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Philippines Startup Report - 2013

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Philippines Startup Report - 2013

  1. 1. A 15-min guide by World Startup Report Lead Author: Ron Hose Updated: Sept 26, 2013!
  2. 2. Our Mission Document Document our world’s startup ecosystems through a series of reports detailing the local culture, trends, key players and challenges. Share these reports for free to benefit everyone in the global startup community. Connect Identify and empower local startup activists to become the ambassadors of each ecosystem. Leverage this network of ambassadors to help connect people to each other and to the global startup community.
  3. 3. OUR TEAM AUTHOR Ron HoseCris Sarmiento UP Dilliman ‘14 CO-AUTHORS CONTRIBUTORS Dennis Negron Stanford ‘14 Ralph Wunsch MetroDeal Beryl Li SeedAsia Bowei Gai World Startup Report Silicon Valley Investor and Entrepreneur, now based in Southeast Asia. Founding Partner @ Eric Schmidt’s Innovation Endeavors, an early stage VC firm based in Palo Alto and Tel Aviv. Founder @ Tokbox, funded by Sequoia Capital and acquired by Telefonica Masters degree from Cornell University
  4. 4. WHY PHILIPPINES? Fastest growing economy in Asia Investment grade (2013 upgrades: S&P, JCRA, Fitch Ratings) Low operating costs English speaking, western minded, heavy social users Large local market, minimal competition     
  5. 5. 105.7 M Population 313.9 M 7.8 GDP Growth Rate 2.2% (2012 est.) US$ 2614 (2012 est.) GDP per capita US$ 49,601 (2012 est.) 23 Median age 37 76% M Population under 40 40%M 5% Consumer debt (of GDP) 81% 25MM Population <$1 a day - PHILIPPINES USAVISAVIS BY THE NUMBERS PHILIPPINES USA
  6. 6. PHILIPPINES USA CHINA MOBILE PHONES 106MM (114%) 328MM (104%) 1.15b (87%) SMART PHONES 19MM (18%, 17th) 219MM (58%, 2nd) 354MM (29%, 1st) SMART PHONE GROWTH 34% 28% 31% MOBILE INTERNET 3.4% 81% 21.8% OPERATOR ARPU $5/ month (mostly prepaid) $46.50 $46.50 INTERNET USERS 30MM (29%) 244MM 516MM E-COMMERCE REVENUE $1.15b $343b $110b E-COMMERCE MARKET SHARE <1% 6% 2.5% CREDIT CARD PENETRATION 7% WEB & MOBILE
  7. 7. “Social networking is so popular among Filipinos, the country has been nicknamed ‘The Social Networking Capital of the World.’ -Jon Russel, asiancorrespondent.com LET’S TALK SOCIAL
  8. 8. FILIPINOS ARE SUPER SOCIAL. SOCIAL MEDIA PENETRATION 93.9% 53.8% Prior to Facebook, Filipinos sent the most SMS msgs per capita in the world. FACEBOOK 83% 49% PHILIPPINES USA AMONG TOTAL INTERNET USERS USERS
  9. 9. BROWSING 1 2 3 4 5 TOP 5 WEBSITES TOP 5 LOCAL SITES Facebook and YouTube are ahead of Google search! 1 2 3 4 5 (classifieds) (daily deals) (classifieds) (news) (news) MOST VISITED WEBSITES
  10. 10. STARTUPS IN THE PHILIPPINES “The majority of the population in Asia has limited access to healthcare, education, and commerce. With the penetration of mobile devices and social networks, this population is now reachable, and hence, addressable.” - Ron Hose
  11. 11. PAST EXITS CURRENT MOVERS UP AND COMING STARTUPS TO KNOW Chikka (Telco acq.) Airborne (Telco acq.) Sulit (Naspers) iRemit (IPO) Netbooster (WPP) PinoyAutoTrader (Sulit/Naspers) Rappler (Social News) AyosDito (Classifieds) Metrodeal (DailyDeals) Lazada (Amazon Clone) Zalora (Zappos Clone) CashCashPinoy (DailyDeals) Kalibrr (YC 2013) TwitMusic (500 Startups) AVA (HBS founders) AYANNAH (HBS founders) PayRoll Hero (SV investors)
  12. 12. INCUBATORS SEED VENTURE CAPITALIDEASPACE (First Pacific) LAUNCH GARAGE UP (CEBUINIT, ENTERPRISE) KICKSTART HATCHD JOJO FLORES (PLUG AND PLAY) WINSTON DAMARILLO BERYL LI / SEEDASIA ICCP NARRA VENTURES Jeffrey Paine- Golden Gate Ventures (Ayannah), John Tan (PayRoll Hero), Benjamin Joffe (Payroll Hero), Dan Martell - Clarity (Payroll Hero), Ryan Homes - Hootsuite (Payroll Hero), Blumberg Capital (Lenndo), 500 Startups- Dave McClure (Payroll Hero, TwitMusic), Paul Santos, Seimer Ventures (Ayannah), MIH- South African Group (Sulit, Multiply), New Leaf Ventures (Payroll Hero) FOREIGN INVESTMENTS ANGELS, INCUBATORS, VCS Seed funding is limited and anything beyond that is virtually non-existent.
