The first financial technology unicorn was born this year to interpret the highlights of the Philippines' start-up ecology

2022-11-21
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Author:Shi Yi
Source: 36kr

Editor's note: This article is selected from KrASIA, the original title6 takeaways from Gobi-Core Philippine Fund’s report on the Philippines’ thriving startup ecosystem, by Stephanie Pearl Li

The Philippines is the country with the fastest development of digital economy in Southeast Asia. According to the latest Southeast Asia Digital Economy Report released by Google, Temasek and Bain, the Philippines' digital economy is expected to grow by 93% this year, with a scale of 17 billion dollars in 2021 and 40 billion dollars in 2025.

The driving force behind the growth of the digital economy is the 12 million new Internet users in the Philippines since the COVID-19. Nevertheless, Gobi Core Philippine Fund's《2021 Philippines Startup Ecology Report》It shows that the Philippines still has many obstacles on its way to seize digital opportunities. Gobi Core Philippine Fund is jointly operated by Gobi Partners and Core Capital.

According to the report, the investment of local start-ups in the Philippines is still insufficient. Among the six largest economies of ASEAN (Indonesia, Singapore, Malaysia, Thailand, the Philippines, and Vietnam), the per capita GDP of the Philippines is only higher than that of Vietnam. The per capita Internet and service expenditure is the lowest among the six largest economies of ASEAN, at only $145, while the average value outside Singapore is $337.

"Although many Filipinos are online, they have not started to use the Internet to buy goods and services, especially in small cities that have not been penetrated by start-ups and technology companies."

The following are six key points extracted from the report for readers to understand the current situation of the Philippines' e-commerce, financial technology and logistics industries.

1. Catering to local demand, local e-commerce opens up market segments

Shopee of Donghai Group, Lazada of Alibaba, and Zalora, a fashion e-commerce business, occupy the leading position in the Philippines' e-commerce industry. Zalora is backed by Ayala Corporation, the oldest and largest commercial group in the Philippines. These companies have entered the Philippine market as early as 2012, taking the first advantage.

However, Gobi Core reports that in 2020 and 2021, there will be 35 new e-commerce start-ups in the Philippines, with a total number of 81. Local e-commerce with rapid growth includes beauty products e-commerce Beauty MNL, flower distribution platform FlowerStore and "overseas shopping" platform Galleon.

2. The logistics industry will show negative growth in 2020, and the investment will gradually recover in 2021

After COVID-19, the blockade and strict border control brought the global supply chain to a standstill. However, the amount of investment in the logistics industry has shown signs of recovery. The investment in the storage and logistics industry in the Philippines will increase by 9 times in 2020, reaching $740 million.

In 2020 and 2021, the Philippines will add at least 10 logistics start-ups, accounting for 4.3% of the new start-ups in the past year and a half. According to the report, many new logistics start-ups operate on a small scale and have not yet received venture capital. They face challenges in providing competitive prices and ensuring shipping flexibility.

At present, the logistics industry in the Philippines is dominated by regional unicorns such as Grab, Ninja Van and J&T Express. In addition, there are some start-ups supported by large companies such as Entrego (Ayala mentioned above) and Quad.

3. Local financial technology giants obtain large amount of financing

FinTech is one of the hottest entrepreneurship tracks in the Philippines. Between 2020 and 2021, 11 FinTech start-ups will be established, accounting for 4.7% of all new start-ups. In the first half of 2021, local financial technology start-ups in the Philippines received a total of $342 million in financing, an increase of 149% compared with $137 million in 2020. It is worth mentioning that two rounds of financing with huge scale, namely, $175 million from Mynt, the mobile wallet GCash operator, and $167 million from PayMaya.

Mynt also obtained US $300 million from Warburg Pincus, Insight Partners and other investment institutions in the second half of this year. It is currently the only Unicorn company in the Philippines, with a valuation of more than US $2 billion.

4. The number of start-ups has nearly doubled in the past three years

In 2021, more than 700 start-ups will operate in the Philippines. The number of Philippine start-ups has grown at a CAGR of 29% over the past four years.

According to the report, globalization and the increasing Internet penetration are two reasons for local entrepreneurs to join in technology or technology related enterprises. The Philippine Government also established the Innovative Enterprise Act(Innovative Startup Act)And startup research fund projects(Startup Research Grant Program)And support the local start-up ecosystem.

5. Philippine start-ups are expected to raise $2 billion in the next three years, more than the total of the last five years

Before 2021, most Philippine start-ups will complete round A financing at most. However, the emergence of local VC and the growing interest of foreign investment institutions and angel investors are helping local enterprises go further.

In 2021, Philippine start-ups announced the completion of three rounds of B financing and one round of C financing. Kumu, a live broadcast and social e-commerce application, completed the round B financing in March and the round C financing led by General Atlantic in October, becoming the first Philippine local enterprise to complete the round C. Kumu currently raises a total of US $100 million. Other noteworthy companies that have completed financing include Great Deals, an e-commerce startup that completed a USD30 million round B financing in May, and GrowSari, a B2B e-commerce startup that completed a USD30 million round B financing in June.

The report predicts that the number of Philippine start-ups will maintain a growth rate of 20% to 30% in recent years.

6. More and more female entrepreneurs are taking the lead

The proportion of female entrepreneurs in Philippine start-ups increased from 17% in 2015 to 36% in 2020, while that of male entrepreneurs decreased from 83% in 2015 to 64% in 2020.

Famous female leading enterprises include Kimberly Yao, co-founder of CloudEats, a shared kitchen, Beryl Li, co-founder of Yield Guild Games, who allows players to make money by playing games, and Clare Ros, founder of Kumu, a social e-commerce platform.

Compile | Shi Yi

Fig. | Unsplash

B2b gave birth to the first financial technology unicorn this year, interpreting the highlights of the Philippines' start-up ecology

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