PHILIPPINE STARTUPS should focus on sustainable growth to attract investors amid tighter regional funding conditions, according to industry leaders.
“Venture capitalists (VC) aren’t necessarily looking at more mature startups, but rather, the criteria of what a good startup looks like has changed,” Bit Santos, a partner for portfolio operations at Kickstart Ventures, said in a video interview.
“Whereas in a cash-rich environment, where capital is very cheap and easy, the priority was who can grow the fastest; now, it’s more about who can grow most sustainably,” he added.
Venture funding in Southeast Asia dropped 46% year on year in the first quarter of 2024 to $555 million, according to Deal Street Asia.
David Lu, co-founder and chief executive officer at environmental tech startup Clarity Movement Co., said investor expectations have shifted significantly.
“The era of cheap capital is gone,” he said. “Especially for Series A and beyond, VCs are now looking for companies that bring good cash flows and can pretty much grow sustainably themselves. We’re really back to the fundamentals of investment.”
Mr. Santos noted that investors are less concerned about a startup’s maturity and are more focused on business fundamentals. “It’s less about who’s investing in more mature startups, but rather investing in more sustainable startups.”
He also warned of the continuing “tech fog” in the region — a period of uncertainty marked by slower investment cycles and funding gaps.
“Given that we’re anticipating that we’re still all going to be in a prolonged tech fog, things will continue being challenging,” he said. “From the VC side, we’ve been focusing on the value-added and being more supportive, beyond just the money and the investment.”
In response, venture capital firms are adapting their role. “From the VC side, we’ve been focusing on the value-added and being more supportive, beyond just the money and the investment,” Mr. Santos said.
Mr. Lu said the venture capital role is evolving from solely being financial backers to operational partners. “Inevitably, the function of the VC is also shifting… now 80% is for providing capital, while 20% is for providing operational support.”
Patrick Gentry, co-founder and CEO at human relations technology firm Sprout Solutions, said trust between startups and investors is important.
“Just like anything, when you’re going through crazy stuff, you want people with you that are aligned with your values and your character,” he said.
The Philippines captured 19% of total VC funding in Southeast Asia in 2024, according to the Philippine Venture Capital Report by Boston Consulting Group and Foxmont Capital Partners. The ecosystem is moving beyond early-stage bets to bigger, growth-stage deals beyond $20 million, they said. — B.M.D. Cruz
