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?


Entrepreneurs can change the world

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What it Takes for Filipino Software Companies to Go Global

Melvin Calimag, a Filipino journalist and blogger for ZDNet Asia posts in his blog PinoyPost a question on why is it that, unlike in India, there are very few IT/Tech companies in the Philippines who have gone global. He writes:

Need for Filipino IT firms to go global : Pinoy Post : Blogs : ZDNet Asia

Unlike India which has launched quite a number of successful global IT firms, mostly in the BPO (business process outsourcing) sector, the Philippines seems to be content in merely hosting multinational companies in the country. 

A cursory glance at the composition of the largest tech firms in the country would reveal that the majority, if not all, of them are foreign-owned. Even in the field of outsourcing where the Philippines has made some inroads, the biggest names are still those from the United States, United Kingdom, and yes, India.

Sure, there are some Filipino-owned BPO firms which have expanded into foreign shores, but none of them have approximated the level of prominence or success the likes of India’s Infosys, and even Satyam, have achieved–just the mention of these company names would earn recognition of their country of origin.

Sadly, that’s not the case with the Philippines. While the country has somehow been able to market itself as a viable offshore destination, there are no homegrown icons to speak of that can serve as IT ambassadors for the country.

While I certainly share the sentiment, let me share my thoughts on why that is–specially for software product companies (which have a different set of challenges than IT service or IT-enabled service companies). I think the challenge for many software companies in the Philippines (and in Asia for that matter) is that it takes a considerable amount of capital to build a sustainable and profitable business abroad.

Although I have heard of stories and case studies of small, local shops making a nice profit developing casual games, online services or iPhone apps; I have yet to see one scale to a size beyond being a lifestyle business for the owner, or to develop a sizable customer base or presence to be called a truly “global” company. By global, to have the size, reach, stature and success of companies like F-secure (Finland), Trend Micro (Japan/Taiwan), Kaspersky (Russia), ICQ (Israel), Skype (Estonia/Sweden), SAP (Germany), Zoho (India), and many others.

Creating a scalable business with considerable international presence and a sustainable business model in my opinion requires considerable capital. Companies can start out with low cost Internet direct marketing, but to truly grow and to make a name for themselves, they will eventually have to join trade shows, go on trade missions, meet face to face with international analysts/press/decision makers and influencers , or in the case of complex or business applications provide consulting and support, develop partner/reseller channels, and many others.

In order to do this, you need capital. For a company just starting out, often times the only way to do this is to get funding from a) a wealthy angel investor (as in the case of GSCand G2iX as mentioned in Melvin’s blog post); or you would need b) venture funds/institutional investment/debt/capital raised through IPO; or a third route is to c) raise capital purely through organic growth.

Now the first (getting angel investment) is difficult as it requires the right sort of connections or “social capital.” Preferrably you would want to get investment from people who know the industry–who have realistic expectations of the time horizons and amount required to get a software company of the ground and can mentor the software entrepreneur how to best use the funds provided. This is something not all Filipino entrepreneurs have access to, but is something that considerably more Indian entrepreneurs have with the success of many country men who made it big in the US in the 80s and 90s like Vinod Khosla of Sun Microsystems and Sabeer Bhatia of Hotmail (and literally hundreds, possibly thousands of others who found success as software engineers/analyts/testers, etc in the US).

The second (venture capital/institutional investments/IPO) is hard, because the Philippines and many countries in Asia simply don’t have access to the type of capital markets and business ecosystem that entrepreneurs in the US (specially in Silicon Valley) enjoy. In this regard, GSC and G2iX (companies mentioned in Melvin’s article) struggle as well as evidenced by their aborted IPOs.

The third route is hardest as it requires that software companies have a large enough market in its home country for it to be able to grow enough to support and fund that kind of internal growth. This is hardest as it is outside of the entrepreneur’s control. For Filipinos it is difficult because of lackluster economic performance of the country. This is compounded by the fact that the market is just too small (specially for companies developing enterprise/engineering/scientific) applications to fuel the kind of focused expansion/growth required for quick product development, innovation and market penetration (notice how many Singaporian and Australian software companies themselves struggle to create truly global software product companies, simply because their home market is just too small to raise enough capital to build global companies).

Perhaps technical brilliance, innovative products, smart people are not enough? The environment, connections, access to capital, and maybe luck (ie where you were born) plays a part as well. Do you agree? Let me know your thoughts as well.