Filipino startup founders are pessimistic on funding climate in 2024, and are shifting focus to profitability, a study showed Thursday.

The study conducted by Uniquecorn Strategies, a Philippine-based startup-focused communications firm, and market research firm, The Fourth Wall, painted a stark picture for Filipino startup founders heading into 2024: a challenging funding environment and a strategic pivot towards profitability, indicating a considerable shift in founder priorities driven by the current economic landscape.

According to the findings of the 2024 Philippine Startup Founders’ Outlook, founders are faced with a pessimistic funding environment, with the average optimism outlook on funding opportunities scoring 2.65 out of 5.

This pessimism is largely attributed to the sharp 40 percent decline in local startup investments in 2023, as reported by Gobi-Core Philippine Fund.

The funding winter also influenced the lack of confidence of startup founders in their company valuations for 2024.

Founders’ average valuation assessment score with their own startups stands at 2.65 out of 5, indicating expectations of lower valuations compared to 2023.

Given these conditions, 75 percent of founders are now prioritizing profitability over growth to reduce dependency on investor funding.

For the next 12 months, 70 percent have identified profitability as their top priority.

The necessity to ensure financial sustainability has forced founders to recalibrate their focus, underscoring profitability as a key objective, which is largely attributed to the dry funding climate and the short runway faced by many startups.

Meanwhile, improving customer experience and product development are also high on the agenda, garnering 55 percent of responses each.

The survey, co-presented by The Fourth Wall, Bossjob, and Launchgarage, highlighted that startup founders recognize two critical external factors impacting their funding prospects: the Philippines’ economic growth performance and government investment regulations.

Founders also weighed in on how helpful current government policies are for startups, rating them at a middling 2.45 out of 5.

Notably, 55 percent say they could not identify any beneficial government policies, reflecting a negative perception of the government’s role in supporting the startup ecosystem.

When asked what the Philippine government could do to improve the funding environment, 70 percent of the founders suggested an increase in investment in digital infrastructure.

Meanwhile, startup founders are moderately optimistic about the country’s economic prospects, with an average outlook score of 3.40 out of 5.

Those who launched their startups during the COVID-19 pandemic (2019-2020) showed the least optimism.

This group was particularly impacted by the economic downturns and uncertainties of the pandemic, which likely influenced their cautious outlook.

The survey also highlighted the primary challenges facing founders in 2024.

While profitability remains a significant concern for 55 percent of them, raising funds is a close second at 50 percent and 40 percent struggle with talent acquisition.

These challenges paint a picture of a startup community grappling with multiple fronts, from financial sustainability to operational growth.

Despite these challenges, there is a silver lining. A significant 55 percent of founders expect their startups to become profitable within the next one to two years.

Furthermore, 20 percent of the respondents said they have already achieved it.

Looking towards long-term aspirations, a majority of Filipino startup founders are setting their sights on international expansion, with 60 percent of them particularly looking at neighboring countries in Southeast Asia as a new geographic market.

Dean Bernales, Founder and Chief Executive Officer of Uniquecorn Strategies, noted that the survey results depict a startup community that is resilient, adaptive, and forward-looking.

“While the immediate challenges in funding and valuation are evident, the founders’ focus on profitability and expansion indicates a proactive approach to navigating the complexities of the current economic climate,” he explained.

He also observed that the overall tone is one of cautious pragmatism.

“The pandemic’s lingering economic impact continues to shape strategic decisions, with founders navigating a tightrope between growth aspirations and the harsh realities of funding,

“As 2024 unfolds, the Filipino startup ecosystem shows signs of balancing immediate pressures with long-term strategic goals,” he added.

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