The startup ecosystem of Southeast Asia’s fastest growing economy is on the verge of a breakthrough. Despite the chill of a ‘funding winter’, deal activity and funding in the Philippines have continued to heat up significantly post-pandemic, and government support for emerging companies remains steadfast.
While the Philippines has produced only a handful of unicorns thus far, with mobile payments services provider GCash leading the way, there is palpable excitement among investors that the archipelago is poised to become the next startup giant in the region. In this article, we examine the reasons why.
More in ’24
2024 was a banner year in the Philippines emerging markets scene. According to the 2024 Global Startup Ecosystem Report by Startup Genome and the Global Entrepreneurship Network, the valuation of the country’s startup ecosystem surged to US$6.4 billion in 2024, significantly higher than its US$3.5 billion valuation in 2023. Moreover, in its report titled “Philippine Horizons: Filipino Innovation in the ASEAN Landscape”, VC firm Gobi-Core Philippine Fund shared that tech funding in the Philippines surpassed $1 billion in 2024, almost quadrupling the figure in 2023. Gobi-Core also noted that deal count in the tech sphere increased by 14% from the previous year.
Investors are looking to build on this momentum. Local VC firm Kaya Founders is reportedly aiming to invest in at least 10 startups this year, and to deploy $25 million of capital in the next two to four years. KickStart Ventures, the VC firm of local tech behemoth Globe Telecom is looking to invest in five startups in the Philippines and abroad in 2025 with a focus on artificial intelligence and cybersecurity. Meanwhile, there are reports that GCash is mulling an IPO in the local bourse in 2025 that could raise up to $1.5 billion, which would be the largest in Philippine history.
Government support
In recent years, the Philippine government has introduced policies aimed at promoting the growth of startups and attracting investors. Such include the Innovative Startup Act of 2019, which allows government to provide subsidies to qualified startups for operational and administrative costs and offer expedited processing of government applications, and the amended Foreign Investments Act which lowered the minimum capital (now to US$100,000) for qualified startups with more than 40% foreign equity.
For more information about recent reforms to general Philippine investment laws, you may refer to our previous article here.
In addition, government continues to partner with the private sector to establish incubators and accelerators that cater to promising startups. These include QBO Innovation Hub, a collaboration of IdeaSpace, J.P. Morgan, the Department of Science and Technology, and the Department of Trade and Industry, as well as and the National Startup Accelerator Platform, a partnership between the Department of Trade and Industry and VC firm Plug & Play.
Challenges to overcome
While the Philippines has the potential to become a thriving startup destination, it must first overcome some key challenges.
Red tape remains prevalent, with businesses required to obtain several permits and undergo lengthy processes before commencing business operations. One suggestion is for the government to adopt a “one stop shop” for qualified startups, similar to the “Green Lanes” established for strategic investments, which would serve as a single point of contact for these startups and which would liaise with the startups and the various government agencies for the necessary permits. For a more detailed discussion on new systems aimed an reducing red tape in the Philippines, please refer to our previous article here.
Lack of access to capital is also a major issue for Philippine startups. In its 2023 study “The Philippines’ Ecosystem for Technology Startups”, the Asian Development Bank reported that a funding gap exists in the pre-Series A stage, with startups in this stage having limited formal funding opportunities and thus stunting their transition to Series A and beyond. One way in which the government can help address this is by supporting the participation of startups in conferences and road shows held in investor-friendly hubs such as Singapore and Hong Kong.
Withers Tech has an experienced and diverse team in Singapore that routinely advises venture capital clients in fundraising activities and cross-border transactions. The team, led by Joel Shen and Jonathan Kok, has been consistently ranked by Chambers and Partners as a leading firm in the startups and emerging companies sector. Luis Seña is a member of Withers Tech and is qualified to practice law in the Philippines and New York. Withers Tech can assist whether you are looking to invest into a Philippine startup or looking to form one in the Philippines.
For further information, please contact:
Luis A. Sena, Withersworldwide
luis.sena@withersworldwide.com
