Ecosystem Deep Dives #30: Philippines - Riding the wave
Similar to Peru in LATAM, the Philippines was late to the Asian startup fury but it is catching up fast.
Ecosystem Deep Dives is a weekly series in which I analyze and compare different start-up ecosystems from around the world. If you enjoy and gain value from my work, feel free to share and subscribe!

Unexpected serendipity
Before 2021, the biggest round raised by a Filipino startup was a Series A. Made up of nearly 110 million people, the second most populous country in South-East Asia had seemingly not gotten the memo that their socio-demographic makeup was fertile ground for tech innovation. Meanwhile, their Indonesian neighbor was basking in its new unicorns. An economy traditionally reliant on tourism and remittances, it looked like the Philippines was bound to be yet another market for foreign startups, secretly wishing it had its own national tech champions.
Now, that isn’t to say that the Philippines’ startup ecosystem was non-existent in the 2010’s decade. However, it could be described as early at best, losing to its regional peers at worst. Then, something happened. A virus that, out of all of its devastating consequences, turned out to be the unexpected protagonist in the true takeoff of the Philippines’ startup ecosystem.
You heard that right. The year 2020 and the subsequent pandemic was a blessing in disguise for the plethora of Filipino startups banging their heads at changing people’s habits from analog to digital. During the pandemic, the Philippines gained 12 million new internet users, while simultaneously breaking decade-old paradigms related to digitalization. Moreover, according to a Google report, 37 percent of all digital service consumers in the Philippines in 2020 were new, with 95 percent of these new consumers intending to continue their behavior post-pandemic.
“The timing could not have been better – or worse, depending on who you ask – for in 2020, the Philippines was thrust into an accelerated digitization phase that birthed many pandemic-era startups focused on the Iron Triangle sectors: e-commerce, fintech, and logistics.” - TechNode Global
The 2021 boom
The pandemic rejuvenated the Philippines’ ecosystem , which came out all guns blazing in 2021, largely considered to be the ecosystem’s watershed year. Two landmark governmental initiatives, the Innovation/Startup Act and the Startup Research Grant Program, also demonstrate the public administration’s determination to support the ecosystem. Another notable project to look into is QBO, a public-private partnership aimed at catalyzing the growth of the ecosystem.
In 2021, the ecosystem raised $1 billion in funding, a 179% growth on the previous year. Two local fintech startups are valued at more than $1 billion, with Mynt achieving "double unicorn" status in November 2021 after raising $300 million and Voyager Innovations raising a total of $210 million in its latest funding round. Kumu raised a $73.6 million Series C and GrowSari, an e-commerce startup, raised $77.5 million in its latest funding round.” - Startup Genome
A bit of nuance
The beginning of this article might sound like an over-hyped LinkedIn post, so let’s add some nuance to the conversation and take a cool-headed approach to the current layout, challenges and opportunities relevant to the Philippines’ ecosystem.
The ecosystem, up until now, has largely stood on the shoulders of the so-called ‘Iron Triangle’, a triad made up of e-commerce, logistics and fintech. The term was coined by Chinese magnate Jack Ma when referring to Alibaba’s dominance of those three verticals. When taken in the Filipino context, this triad has, and still is, under the control of big corporates or foreign players. Even in the startup world, the Philippines is very similar to Thailand in the sense that the country’s big corporates got involved very early in the game, setting up a plethora of Corporate Venture Capital (CVC) funds, as well as incubating their own champions. Mynt, the ‘double unicorn’ referred to in the first section of this article, was built by one of the country’s telcos, Globe Telecom. Voyager, the other big fintech, is also run by another telco giant, PLDT. If we want to be purists, the Philippines has yet to produce a local, non-corporate unicorn.
“The big boys in the local e-commerce space are largely foreign-owned, backed by the country’s massive conglomerates, or more likely, both. According to the Gobi-Core Philippine Startup Ecosystem Report 2021, the Top 4 e-commerce marketplaces by monthly visits are Shopee (owned by Singapore’s Sea), Lazada (owned by Alibaba), Zalora (half-owned by Ayala Corp, one of the Philippines’ oldest and largest family conglomerates) and eBay from the U.S.” - TechNode Global
I have a pretty pragmatic opinion on the hyper-involvement of corporates in the ecosystem. On the one hand, their infrastructure and resources are necessary. In the Philippines, it can be argued that pioneering CVC’s such as Kickstart Ventures well, kickstarted the local VC scene. However, corporates have an agenda regarding their portfolio companies, and founders should have the choice of whether to subscribe to that agenda or not.
Sectors of interest
However, local grass-root successes are increasingly commonplace. The Philippines is full of markets for founders to ride while surfing the wave of a once-in-a-lifetime digitalization boom. The 132% GMV boom in Filipino e-commerce between 2020 and 2021 laid the foundations for the online buying experience, a nonnegotiable preamble to any tech startup.
Filipino founders have a special card to play in sectors/markets that are of particular significance to their local economy. Examples of this includes the widespread eating out culture that powered the rise of food and beverage startups such as CloudEats. Another area where local innovation could thrive is the remittances sector, bolstered by the large Filipino diaspora and the 1.7 million OFW (Overseas Filipino Workers)
“Banks traditionally have been owners of cross-border payments, but due to pain point/inefficiencies in the legacy system, there is a global opportunity to disrupt this legacy financial industry. New entrants to the market focus on low-value transactions in the C2C, B2C and B2B segments, which are currently underserved by banks and traditional payment providers” - Foxmont Capital Partners X BCG
In terms of ecosystem empowerment, one can note the interesting Sinigang Valley initiative (headed by some of the ecosystem’s top players).