  13. 13. LOCAL MEDIA EVENTS CONFERENCES MEETUPS the bobbery webgeek angelhack startupweekend hack2hatch rootcon y4it dcom geeks on the beach techtalks.ph techmanila juangreatleap founder's drinks MEDIA & EVENTS
  14. 14. NATURE OF STARTUP 49% 3% 38% 3% 8% New Product 57% Adapted to local market 30% Clone 13% INDUSTRY PLATFORM LOCATIONFOUNDERS PROFILE MANILA CEBU DAVAO *Survey is based on a 37 startup responses from startup.ph group
  15. 15. SOURCE OF FUNDING AMOUNT RAISED NUMBER OF ROUNDS Loan 6% Self-funding 61% Equity 19% Service exchange 8% Grant 6% 62% 16% 5% 8% 5% 3% 3% NONE  67.5% ONE  22% TWO  2% THREE  2% FOUR & ABOVE  5% FUNDING FOUNDERS PROFILE
  16. 16. Filipino 65% Foreigner 22% Balik Bayan, Studied Aborad 13% Female 8% Male 92% 22% 38% 24% 8% 8% PROFILE AGE GENDER Corporate 33% Serial Entrepreneur 24% Worked for a startup 24% Academic 19% FOUNDERS BACKGROUND
  17. 17. 4G/LTE network and proliferation of smart phones are paving the road for m- commerce. STATE OF E-COMMERCE est. $1.2b e-commerce est. $230b retail market 95% of e-commerce is airline travel bookings 40%ACCESS THE INTERNET TO SHOP 64%PURCHASED ONLINE IN PAST 3 MONTHS 1 eBay (ph) 2 Sulit (classifieds) 3 MetroDeal (daily deals) 4 Cebu Pacific (airline) 5 Ensogo (daily deals) 6 Amazon (US) TOP SITES Payments, Logistics, and consumer trust are the biggest obstacles to overcome.  
  18. 18. PAYMENTS Total Credit Cards 7.36 Million (7%) Total Debit Cards 35.36 Million (33.7%) – mostly out of Visa/Masterard network Total Remittances $24.453 BN (4th largest remittance receiving market in the world behind China, India and Mexico) Cash Transactions by volume 2012 90% Mobile payments (GCash/Smart Money) are niche products. The majority of e-commerce payments are done with CC, followed by Paypal and DragonPay. Over-the-counter payments for online transactions are still very common (collection at 7/11, pawn shops, bank, etc.). With 7000+ islands and vast rural (un-addressed) areas, shipping outside of the metro areas can be very challenging. Most e-commerce sites operate their own shipping logistics, in addition to relying on outside providers. DragonPay - local payment aggregator for over-the-counter payment and online banking payments XEND – shipping logistics for geared for e-commerce 2GO, LBC, AIR21 – local shipping and courier services
  19. 19. Defunct: FoodPanda (competition from entrenched players) Property Lazada (Amazon) Zalora (Zappos) OfficeFab* (Staples.com ) PricePanda EasyTaxi Employees Alexa Rank 43 112 6555 3181 in planning Launched Q2 2012 Q1 2012 ? Q1 2013 Q34 2013 Local Competitors none none none Save22, PricePrice, Priceme grabTaxi * OfficeFab recently announced they will cease their operation in Southeast Asia.
