A supportive ecosystem for startups has been established in the Philippines, providing a platform for the development of innovative enterprises, according to a new report by the Asian Development Bank (ADB).

As in many countries, fintech and e-commerce dominate the startup landscape. Meanwhile, startups with high development impact—those focused on education (edtech), health (healthtech), agriculture (agritech), and the environment (greentech)—are emerging, although at a slower pace, according to the report, The Philippines Ecosystem for Technology Startups, released. These four sectors were the focus of the study.

The government has put in place a host of supportive policies and programs, including the Innovative Startup Act and the Philippine Innovation Act, which were both passed before the onset of the COVID-19 pandemic. A large number of incubators have been established, many through universities, and a grants program has been launched.

“The government understands the importance of startups for driving innovation now and in the future,” said ADB Economist Paul Vandenberg, who collaborated on the study with local researchers.  “It has significantly raised the scope and quality of public sector support for startups in recent years, including creating a policy environment conducive to the sector’s growth.” 

Finance is a key constraint for young startups. In the Philippines, venture capital provided by large corporations was the earliest investment source for startups, and this remains a primary source of funding today. These conglomerates either have their own venture capital arms or invest directly in startups that fit their core business. There are at least 40 venture capital firms in the country, but investments are concentrated in mature digital sectors such as fintech, media and entertainment, and e-commerce. 

“There is a need to attract investors for agritech, cleantech, edtech, and healthtech to give these sectors a greater chance of development,” Vandenberg said. “Investors need to understand a sector before they feel comfortable. If they don’t know a sector, it’s considered higher-risk, and they are less likely to engage.” 

Many of the startups interviewed for the study have joined an incubator program. Along with the advice and training provided, key benefits they cited include pairing up with a mentor, and networking with business partners and customers. Incubators cater to early-stage startups, whereas advanced-stage startups seek more customized mentorship and support. In the Philippines, there is currently no mature accelerator that offers such a customized approach.

ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 members—49 from the region.