The Philippines tech ecosystem, which has been lagging behind its Southeast Asia counterparts, has begun changing for the better following a growing number of investments in the local market and increasing support from the government, a recent report showed.

Funds raised by startups in the Philippines during the first ten months of 2021 almost exceed the total amount of funds raised from 2017 to 2020, according to the Gobi-Core Philippine Startup Ecosystem Report 2021.

Prior to 2021, the highest funding stage a Philippine startup reached was Series A. In 2021 alone, the country witnessed three Series B fundraises and a Series C in October, the report showed.

The report, published by Manila-based venture capital firm Core Capital and Pan-Asian Gobi Partners, also sheds light on the growing startup ecosystem in the Philippines both in relation to its ASEAN neighbors and as a promising technology ecosystem in its own right, the VC firms said.

“At present, the Philippines has been lagging behind its Southeast Asian neighbors in the technology ecosystem. Several external and internal barriers have delayed this growth relative to other ASEAN countries. But with the growing number of investments in the local market, the Philippine startup ecosystem has begun changing for the better,” the firms said in a statement on Monday.

The Philippine tech ecosystem is nascent, which makes it a potential market for the growing tech startup community, the firms added.

Equity investments into Philippine tech companies

Notable highlights from the report include:

  • Prior to 2021, the highest funding stage a Philippine startup reached was Series A. In 2021 alone, the nation witnessed three Series B raises and a Series C just last October. In addition, 2021 funds raised in the first ten months of the year almost exceed the total amount of funds raised from 2017 – 2020.
  • There has been increasing support from the government through initiatives by the Department of Trade and Industry Philippines (DTI), The Department of Science and Technology (DOST), and The Department of Information and Communications Technology (DICT), such as the Innovative Startup Act, the Startup Grant Fund Program, Startup Venture Fund, and the Startup Research Grant Program, among others.
  • The Philippines’ e-commerce sector was the sector the biggest gainer from pandemic-fueled digitization, and a total of 35 e-commerce startups (including enablers) were founded in 2020 and 2021 alone, during the pandemic.
  • E-money accounts skyrocketed by 94 percent in 2020, following the necessary digitization of financial transactions in light of lockdowns, a sign that fintech startups can continue to expect policymaking and regulatory support to hit BSP’s target to see 70 percent of the population banked by 2023.
  • Gobi-Core’s tracking has revealed that the gender gap between male and female startup founders in the Philippines is now 1:2 – a massive improvement from 1:5 in 2015.

There has been growing support from the government as well as both foreign and local venture capital firms and angel investors through the creation of laws, funds, and incubation programs. This increasing investment has led to the emergence of the local technology market with the fortification of the Iron Triangle (consisting of logistics, e-commerce, and FinTech sectors) as a result of the COVID-19 pandemic, the VC firms noted.

With the Philippine technology market now being solidified in the country’s ecosystem, there is now a clearer direction of how this startup community will continue to progress, they added. This includes the country’s new wave of technopreneurs, the preference for camels over unicorns, and the rise of the entertainment and cryptocurrency sectors in this new world.

With these opportunities, the Philippine startup ecosystem is only just beginning. The time is ripe for the Philippines to take its place in the world as a key player in the technology sphere, the report added.

Founded in 2018, Core Capital is a venture capital firm based in Manila, Philippines that provides early-stage financing for Philippine technology companies. The firm invests through the Gobi-Core Philippines Fund, co-managed with Gobi Partners, a venture capital firm investing in emerging and underserved markets across Asia, with $1.2 billion in assets under management.

Featured image credit: Core Capital

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