evening making new friends, reconnecting with old friends, and swapping stories over beers!
For any questions, you can contact the Fridgemaster via firstname.lastname@example.org. To view our Raid The Fridge events, check it out through Doorkeeper.
“Coins.ph makes it very easy for people to access financial services directly from their phones. We’ve crossed half a million customers in the Philippines.”
This was Ron Hose in December 2016, founder and chief executive officer of fintech startup Coins.ph, during a video interview arranged by one its investors — Kickstart Ventures, a corporate venture capital firm headquartered in Manila and investing in digital startups globally.
At that time, Kickstart had gathered a selection of digital startup founders to talk about why it’s a good time to invest and grow a business in the Philippines. After all, the Philippines, as oft-repeated in business and tech conferences, is in a demographic sweet spot: a young, connected, and tech-savvy population driving the adoption of mobile and internet products and services.
The video, entitled “#investPH,” introduced locally-based digital startups already showing growth and progress — while not massive successes yet, they are generating real traction in the market solving deeply felt problems of customers in the Philippines and elsewhere in the world. The founders’ objective: attract investors to invest in digital startups operating in the Philippines.
It is a digital wallet and mobile payments app for the unbanked looking for life-improving financial services. It allows users to easily send or receive cash across online and offline platforms, transact bills payments across registered and non-registered users, or buy mobile load top-ups.
Lessons Learned: Bringing Banking to the Unbanked
In the time since that fortuitous video interview, Coins.ph has successfully carved out a path to scale and profitability, thereby becoming a compelling fintech player for emerging markets.
However, this is not to say the journey has been easy for Coins.ph — Ron and his team at every significant step towards building a valuable business meant responding to customer demands at a scale and speed uncommon in a highly-regulated industry.
So while there is truth to the saying “fortune favors the bold,” Coins.ph is a representation of “fortune favors the prepared.” Here now are three startup growth lessons that helped Coins.ph transform from crypto exchange services to a suite of mobile wallet and payments services:
Growth Lesson #1: Solve a real problem. The bigger the problem, the better the opportunity.
Founded in the Philippines in 2013 by Ron Hose and Runar Petursson – CEO and CTO respectively – Coins.ph was built to address banking for the next generation of Southeast Asia customers.
They assessed the emerging economies and came up with these numbers: for SEA’s population of 618 million, 59% were still unbanked and 95% without a credit card ownership. But most were online or owned digital identities e.g. Facebook.
In 2013 Philippines with a population of 100 million then, two out of 10 households were banked and one out of 20 Filipinos owned a credit card. Amazingly, four out of 10 Filipinos were on Facebook.
Given this socio-economic environment where the majority of the Filipino population is unbanked, Coins.ph created a free digital wallet app that allowed mobile phone users to conduct domestic and international financial services transactions such as remittances, instant person-to-person money transfers, bills payment, mobile load top-ups, etc.
By the fourth quarter of 2015, Coins.ph had signed up 270,000 users and was steadily growing; also, almost 24,000 Coins.ph subscribers were actively using the company’s suite of financial services monthly, thereby allowing Ron and his team to handle cash transactions in millions of US dollars each month.
In 2015, Coins.ph expanded to Thailand. Within the same year, it launched the first-ever instant blockchain-based remittance service for the benefit of Filipino OFWs whose relatives based in the Philippines could claim money remittances instantly through a bank ATM.
Growth Lesson #2: Differentiate.
Coins.ph’s stickiness as a product is anchored on two key pillars: a powerful technology at its core and ease of use/low friction for customer adoption.
First, blockchain. The use of blockchain as its underlying technology for the Coins.ph platform has allowed the company to provide instant, global cross-border settlement, and access to a global network of fintech services.
Second, great user experience. The team regarded user experience as a product, not a by-product of a great design. Onboarding of new customers became more seamless, despite operating in a highly-regulated industry where “Know Your Customer” or KYC is a regulatory requirement for financial institutions. With faster KYC from Coins.ph, it allowed customers to spend more time transacting on their app than learning how to use it.
In addition to creating a great product with effective user experience, the efforts of Coins.ph to proactively work with government regulators and other relevant institutions deemed likely to impact the financial sector’s growth in the future mattered to Coins.ph to the extent that it allowed its founders to discover and address risks to the business.
The recognition that Coins.ph received — the first company in Southeast Asia to be regulated as a Virtual Currency Exchange and Electronic Money Issuer (e-wallet) as well as the first virtual currency provider based in the Philippines to be issued the “Virtual Currency Exchange” license by the Bangko Sentral ng Pilipinas (BSP) — these serve as testaments to the product’s compelling value proposition, and their differentiation from the earlier mobile wallets.
Growth Lesson #3: Scale.
