COVID-19 may have impacted many companies, but it is also validating many business models, particularly in the online consumer space. Several dominant brands were born in the last recession—Uber, AirBnB, and Slack all emerged from the global financial crisis.
Every time there is a world-changing event, those on the edge of innovation are the ones that are best positioned to shape the future. New startups may form during this time, but some may well be existing startups that have suddenly found themselves in a unique position, says Bit Santos, portfolio operations director at Kickstart Ventures.
“It’s a tough road ahead for some startups, but we are confident that the ecosystem will get back up and become much more resilient than ever,” he adds. “We see promise in the areas of digital content, cloud-based productivity, digital healthcare, education, and on-demand logistics.”
KrASIA recently spoke to Santos to discuss the startup ecosystem in the Philippines, lessons that early-stage startups can learn from the pandemic, and how Kickstart Ventures is supporting its portfolio companies.
KrASIA (Kr): Please share with us what Kickstart Ventures does and what’s its vision?
Bit Santos (BS): Kickstart Ventures is a corporate venture capital firm that invests into the early- to growth-stages of company formation and expansion. We are a wholly-owned subsidiary of Globe Telecom, and backed by SingTel and Ayala Corporation.
Our mission is to make a positive impact in the lives of founders, by creating disproportionate value for our startups through our collective business networks and relationships.
Our vision is a Philippines and Southeast Asia where founders’ greatest ambitions can take off, and where startups can achieve massive success, where the community is justifiably proud of its achievements, and optimistic about prospects for the future.
Kr: The Philippines is the second largest country in Southeast Asia by population, behind Indonesia, yet its startup scene has yet to produce strong local players of the scale of Gojek, Bukalapak, Tokopedia, or Traveloka. Can you share your views on the current startup landscape in the Philippines and what’s holding back startups in the country?
BS: The ongoing pandemic has introduced unprecedented challenges and opportunities in the country. This has also scaled back fundraising efforts of many startups, leading to uncertainty.
Many startups are also looking to the government for support. A recent report by PwC found that financial impact is at the top of their concerns, with several respondents stating that they would require up to PHP 5 million to get operations back in order.
The Philippines’ large population is mostly young, and it has an emerging middle class whose purchasing power is slowly increasing. Internet penetration has also steadily increased over the past several years. While these signs bode well for the kinds of digital businesses that have exploded in the region, there are still some gaps.
The emergence of e-commerce and consumer-facing digital tech-powered solutions in the Philippines is still relatively new, and Filipino consumers still need to become more comfortable transacting online. In the Google-Temasek-Bain SEA Internet Economy Report in 2019, the Philippines had the smallest gross merchandise value (GMV) of the six Southeast Asian markets that were studied. On the other hand, the same study also showed that the Philippines’ internet economy GMV had one of the biggest growth rates from 2015 to 2019, and is projected to continue that momentum into 2025 to catch up with its regional neighbors.
More Philippines startups also need to start expanding regionally. Entrepreneurs who have unicorn aspirations need to look at Southeast Asia as a whole market of 650 to 700 million, as compared to 100 million or so in the Philippines.
Recent legislation such as the Philippine Innovation Act and the Philippine Innovative Startup Act, which were signed into law in 2019, show the government support for startups. The Innovative Startup Act in particular led to the Philippine Startup Development Program which aims to provide access to programs, link startups to potential investors, mentors, collaborators, and customers, both locally and abroad, and remove restrictions that hamper the establishment and growth of startups. It will take a while to reap the benefits of this, but it’s a step in the right direction, creating an appetite for entrepreneurs to take part in the local startup ecosystem.
Kr: What are the startups to watch in the Philippines and should get more attention in the region? Why?
BS: Big or small, each startup should be given the chance to succeed. This includes providing them with the support to grow, including market access, connections, as well as mentorship. We are always on the lookout for early- to growth-stage startups in various industries—including property, construction, banking, utilities, education, healthcare, and telco. This also includes tech startups whose strategic innovations align with that of Globe Telecom.
Kr: How effective is Kickstart Ventures when it comes to producing new startups in the Philippines and in other parts of the world?
BS: We have been actively backing successful startups, such as Wattpad, Kumu, igloohome, InnoVantage, and more. They have brought extraordinary change to their respective sectors and industries across the region, and we are always on the lookout for more.
While the Philippines has not yet matured at the same pace as its other counterparts in ASEAN, we are extremely optimistic of the landscape and believe that it wields immense potential.
We work closely with our stakeholders and colleagues in Globe Telecom and Ayala Corporation to foster an environment of collaboration and innovation with the startup ecosystem. We also maintain a wide network of collaborators throughout the Philippines business community to ensure there is no shortage of opportunities for our portfolio companies.
We also work with our colleagues at Singtel, a major shareholder of Globe Telecom, and other investors and startup enablers around the region to build bridges for Philippine startups to expand overseas and for startups abroad to expand in the Philippines.
Kr: What lessons can early-stage startups learn from this period, especially when it comes to managing cash flow and ensuring survivability?
BS: The appetite for investments has shifted. Getting cash in flow during this period is increasingly difficult, and investors are much more cautious than ever. This and more, has taught startups to always ensure healthy reserves for the months ahead, and set focused goals on evolving their business models.
With the volatility of the situation, startups must structure their organization to be able to survive for the next 18 months. Cutting costs quickly and decisively is necessary. Determine what capital you will need to survive and consider all practical sources for this capital. Fundraising will slow down and become more challenging, with investors likely to demand more rigor and lower valuations.
Startup leaders must communicate frequently, openly, and candidly with their teams, with their customers, and with their investors and stakeholders. They must lean on the experience and perspectives that their senior leaders, advisors, and investors may be able to offer, especially if this is the first time for them to experience an economic downturn.
Kr: How are you supporting startup founders in your portfolio that are affected by the pandemic?
BS: We keep open lines of communication and also provide business development support through introduction to potential partners or customers. We seek opportunities to introduce their products and services through industry events with a wide reach. Workshops and mentorship sessions that support founders on an operational standpoint are offered as well as personal development sessions to help them cope with the effects of the pandemic.
The interview has been edited for length and clarity.