A peek into DTI’s plan to support startups

The Philippines is a home to a developing startup community. According to 2017 Philippine Startup Survey , the first report profiling the country’s startup ecosystem conducted by accounting firm PwC Philippines, there are more than 300 startups in the country and over 200 of them are still active.

The study, which tapped 106 startups, found out that majority of new enterprises cite “capital requirements” as their main challenge in building their businesses. Moreover, 59% of the respondents said an improved tax incentives plan should be prioritized for them to grow their operations. The same percentage of respondents also said that the ease of doing business in the Philippines is a vital area that needs to be improved.

With these kinds of demands come the important role of the government. What should the government do to help startups?

“These are activities that would gather everyone, that would be the springboard for many ideas, meet with startup community that to me is a good incentive,” Lopez said in a press conference during Slingshot ASEAN 2017 (Slingshot) last Oct. 18 at the Philippine International Convention Center, Pasay City.

“Second step, looking forward we would like to start a certain policy interventions. Hopefully we can look into incentives that can probably grant fiscal incentives to those who would be investing in these kinds of activities,” he said.

According to him, a better way to support startups is by providing them with funds rather than tax incentives, which could be abused.

“Right now there is none (government fund for startups), but we will think about it. Our financial institutions can possibly consider this as an area. Right now these are private sector-initiated, but for us to help accelerate the growth of startup businesses in the country especially encouraging innovative Filipino startup developers, that would be a good program to consider,” he said.

“We run the risks also of that incentive being abused, a lot of guys might just need funding [and use] that as an excuse to increase the tax deductibility. We’ll just be careful and study that further, but providing a more proactive fund that would support startup activities might be the next step, a better way to do it,” he added.

In looking for proper market, Lopez said startups do not need the government’s hand.

“These innovators, frankly, they don’t need government support because if you develop something [that is] supposed to be a great, big idea, normally they would have a market in their minds already,” he explained.

However, she noted that for the government to do so, the country’s startup community has to grow first into an active ecosystem with around 500 to 1000 enterprises.

“The Philippine [startup] ecosystem is in the initial stage, very foundational, and right now what we’re trying to do is to bring the startup community together and build scale,” she said.

Terrado clarified that the kinds of startup businesses that will be considered under such initiative are the technology‑based ones.

“We’re looking for startups that have a big ambition and [that] are technology‑enabled. They are not just a small livelihood, but something that will bring a good brand [in] the country to the world, something made of entrepreneurs who have the grit to make it work and a new breed of businesses that will thrive in the innovation algorithm economy,” she explained.

During Slingshot, about 20 angel investors from different countries were invited and introduced to more than 80 startups from Southeast Asia.

“The venture fund architecture in the Philippines will have to be customized here but there is a growing interest from local and foreign funders to have access to the ecosystem in the country and identify very ambitious startups to bring to the world,” she said.

“If you think of it that way, it can encourage probably a higher risk appetite, but this time it’s not a plain donation, a donation that has no payback so to speak. In this case you create an investment that may have a big payback not only for the individual but especially for society,” he said.