More funds for PH startups

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Tuesday, August 26, 2014

MORE funds will pour in for Philippine startups this year as one investor group from Silicon Valley has announced that it will be investing in five to 10 startups from the Philippines each year.

500 Startups founder Dave McClure said in a press conference during the second Geeks on a Beach held in Cebu last week that the company will be allocating $100,000 or more than P4 million for each startup. The investment will come from the $15 million worth Southeast Asian Fund of the company, which is good for two to three years.

“We are definitely interested in the Philippine market (…) I guess (we will have) five to 10 investments a year in the local market (Philippines). We are also looking at Indonesia, Thailand, Singapore, and Malaysia,” McClure said.


500 Startups has already invested in 800 startups in the past four years, 200 of them come from outside the United States.

McClure expressed interest in the Philippines as an investment haven, adding that he also wants Filipino startups to grow and make it global.

Not much competition

“The opportunity to open business in the Philippines is probably better than other places in the world because there isn’t much competition going on and the market is growing faster than it is in other places. This is one of the best places in the world to be investing in. The undiscovered talent here is probably as good as any other place. The only challenge is that the investors don’t probably believe that.

The investors probably look at the US market saying where is the next Mark Zuckerberg?” he said.

McClure pointed out that the Philippines has already established an ecosystem for startups but it is still in the “early” stages, basing his assessment on three factors: market, capital access, and level of talent and entrepreneurship.

He said general market conditions “look good” with a hundred million population accompanied by a growing smart phone adoption and Internet penetration.

On capital access and availability, IdeaSpace Foundation Inc founder Earl Valencia said there has been a heightened interest among local and regional investors to help Filipino startups grow and expand. McClure added that the government can help increase capital availability for startups through subsidies or tax incentives.

In the United States alone, venture capitalists are attracted to fund startups, said McClure, saying that US investors envision the latter to grow their investments in multiple folds.

“For small percentage of startups, the returns are tremendous,” he said.

However, he said investing in startups is also risky because roughly 70 to 80 percent of them won’t bring returns, 20 to 30 percent of them would bring enough returns, while only one to 10 percent of them bring “substantial” returns, amounting to 10, 20, or 50 times the amount invested.

For 500 Startups, McClure said only 10 to 20 percent of their startups brought significant returns.

Investment factors

In investing in startups McClure said the company looks into several factors like their functionality and profitability.

“Typical scenario for us is that we look at companies that have functional products in the market that are generating anywhere from maybe $5,000 to $25,000 a month (and) have some reasonable economics that we think will eventually be profitable. (…) And usually we will be investing a hundred thousand dollars and then look into helping them raise a million,” he said.

Startups, according to the Silicon Valley investor, have a competitive advantage over existing businesses, citing the latter as not aggressive as startups in looking for new markets.

“Startups acquire more customers faster and cheaper…The ability to acquire customer online is the significant change happening over the past five to 10 years.”

Valencia calls on to Filipino startups to create relevant businesses that address problems by using technology.

“(I hope there’s) no more waiting (attitude). Just do it now so that we get this ecosystem fuelled,” Valencia said.

Published in the Sun.Star Cebu newspaper on August 27, 2014.


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