The Pinoy advantages
The Philippines has a couple things going for them. First, the country is culturally close to the US, byway of a tortuous common history and a significant slice of the Filipino diaspora living in Uncle Sam’s backyard. This cultural proximity has been crucial for the ecosystem, as the country enjoys high-levels of English proficiency (66% of Filipinos speak English fluently) and founders can easily digest startup literature, which is overwhelmingly dominated by American authors such as Paul Graham, Eric Ries or even Peter Thiel.
Another advantage the ecosystem has going for it is the way its government approaches innovation. If you follow international politics, you will know that the Philippines has been far from a model of good governance in recent years, with the previous president facing crimes against humanity charges and the new president being the son of infamous dictator Ferdinand Marcos. In the startup realm however, the country’s legislature has differentiated itself from its regional peers by adopting an open stance to innovation.
On top of the two governmental initiatives mentioned earlier, the Filipino government has favored an experimental approach to regulation aimed at ‘disrupting itself’ if you will. One example of this approach would be the way the government approaches fintechs. Indeed, instead of trying to craft a new digital banking license from nothing, the government favors giving new fintechs a rural banking license and a regulatory sandbox, aimed at crafting a relevant digital banking license further down the line. The government has also looked into facilitating public listings of Filipino startups on the national stock market, an initiative also carried out in Morocco and France.
Finally, the Philippines has what I call the ‘golden trifecta’ of young/tech-savvy population, covid-induced digitalization boom, and rising middle class. The market opportunity is very clear: what matters now is clean and stable execution.
The diaspora factor
When I founded GrowHome, a startup aimed at connecting Palestinian founders to Palestinian mentors and investors in the diaspora, I was convinced diasporas were the cheat-code emerging market ecosystems could use to bypass traditional ecosystem building blocks and leap ahead. This conviction is validated by almost every Ecosystem Deep-Dive I’ve written, from Greece to Bangladesh. The Philippines is no exception.
In South-East Asia, returning diasporas are often referred to as ‘sea-turtles’. What’s been interesting in the Philippines is the engagement from second-generation diasporas, who use their western education and networks to make a dent in their home country’s ecosystem. Some of the most successful startups in the Philippines, such as Kumu, PDAX or PayMongo were once part of the diaspora. One of the country’s most influential, non-corporate, VC is Foxmont Capital run by returning Filipino-Canadian Franco Varona.
The crypto component
The Philippines has a potential unfair advantage in the field of crypto, as the country ranks 5th globally in terms of crypto adoption among the adult population (28%). Filipinos have been especially fond of ‘play-to-earn’ games built on the blockchain, such as Axie Infinity. Filipino crypto startups have already started making waves, with Yield Guild Games attracting a16z’s first ever investment in the country, followed by another investment in Breederdao. Filipino founders could potentially create a moat in the fascinating sector of crypto remittances, which I will be writing about soon.
Remaining obstacles
Much remains to be done, and some of the obstacles still hindering the ecosystem are out of founders’ control. The country’s political stability, and its image on the international scene, have been scrutinized by foreigners during the tumultuous Duterte years. We shall see what this new presidency brings. The country has one of the highest rates of income inequality in the world, and one of the challenges faced by startup ecosystems is to truly act as a catalyst for societal change rather than create a new elite tech cast. Strong inequality and low average income per capita also have an undeniable effect of reducing startups local SAM (Serviceable Available Market).
There is still a need to simplify bureaucratic procedures, as well as create a safe environment for foreign investors to be assured of the safety of their investment. The way Pakistan dealt with this, and essentially boosted foreign investment, was allowing for the incorporation of startups in more ‘renown’ jurisdictions like Hong Kong, but I don’t necessarily know if that doesn’t complicate things in the long run.
One of the other thorns in the side of the ecosystem is brain drain. While traditional brain drain is still present, I’m referring to another type of brain drain: big corporates poaching startup-grade talent by offering salaries early-stage startups could never afford. Here is a link to a great piece on this phenomenon in Kenya.
“It’s no secret that almost 10% of our workforce are actually overseas. These are our most talented and most ambitious people. Automatically, they leave the country. Global servicing hubs in India and Malaysia are consuming a lot of our tech talents. Even the Filipinos who work in hubs in the Philippines are doing back-office work for Accenture or HP. Who can fault them, when the choice for fresh grads is between $1,000 a month (three times the minimum wage) to support their families, or joining a startup? That’s why funding is so important for startups. Now, we can compete for the best talents and make it a point to pay above average, very competitive wages,” - Nichel Gaba, CEO of PDAX
Conclusion
The Philippines is undoubtedly at the beginning of its startup boom. The market conditions are set, and the problems to solve are numerous. The country still hasn’t reached '“mafia stage”, where local exits and the subsequent generation of angels and mentors suffices to self-sustain the ecosystem. Once again, the diaspora will play a key role in shortening the time to that objective, acting like a ‘temporary’ mafia if you will.
I always feel a slight discomfort when I write these deep-dives. I am truly an enthusiast about the impact of startups on the economy and especially in emerging markets, but I have yet to be convinced of their effect on the very poor segments of society. I wonder if the VC model is adapted to startups that might want to forego some profit in order to serve a population that really needs it, at lower margins. I recommend this thought-provoking paper advocating for skepticism regarding the actual impact of fintechs on financial inclusion.
Ecosystem Deep Dives is a weekly series in which I analyze and compare different start-up ecosystems from around the world. If you enjoy and gain value from my work, feel free to share and subscribe!