WHILE most brick-and-mortar businesses in the Philippines have yet to recognize the importance of tech start-ups and still shy away from investing in these kinds of ventures, a local business leader said Cebu is already on the right track.
Michael Cubos, president of the Cebu Innovation Council (CIC), said support for start-ups from traditional businesses cannot be gained overnight.
“It will take time for this to take root. We may need a few more years, but we are on the right track,” he said in an interview with Cebu Daily News.
The CIC president said Cebu has better collaboration and support, which are important in helping the local start-up ecosystem and innovation culture grow.
One of the initiatives aimed at helping local start-ups was the Slingshot Philippines Cebu conference held earlier this month, which served as a venue for digital and innovation players in Cebu, together with traditional business owners, to meet, learn and exchange ideas, as well as be updated on recent technological changes and seek funding support from investors who are ready to embrace innovation.
This event, which gathered around 300 participants, was part of the Department of Trade and Industry’s thrust to make Cebu an “innovation island.”
During the fifth edition of the Geeks on a Beach (GOAB) Conference in Puerto Princesa City, Palawan, last week, it was brought up that none of the country’s richest tycoons are investing in technology start-ups, even as most of the largest firms in the world are doing so.
For the 10th consecutive year, Forbes Asia named Henry Sy of the SM Group as the Philippines’ richest man, with a net worth of $18 billion in 2017, up from $13.7 billion in 2016.
The wealth of the Philippines’ top 50 richest accounts for 24 percent of the country’s Gross Domestic Product (GDP), signifying that there is no shortage of potential investors in tech start-ups here.
However, most of these businessmen are involved in either real estate or retail, and other related industries.
Cubos said the same scenario is happening in Cebu and the rest of the Philippines.
Factors at play
Start-up founders do not have to look elsewhere for potential investors, but Cubos said there are a lot of factors at play as to why the country’s richest do not seem interested.
“Most financially capable people are in their 50s or older and are not likely to risk investing in areas they are not familiar with,” he explained.
However, this is already changing as business leadership is transferred to their heirs who are more knowledgeable about technology.
90 percent failure rate
Cubos also pointed out that the failure rate among start-ups is also staggering, with about 90 to 95 percent failing in their first year alone and making these types of ventures risky to invest in.
He also said that there are very few models and success stories that would inspire people to invest.
“Our start-up and investing culture is not mature yet. Education and regulations are very loose while our skeptical nature prevents us from trusting someone we don’t know that well with our hard-earned money,” said Cubos.
But start-up advocates believe stronger support for start-ups is possible in the Philippines, beginning with open discussions with large corporations.
Jojo Flores, co-founder and vice president of Sillicon Valley-based start-up accelerator Plug and Play, said they have already started engaging with the Philippine Chamber of Commerce and Industry (PCCI).
He said some PCCI members are already engaging start-ups, whether by putting out investment or partnering the piloting of projects.