Is being in the Philippines bane or boon for founding a tech startup?

Last January 10th, I posted a topic which I hoped would get insights from the community to help not only budding technopreneurs better understand the challenges they face in not only starting their own technology venture, but also help them create truly sustainable, wealth-creating companies which can emulate the success of organiations such as F-secure (Finland), Trend Micro (Japan/Taiwan), Kaspersky (Russia), ICQ (Israel), Skype (Estonia/Sweden), SAP (Germany), Zoho (India), and many others.

I was surprised and happy to find that it generated a  lot of insightful comments from very knowledgeable people in the industry (many of whom have actually lived through, going through, or are helping others through the experience).

The gist of the discussion: Filipino technopreneurs face several challenges in getting their company to a point where it can become a truly world class company (initially the discussion was confined to software, but is applicable as well to any technology venture). Here are some of them:

1) Access to capital:

  • according to Carlos Perez: “Easy and cheap capital helps you avoid distraction of having to hunt for money”
  • But Jay Fajardo had a counter point saying: “Tech startups nowadays require less capital to launch because of very cheap access to web and cloud infrastructure. The focus [has] shifted from raising money to getting a product out fast.”
  • Francis Egenias shared that organic growth is possible

2) Timing
(need to catch an inflection point in the industry, take advantage of discontinuous shifts in technology and business models)

  • Jay Fajardo mentioned leveraging new developments such as cloud computing; but applicable here as well are new trends such as open source, social/Web 2.0 technologies, mobile applications (ie iPhone apps), virtualization, etc.

3) Focus
(dominate a niche, target specific verticals, get into markets where size and capital is not an issue, target the needs of a larger, international market, go into markets similar to your local market, leverage local unique culture/economic/social conditions–>ie as in the case of wireless/SMS technologies; or English speaking talent in the case of customer service and distance learning solution providers)

  • Here strategy was mentioned

4) Talent
(access to world class engineering talent, product management and product marketing talent, executive talent, ability to recruit and retain talent–> not losing them to greener pastures abroad or to multinationals with local operations)

  • Paco Sandejas and Joey Gurango talked not only about engineering talent but product management talent.
  • Giancarlo Angulo mentioned a lack of critical mass of talent

5) Leadership
(of course!)

  • Joey Gurango, Paco sandejas and Michael Hamlin talked about competence and experience of the leader (they themselves are leaders of their own enterprise)

6) Attitude/orientation/commitment
(to have confidence to stay the course when faced with challenge)

  • Miguel Ladios shared his experience working in a multinational environment and the importance of attitude
  • Floyd Piedad shared that we should have an attitude that focuses on solutions instead of over-analyzing problems

7) Enabling infrastructure
(ie government, education, IP protection, etc)

  • Michael Vincent Yap and Albert de Cera talked about IP protection
  • Ody dela Merced and Ruben Canlas talked about the role of government and education in creating the right environment for entrepreneurship to succeed

I’m intrigued however by Michael Hamlin’s last post about:

8) how effective communications plays a key part in gaining success on the world stage.

I agree that communicating effectively is crucial (but unfortunately is often missed as I have). Communication plays a key role in the lifecycle of any enterprise/product from startup to maturity–ie getting attention, creating awareness/interest, driving adoption, creating loyalty, building on success.

But just out of curiosity (and in the context of Filipino technopreneurship and what it takes to communicate effectively to the global market), is being in the Philippines (and being associated with the “Philippine brand” if there is such a thing) bane or boon to founding a tech startup and its marketing communication efforts? Does it matter at all?

A review of the communication strategies service companies employ in the IT and IT-enabled services sector seem to prominently tout the advantages of being in the Philippines (or for that matter India, China, Mexico, Poland, etc). But what if you are a product company?

Social responsibility and nationalism aside, does it make business sense to prominently display that your company is “proudly Filipino?” Or that your product was developed by Filipino talent?

Can it be a liability? (ie shows narrow focus? insular thinking?). Should the fact that your enterprise is a Filipino company employing Filipino talent be buried in the marketing copy? Should it be mentioned at all? Some companies I know (both here and abroad) make it a point to highlight the fact that they have international offices (even if its just a one bedroom apartment or PO Box somewhere) to show their global ambitions. At a time where distance is made almost meaningless by technology, does it still matter? Does it really help?

If I were an entrepreneur wanting to set up the next revolutionary open source/cloud computing/social networking/mobile gaming startup right now—what advice would you give?

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Entrepreneurs can change the world

Be an entrepreneur! Although US-centric, this is an inspirational video just the same. Created by the folks behind http://grasshopper.com.

Vodpod videos no longer available.

more about "Entrepreneurs can change the world", posted with vodpod

Google Losing (Massive Amounts of) Money in Youtube

Google may be losing up to $1.65M a Day on YouTube–this is according to an article by David Silversmith in his blog at Internet Evolution.

He bases his assessment from research provided by financial firm Credit Suisse and Internet measurement provider comScore Inc. According to their estimates, Youtube is on track to serve 75 billion video streams to 375 million unique visitors in 2009. From this amount of users and traffic, it is estimated they earn only anywhere from a low of $90 million (Bear Stearns) to a high of $240 million (Credit Suisse). Revenues come from adwords and home page banner advertising, and premium dedicated channel content.

To earn this however, they spend an estimated $753 million annually on bandwidth and infrastructure. So, depending on whose version of
revenues you accept, Google is losing anywhere from $513 million to
$663 million annually on YouTube, or anywhere from $1.4 million to as
much as $1.65 million every day (see chart below).

Internet Evolution – David Silversmith – Google Losing up to $1.65M a Day on YouTube

You can read more of David’s post here, or read a post from Technologizer, which expects Youtube to radically shift its strategy and content to survive.

Now if Youtube is having a hard time monetizing its massive user base and traffic–what does this bode for the site’s smaller competitors such as Veoh, Brightcove, and others? Or for that matter sites that offer free services such as Twitter. What does this say about the viability of businesses whose business model is around free and user-generated content?

Making Money in Open Source

The folks over at Pingdom in their Royal Pingdom Blog have collected the financial information of some of the most popular open source software companies.

No surprise that it is only Red Hat so far that has had runaway success with a business model purely around open source. They are a publicly listed company, and in a partner event I attended last year, made a big deal about the fact that their revenues have been consistenly growing year on year and are well over US $500 million (and if their growth continues, will join the mythical billion dollar club of Microsoft, SAP, Oracle soon if they are not acquired or bought out first along the way).

For Novell and Sun Microsystems, the money they make from open source software is harder to pin down as they are large, very diversified companies (but with open source a key component of their strategy–as the recent acquisition of MySQL by Sun and SuSE by Novell has shown). Same goes for IBM or Oracle.

For open source application companies, they are still relatively small. Alfresco who does open source Enterprise Content Management solutions is reported to be earning around US $10 million, while SugarCRMaround US $15 million. They are small fry versus the incumbents but definitely respectable given their relatively young age, small size (in terms of headcount) and their adoption rates (albeit many are non-paying customers).

It remains to be seen if pure-play opensSource software companies will be as successful as their proprietary counterparts. I read from CNET in Matt Asay’s (of Alfresco) blog that low conversion rates (as low as 1%) from free downloads to paying customers is not uncommon. One thing is for sure-they are disrupting the market, helping keep the big vendors honest, and offering customers choice. In the long run perhaps the real money that will be made is not from subscription fees or support services for open source code but from savings made in R&D, marketing, testing and QA by leveraging a wider community of users and sharing knowledge embedded in software code.