How is the startup scene and community in the Philippines?

I spent June in the Philippines, working my ass off on my own startup. I also got the chance to learn much more about the startup scene in the Philippines. With that in mind, I thought it deserved a blog post.

Now, I was extremely lucky that David Margendorff from PawnHero and John Dang from Zipmatch wanted to chip in to give a more diverse view of how they see the startup community and scene. PawnHero and Zipmatch are established businesses in the Philippines, and they basically know everything there is to know about the scene.

Before we dig in, I think it’s important to provide some context. Not all readers are very familiar with the Philippines, and context matters, as it is an extremely exciting market worth exploring.

A few words on the Philippines

The Philippines is a country in South East Asia. It has a population of over 100 million people, who are very familiar with English (nearly everyone understands it, and a majority speaks it). The average age is under 24 years, meaning it’s a very young population. It has an Internet penetration of 37%, and it’s growing rapidly:

Screenshot at Jun 27 11-03-26

 

(By the way, Google “internet penetration Philippines” and you get this graph – how cool is that?)

What I find the most interesting is how a small number of companies seem to own everything. A few families own everything from retail to energy, communications to real estate. I believe that makes it very vulnerable to disruption (but for now, these families even own the incubators in the country).

Let’s dig into the scene.

I asked both David and John a range of questions, and I will paste their answers here. If I have something to chip in with, I’ll leave a comment as well.

“How does your organisation look? How many offices? How many people?”

John:

We currently are located in 1 office in Bonifacio global city. 2 years ago we had about 11 of us on board and to date we are currently at 54 employees now.

David:

Our organization at PawnHero is growing fast. We have 2 offices: a creative office and an operations office, about 30 employees and growing.

“How would you describe the startup scene in the Philippines? What makes it unique? What are the opportunities? Challenges?”

David:

“Startup scene in the Philippines is still very young, younger than other
countries in Southeast Asia; however, it’s for that same reason why a lot
of startup founders around the world have set up shop in the Philippines.
There’s a lot of things to be done, and a lot of boundaries that can be
pushed.

One aspect I personally find unique about the Philippines is the fact that
startups here focus strongly on social impact – as the Philippines is a
third world country, a lot of people want to solve the challenges the
country faces like poor infrastructure, horrible traffic, etc. I enjoy the
Philippines because there’s a strong mentality ingrained in the locals to
“give back” to their countrymen, and several of my friends, Filipino
Americans, have started their companies here for that same reason.

Challenges, as I briefly mentioned, are the poor infrastructure in most
areas of the Philippines – this doesn’t only expand to poorly maintained
buildings in more rural areas, but also poor flooding prevention
mechanisms, one of the slowest internet speeds in Southeast Asia, poor
transportation systems, etc. I could go on, but like I said, these
challenges are also opportunities for these startups to turn things around
in the Philippines.”

John:

“It’s a young ecosystem, just two or three years ago it was hard to find an investor, but it’s better now with more venture capitalists and startup incubators growing . However, Philippine entrepreneurship is still somewhat conservative and can continue to grow. Being that it’s still young there is a lot of room to grow.”

I think both John and David have extremely good points here. It’s also worth mentioning that there is quite a high level of education in the country, and it’s quite common to go to university. While the education level of the universities might be below the level of similar universities in first-world countries, it’s still extremely good. That gives a lot of opportunities.

“Can you describe the situation with funding? Is it doable? Impossible?”

John:

“Yes it’s very doable with a lot of grit and hard work.”

David:

“As the startup ecosystem is young, funding is doable but like everywhere it
depends on the business model among other things – there are not too many
VCs that are accustomed to funding early stage startups, and there still is
a gap in receiving seed stage funding and Series C funding.

It’s also a challenge to unlock funding from big, traditional corporations
that are still not used to the concept of a startup. And while there are
angel investors, a lot of them are in hiding and don’t want to come out –
fortunately, at PawnHero we’ve built a strong relationship with investors
in Southeast Asia to have them support what we’re doing.”

“How easy is it to find good talent?”

David:

“It’s always easy to find talent, but it’s always difficult to find great
talent. At PawnHero, I make it a point to find great talent who share a
similar mindset as me: driven and striving to make an impact in the
Philippine ecosystem. To be honest, a lot of people have tried applying to
PawnHero, but we’ve rejected a lot of applications simply because they
don’t identify with the same mindset.