Coins.ph, which last raised Series A funding from a group of investors that included Naspers, Quona Capital, Pantera Capital, Kickstart Ventures, has wisely used its fresh capital infusion to deliver new and competitive products that grabbed market share at a faster clip versus the entrenched incumbents in the Philippines. Certainly, the team has proven the ability to deeply understand the market it serves, and is skillful in partnering with different ecosystem players, even competing ones, whose own products and resources e.g. deep talent bench, geographical reach, etc. complemented Coins.ph. As a result, Coins.ph was able to triple its user base from 1.5 million to 5 million users in under a year, and has developed one of the largest cash distribution networks in the country with over 33,000 partner locations nationwide.
The Way Forward: GO-JEK and Coins.ph working together
When asked how he feels about the GO-JEK acquisition, Ron replied that “it was clear to us that there were strong synergies between the two companies. Together, we can work on creating a cashless society built on the backs of our products without sacrificing our respective missions, visions, and values.”
Ron is also keenly aware of the public’s interest in the Coins.ph and Go-Jek partnership. He responded by retelling the reasons he shared at a local TEDx event some time ago about creating his fintech startup:
“There were a few things that excited me about the Philippines, which led me to establish a fintech startup here in 2014: (1) the economy was growing at 6-7%, faster than other developing markets in Southeast Asia but at the same time, a large section of the population was not included in that growth — this offered me an open area to create social good; (2) there was low penetration of technology, and how technology was being applied that will bring real impact and change in people’s lives; (3) the operating cost here was low, which was conducive for innovation since the cost of experimentation was not so high; and (4) the Filipino culture and mindset, which made me and continues to make me feel right at home.”
What this means for the Philippine startup ecosystem is that in the absence of infrastructure and systems that work reliably, cheaply, and serve the people at scale, there is an opportunity for startup founders to create and offer new solutions to old problems. In many ways, these gaps and inefficiencies are what make scalable technology innovations more valuable and more viral.
Meanwhile, Minette Navarrete, Kickstart president and vice-chairman, viewed Go-Jek’s acquisition of Coins.ph — funded by Kickstart in 2016 — a step in the right direction and should invite a closer look into the reasons that made Coins.ph a strategic acquisition for Go-Jek.
“While a lot of effort has been undertaken by many parties over the years, and we’ve seen progress in how both private and public sectors engage with startups, the universally accepted indicators that define a robust startup ecosystem have yet to manifest in the Philippines, i.e. high deal flow, large investment sizes, a critical mass of significant exits whether in the form of IPOs or acquisitions by global and regional giants like Amazon, or Google, or Go-Jek,” Navarrete said.
She added that “We’re thrilled for Ron and the Coins.ph team: the Coins.ph exit is an important win for the Philippines. For startup founders, it is both proof and a pathway for scaling technology solutions that create measurable market value; for investors, it’s concrete evidence that the Philippines presents attractive opportunities equally as a source of high-value investible startups as well as a compelling consumer market; and for the government and corporate sectors: the Coins.ph exit demonstrates how digital startups are not just a kind of MSME (micro-, small- and medium enterprise), so that the startup-specific policy and programmatic interventions that are being crafted now can genuinely increase tech startups’ chances of massive success.”
The Coins.ph represents one of the first large exits for a startup founded in the Philippines in recent years. It leads the way, for what we hope will be many more to come.
We take our role as a startup community builder seriously, the same way when we invest time, talent, and resources for our portfolio companies. Today, we are responsible for three industry-impacting brands that promote the Philippine startup scene:
#startupPH– widely adopted as the brand for the Philippine startup ecosystem, and a quick hack to search for news, events, and people in the Philippine startup community;
#area55 – an identity for the nexus of the Philippine startup scene (similar to “Silicon Valley,” or Singapore’s “Block 71”), and the gateway for meeting the most prominent startups and investors in the country; and
#raidthefridge – Kickstart’s signature community mixer for startup founders and investors, this is a monthly open event that gathers the startup community and visitors for relevant speakers and opportunities for collaboration.
MANILA, Philippines – Every country aspires to create a vibrant startup ecosystem to accelerate economic growth through innovation and entrepreneurship. The Philippines is not an exception, and the unprecedented economic upswing, coupled with a much-improved global competitiveness ranking, favourable demographics, and rapid technology adoption rates, are providing the proverbial rising tide.
This #startupPH video offers a glimpse into the Philippines’ growing startup ecosystem, which is experiencing a burst of activity and innovation in technology startups.
Highlights: (i) Economic and digital adoption statistics that underpin the thriving innovation and activities in technology startups; (ii) Founders whose startups are as diverse as their cultural backgrounds; (iii) Presence of investors and mentors and their thoughts on what makes the Philippine startup ecosystem distinct compared to other startup ecosystems. | www.kickstart.ph | fb.com/kickstartPH | @kickstartPH | angel.co/kickstart-ventures
** The #startupPH video includes clips from videos owned by Globe Telecom, Ayala Corporation: “Change” and “In Everyday, Ayala,” and the National Competitiveness Council of the Philippines and Makati Business Club: “Invest in the Philippines.”
[vc_row][vc_column width=”1/1″][vc_separator type=”” size=”” icon=”” text=””][vc_column_text]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.[/vc_column_text][/vc_column][/vc_row]