How to build tech unicorns in PH
Credit to Author: The Manila Times| Date: Wed, 28 Aug 2019 17:25:37 +0000
I recently met a friend who founded a tech startup five years ago. I asked him what he is doing nowadays. He curtly said, “Still running my startup”. Apparently, he’s still trying to grow his customer base in Metro Manila.
This is one of the main problems why there’s no Philippine tech company that reached a regional, more so global scale, despite the vigorous activities over the past five years from tech incubators, accelerators, conferences, local venture capitalists, and tech associations.
“Our local founders still don’t dream big,” said Jojo Flores, the co-founder of Plug and Play, a Silicon Valley-based accelerator and incubator firm. Many local startups solve local problems — from traffic, to delivery of goods, to finding parking. Nothing wrong with this lofty goal, but it simply won’t sustain economic viability in the long run.
No wonder why the Philippines does not have a tech unicorn, a term used to describe a privately held startup company valued at over $1 billion, notwithstanding the growth in the local startup scene.
According to data from the Philippine Software Industry Society, there are currently 228 startups scattered nationwide, with the bulk in Metro Manila. This may seem a big number, but Indonesia, who’s population is more than double of the Philippines, boasts “of thousands of startups and four unicorns”, according to KrASIA.
Indonesian ride-hailing tech firm Go-Jek is already valued at $10 billion with infusion from foreign venture capital, while ecommerce platform Tokopedia is valued at $10 billion. The other two, Traveloka and Bukalapak, are both valued at more than a billion dollars. In just a few years, these Indonesian tech firms have become giants in the regional and global markets because they dream big.
One may argue that the 270 million population of Indonesia is a huge market base from which to grow a stratup’s business. While this may be true, there are other factors that contribute to the birth of tech unicorns in a country.
Government plays a vital role in developing and shaping the technology business landscape in a country. An example is former Soviet-controlled nation of Estonia, home to just 1.3 million people, but it’s one of the most tech-savvy countries in the world, according to MarketLine.com.
“It holds the world record for the number of startups in the country per capita, has one of the world’s fastest broadband speeds, and its education system teaches every child how to code. Its highly flexible, transparent, and hassle-free infrastructure makes it a great place for business — and indeed Estonia has four ‘unicorn’ valued startup companies as a result.” One of them was Skype which was acquired by eBay for $3.1 billion in 2006.
How has this country leap-frogged from its Soviet roots and into a haven for innovation, venture funding, and online services?
“In the mid 90’s, Estonia began a transformation. In the aftermath of Soviet control, its relatively young government placed a big bet on what was at the time a promising looking technology: the Internet.”
“The bet paid off. Now, its governance system is probably the least bureaucratic and most user-friendly backbone infrastructure in existence, and underpins a thriving startup nation. A key in its emergence has been the Estonian education system, which is probably the best in Europe.” Quality education molds youngsters to think critically, think globally, and dream big.
On the other hand, the Indonesian government is all-support to its goal “to position Indonesia as a digital energy in Asean”. Rudiantara, Indonesian minister of Communication and Information Technology, was quoted by Nikkei Asian Review – “We are going to act less as a regulator and more as a facilitator and accelerator”. He said the “government has taken local companies to Japan, South Korea, China and the US to meet with venture capitalists.” Indonesia is now poised to achieve its goal of giving birth to 20 unicorns by 2025.
It’s opportune that President Duterte signed the Philippine Innovation Act, a law which would harness innovation efforts to help the poor and the marginalized and enable micro, small and medium enterprises (MSMEs) to be part of the domestic and global supply chain. Through a startup MSME innovation development program, the government shall mobilize its various agencies to work together with private organizations to provide technical and/or financial support programs for the development training of entrepreneurs.
But two other factors need to be addressed for the Philippines to give rise to unicorns — education and technology infrastructure. In the medium term, we expect to see great improvements in Internet quality and cost with the entry of the third telco.
Education, on the other hand, is a long-term intervention which I have written about in length in previous articles. Critical thinking skill has been declining. The education system is the culprit why 70 percent of Filipino teenagers don’t have a dream, according to a study… and becoming a tech unicorn requires dreaming big.
The author is CEO of Hungry Workhorse Consulting, a digital and culture transformation firm. He is the chairman of the Information and Communications Technology Committee of the Financial Executives Institute of the Philippines. He teaches strategic management in the MBA Program of De La Salle University. The author may be emailed at rey.lugtu@hungryworkhorse.com