  20. 20. Saturated Mature Semi-mature Infancy Non-existent PHILIPPINES OPPORTUNITY MAP DEALS MetroDeal CashCashPinoy Ensogo Philippines Beeconomic (Groupon) COMMUNICA- TION Facebook Viber whatsapp WeChat SEARCH Google Yahoo LISTING Sulit AyosDito OLX Philippines BLOGGING Blogspot Wordpress Tumblr Blogger LiveJournal JOBS Sulit Jobstreet Odesk WorkAbroad.ph JobsDB SOCIAL NEWS Rappler Reddit Istorya Mashable PinoyAko.info COMMUNITY Pinoy Exchange Istorya.net PinoyAko.info Female Network Tristan Café LOCAL DISCOVERY Spot.ph Click the City looloo WhenInManila MUSIC Videokeman Mp3 Skull iMesh SoundCloud TwitMusic GAMING Y8 R2 Games Game 321 IGN Garena.ph ONLINE RETAIL Ebay Philippines Zalora Lazada CashCashPinoy DATING Skout DateInAsia Filipino Cupid SOCIAL DISCOVERY Pinterest We Heart It Flipora PAYMENT Paypal Asiapay Dragonpay SmartMoney gCash REAL ESTATE Sulit AyosDito TICKETING Ticketnet Ticketworld SMtickets Sureseats EVENTS EventBrite FINANCE Lenddo NETWORKING LinkedIn RENTAL Sulit AyosDito DINING MunchPunch looloo TRAVEL TripAdvisor Agoda AUTO Sulit AyosDito PinoyAutoTrader TRANSPORTA- TION GrabTaxi tripid.ph EDUCATION MICROWORK SUBSCRIPTION RETAIL Saturated Mature Semi-mature Infancy Non-existent A map of Philippines’ current market leaders in 28 commodity internet business models
  21. 21. BAMBIKES are light, sturdy bicycle frames made out of bamboo LOCAL INNOVATIONS SMART TXTBKS uses inactive sim cards to deliver electronic textbooks to students readable on any feature phone LITER OF LIGHT uses a plastic bottle, water and glue to light up homes without using electricity. APPTIVATE lets iPhone users buy iOS apps without a credit card “Innovation for SEA will come from local entrepreneurs - those who’ve gotten their feet dirty riding a habal-habal are best equipped to address the needs of the 99%” - Ron Hose
  22. 22. DOING BUSINESS IN THE PHILIPPINES “While the Philippines continues to improve its macroeconomic environment and sets pace-setting growth in gross domestic product, it lags in the implementation of regulatory reforms that [make conducting business easier].” Doing Business 2013 Report World Bank
  23. 23. Government Incentives PEZA – 100% corporate tax holiday for the first 4-6 years, tax and duty free importation of equipment and parts, VAT exemption of local purchases, withholding tax exemption Government Restrictions 60% local ownership and board control are required for certain industries (real- estate, banking, press, etc.) Legal Framework Largely based on the US legal system. Contracts are generally written in English. Internet Connectivity Works, but can be unreliable. Corruption Rank 105 of 176 globally Burn Rate Parity* 8 months Number of Days to Incorporate 36 Days BUSINESS ECOSYSTEM & POLICIES  * How long does $100k last (2 founders, 2 engineers, 2 general employees)
  24. 24. ELECTRICITY Most expensive power in Asia at $.23 per Kilowatt hour. Blackouts are periodic and usually isolated. WATER 92% of population has access to improved water sources. Sewage and sanitation are still a challenge. ROADS Still being built. Mainly owned by private entities. INTERNET Fixed line & mobile internet are widely available but connectivity is spotty. One of the first in SEA to deploy LTE. HEALTHCARE Public hospitals carry approximately 5 hospital beds per 10,000 people (global average is 30). INFRASTRUCTURE
  25. 25. Top schools to hire from: Ateneo, La Salle, UP Diliman, UST Fresh graduates require substantial on-the-job training. Filipinos are creative, but work culture does not always provide an outlet for creativity. Brain Drain - Engineers, nurses, etc. are often lured for higher paying jobs abroad once trained. Labor laws provide for 6 months probationary period, after that it’s hard to let go of employees. EDUCATION “Top-class talent is not always hard to find, and not everyone is built for this type of culture - but when you find them, they'll do wonders.” -Timothy Go , Juan Store AND TALENT
  26. 26. LABOR Philippines USA Entry Engineer US$ 700-1200 US$ 4300-9600 Senior Engineer US$ 1400-2800 Doctor US$ 600-1000 US$ 4500-18200 Teacher US$ 430-500 US$ 2500-5900 Call Center Employee US$ 300-700 US$ 2500-3200 Secretary US$ 250-500 US$ 2000-3900 income per month COSTS
  27. 27. QUALITY HOUSING - Fort Bonifacio and Makati offer western standard living and amenities. Typical 1BR in skyrise/doorman building starts at $700/month. - Hiring household staff is very common and affordable (live-in maid or nanny: $150/month). FOOD - Food options are abundant – from major international chains to fine dining. TRAVEL & TRANSPORTATION - Traffic jams are common in major roads. - Cost of owning a Car + Driver = $400/month LEISURE - 7000 islands to explore – from partying on Boracay to relaxing in Palawan and diving in Cebu – all within an hour flight range. Local flights are inexpensive. HEALTHCARE - Healthcare is inexpensive ($10 consultation at a private clinic). - Private hospitals are on a par with US standards. OF LIFE
