The Philippine startup ecosystem has improved substantially in recent years but more can be done to foster innovation and grow the sector, a new Asian Development Bank (ADB) report said.
Released on Friday, the ADB's "The Philippines' Ecosystem for Technology Startups" report noted that the country currently had about 700 startups — defined as "a young company that innovates technologies or applies existing technologies in innovative ways to provide a new product or service" — from just 100 in 2015.
"Promoting innovation is seen as a key strategy for the Philippines to recover from the pandemic, accelerate its growth and achieve high-income status by 2040," the report said. "Through their innovative capabilities, startups can play an important role in these processes."
Financial technology and e-commerce startups currently dominate the landscape, but the report highlighted the need for agritech (agriculture), edtech (education), cleantech (environment) and healthtech (health care) ventures, seen having a high development impact.
The current startup ecosystem was found to be supportive, with the government said to have put in place policies and programs such as the Innovative Startup Act and the Philippine Innovation Act. Many incubators have also been established and grants are also available.
Amid this, "policymakers — and other nongovernment players — can continue to strengthen the ecosystem to encourage startup growth and thereby contribute to the dynamism of the economy," the report recommended.
At the top level, it called for annual reviews of Innovative Startup and Philippine Innovation Acts, and the appointment of startup champions to the National Innovation Council.
As for programs and regulations, requirements for grant programs were said to need streamlining while a co-financing scheme to support local governments in building ecosystems also has to be set up.
Incubator quality and management, meanwhile, need to be improved while the establishment of accelerators should be promoted. Digital infrastructure also has to be improved along with digital literacy.
With regard to procurement and endorsement, startups must be made aware of opportunities in the public sector, healthtech startups endorsements should be promoted and the government should adopt startup solutions.
Startup investors, meanwhile, should be given their own tax credit system, and the government should reduce the need for foreign registration of startups to attract venture capital.
Lastly, talent can be fostered via a voucher system to encourage students to choose science, technology, engineering and mathematics (STEM) degrees. STEM elements in agriculture courses should also be increased, the report said.
In a statement announcing the release of the report, the ADB highlighted the financing constraints faced by startups.
Venture capital provided by large corporations remains the primary source of funding for startups in the Philippines, it noted. The country was said to have at least 40 venture capital firms but with most investments focused on fintech, media and entertainment, and e-commerce.
"There is a need to attract investors for agritech, cleantech, edtech and healthtech to give these sectors a greater chance of development," ADB economist Paul Vanderberg said in the statement.
"Investors need to understand a sector before they feel comfortable," he added. "If they don't know a sector, it's considered higher risk, and they are less likely to engage."
Many of the startups interviewed for the report were said to have joined incubator programs, which provide them with mentors and networking opportunities.
"Incubators cater to early-stage startups, whereas advanced-state startups seek more customized mentorship and support," the ADB noted.
"In the Philippines there is currently no mature accelerator that offers such a customized approach."
Source: Manila Times