PawnHero has great plans to succeed, and we need great people to help bring
us to that goal. ”

John:

“It’s not very easy, not only do you need to have the skills but you also need to have the right attitude. It really boils down to great referrals. If you have a great attitude and know someone skillful, usually that similar attitude would resonate with the person you refer. You tend to see a similar work ethic and mindset. So far it’s been really helpful for us.”

I employee a couple of Filipinos, mostly on freelance basis, and I see it a bit differently. It’s very difficult to find good project managers and people with experience in leadership (which also makes sense because of the very young population), while it’s relatively easy to find talented developers.

It’s also worth noticing there is a huge culture difference. I have a friend who runs a call center. It’s not uncommon for employees here to suddenly stop coming to work without a warning because they want to quit. This is also why relationships to the employee are important, and a lot of people hire from families here to ensure loyalty.

“What are the biggest opportunities of starting in a place like the Philippines?”

John:

“If you’re a foreigner starting a business in the Philippines, you’ll first notice the upfront costs to be much more competitive. Mainly you’ll find amazing talent in the Philippines, other countries outsource a lot of work here, so it’s needless to say that you’ll be able to find all the key players you need in creating your startup in terms of talent. The startup community is currently growing but since it hasn’t reached a large number yet, right now it’s less competitive.”

David:

“A lot of people have yet to be accustomed to new technologies here – the
fact that we’re the 1st online pawnshop in Southeast Asia proves that. The
Philippines is primarily a traditional country that has yet to be given a
technological opportunity to make their lives easier – this is the whole
message and vision of PawnHero. Since traditional pawnshops have yet to
embrace anything digital, we’re taking the first step in making this a
reality to the Philippines, and I think that’s a very exciting thing.”

I also think it’s worth mentioning the demographics are very interesting. Over the next 5-10 years, a huge amount of people will enter the job market. They will be in their twenties and thirties, and they’ll have grown up watching Western television, YouTube and movies. They will all want iPhones and a high standard of living; those who can provide that will win hugely.

“What are the biggest challenges of starting in a place like the Philippines?”

John:

“There are currently not as many venture capitalist firms in the Philippines as well as other venues to pitch your ideas to. Most of our investors are from international VC’s. Hopefully this will change as the startup community continues to grow.

Websites or digital services as we’ve seen usually act independently from government bodies.

However in the Philippines, the challenge is that the government may or may not have policies that are updated to support the newer technologies that startups may create.

Internet that is slower and much more expensive compared to other South East Asian neighbors.

Many people in this country are used to the more traditional ways of doing things in Philippine real estate. It’s what they know and are very comfortable with doing.

At first, those in the industry didn’t understand the concept of a real estate marketplace not being solely dedicated to listings and advertising slots. We realized that smart home buyers needed more information and that their home-buying process didn’t stop at just finding a property. It then called for us to create more products and services to make it more informed and easier for them to find a home which resulted in creating our project pages, concierge service, broker to buyer matching, and self educating with our blog.”

David:

“Adjusting to the local cultures and its infrastructure problems is always
challenging. A lot of people are stuck in a cynical mindset since things
have been set in stone for a very long time, and you need to constantly
fight that mentality when you first start out. Like any startup, a lot of
the people will tell you that your idea/product/service will not succeed,
but you always need to fight against that idea.”

“Any advice for potential founders who are considering creating a startup in the Philippines?”

David:

“Know your market. I’ve seen a lot of young startups who want to make a
startup but they don’t identify with the customers nor do they understand
what the customers want and need. Additionally, having “ok” technology
isn’t going to cut it – if you want to stand out against the copycats of
your industry, you need groundbreaking technology or some “secret sauce” to
survive; otherwise, you’ll just have a startup duplicate your methods, then
you’re screwed. ,”

John:

“Many startups make this mistake, they all want to make the next social, chat app, networking type of product.  There are big real world problems, look at fundamental, real needs problems.  I’m talking about housing, transportation, education, and so on,  there are so many existing inefficiencies. Focus on doing something bigger. Look at big problems first and see if you can create a product or provide a service where you can fix real world problems for people. Start with that.”

With that, I want to send a HUGE thanks to both David and John. Please visit both PawnHero and Zipmatch.

Thanks for listening. I would appreciate it a lot if you wanted to share this on Twitter, LinkedIn or Facebook.

I am on Twitter. If you found the post interesting, you should follow me. 🙂

Leave a Reply

Your email address will not be published. Required fields are marked *