  28. 28. PHILIPPINE’S BIGGEST EXPORT IS ... LABOR! o More than 2MM Filipinos work abroad. o $21.3b total remittances in 2012, constituting 30% of national export - 3rd largest destination in the world o BPOs - $11b industry (4% of GDP) employing 640k Filipinos o World’s largest exporter of nurses and second largest exporter of doctors. CASH FLOW ECONOMY o Earn today, spend today - many Filipinos don't save or have bank accounts. o “Tingi culture” from toothpaste to mobile load - Filipinos prefer to purchase in single serve packets (sachets) o Small stores typically extend micro credit to customers (“Gives”) MALL CULTURE IN THE BIG CITIES o Three of Asia’s 10 biggest shopping malls are in the Philippines. o Filipinos frequent malls to socialize, cool down in the A/C, use free WIFI, and sometimes shop. PHILIPPINES SURPRISES
  29. 29. BUSINESS IS RELATIONSHIP DRIVEN o The majority of big businesses is family owned. o Inter-family relationships often span 2-3 generations. UNIQUE CULTURE o “Latin Feel” - Spanish colony for 333 years, cultural influence is everywhere. o Only formal US colony in SEA – Education and legal system are modeled after the US. (NBA, Starbucks, and other American brands are huge). o English is widely spoken as first or second language. o Only Catholic country in Asia PHILIPPINES SURPRISES
  30. 30. Ecosystem Ratings
  31. 31. TOURISM RESOURCES ABOUND, BUT STILL RELATIVELY UNDEVELOPED o Some of the nicest islands (7107) and beaches in the world, world class diving, surfing, kite-surfing o Very little information on where to go! FAMILY-ORIENTED CULTURE o Children live home until married o Extended family - grandparents to grandchildren live under the same roof PHILIPPINES SURPRISES
  32. 32. advice for ENTREPRENEURS Get to know the local culture, environment and players first. The Philippines has a lot of Western elements and South East Asian influences, though as an archipelago - it is quite diverse within itself & carries distinct culture. Anticipate that to get things done the way you want them, it will take a little longer here. Very few funding options, especially post seed stage - plan accordingly! Find a local you trust to help you, or ask the local community. Everyone here is very ready to help!
  33. 33. Find local partners who can work closely with founders. Late stage funding and liquidity are scarce. Focus on investments that can generate cash early. Not enough quality deals for setting local presence. If you indicate any form of interest in the local market, the good deals will find a way to come to you. advice for INVESTORS
  34. 34. CONCLUSION The Philippine Startup ecosystem is still in its infancy – funding is scarce, experienced talent is hard to find, payment, delivery and internet infrastructure is poor. But for all those challenges, opportunities are abound – the local market is big and competition is still very low. Widely spoken English and a super-friendly culture makes the Philippines a great first base for startups aspiring to tackle Southeast Asia. - Ron Hose, August 2013
  35. 35. THANK YOU! QUESTIONS? Ron Hose @ronhose www.ronhose.com
  36. 36. Special thanks to: Dave McClure Brad Feld Want to be a World Startup Report sponsor? Email us: hello@worldstartupreport.com Christian Besler, Tony Pio de Roda, Jojo Flores, Stephen Jagger, Frederic Levy, Minette Navarrette, Paul Pajo, Runar Petursson, Diego Jose Ramos, Paul Rivera, Angelo Romasanta, Paco Sandejas, Dan Siazon, Andrew Syling, Earl Valencia, Jay Yao
  37. 37. REFERENCEShttp://blog.prialto.com/ph-bpo-infographic/ http://www.abs-cbnnews.com/business/11/21/12/ph-worlds-3rd-biggest-remittance-recipient-2012-wb http://www.census.gov.ph/content/total-number-ofws-estimated-22-million-results-2011-survey-overseas-filipinos http://voices.yahoo.com/shopping-manila-philippines-countrys-top-three-6137708.html http://www.emarketer.com/Article/Ecommerce-Sales-Topped-1-Trillion-First-Time-2012/1009649 http://www.emarketer.com/Article/Retail-Ecommerce-Set-Keep-Strong-Pace-Through-2017/1009836 http://www.totaltele.com/view.aspx?ID=472089 http://www.forbes.com/sites/greatspeculations/2013/05/06/as-china-mobiles-earnings-flatten-more-3g-growth- needed/ http://www.slideshare.net/kleinerperkins/kpcb-internet-trends-2013 http://en.wikipedia.org/wiki/List_of_countries_by_number_of_mobile_phones_in_use http://www.pldt.com.ph/investor/Documents/1Q2013%20MD%20and%20A.pdf http://www.alexa.com/topsites/countries/PH http://www.slideshare.net/janettetoral/ecommerce-in-the-philippines-opportunities-and-challenges http://remittanceprices.worldbank.org/Country-Corridors/Australia/Philippines/ http://remittanceprices.worldbank.org/~/media/FPDKM/Remittances/Documents/RemittancePriceWorldwide- Analysis-Mar2013.pdf http://www.westernunion.com.ph/en/about_us.php http://www.creditcards.com/credit-card-news/credit-cards-around-the-world-philippines-1276.php http://indexmundi.com http://imf.org http://worldstartupreport.com http://newsinfo.inquirer.net http://careeroverview.com