Four highlights from the 2020 Philippine Startup Survey: COVID Edition

Last May 12, PwC Philippines, together with the Department of Trade and Industry, QBO Innovation Hub, and IdeaSpace, shared the 2020 Philippine Startup Survey: COVID Edition, which aims “to understand the impact of the COVID-19 outbreak on the tech startups in the Philippines.” The effort follows a previous report released in February that mapped out the same landscape pre-pandemic.

“This crisis is really forcing us to make decisions quickly and to act with urgency,” said Jade Roxas-Divinagracia, deals and corporate finance managing partner at PwC Philippines. “And while it brings with it numerous challenges, admittedly, we sense a lot of opportunities especially for startups.”

“Given the right support, founders and startups with the ability to seize these opportunities and to make the necessary adjustments or pivot will survive this crisis and will be well-positioned to thrive thereafter.”

Here are four important highlights from the report.

1. Majority of startups are worried about the long-term effects of the pandemic.

Out of the 90 founders interviewed for the survey, 48% felt threatened by the pandemic’s impact on their startup, while only 23% consider it as an isolated concern. Their top concerns include the financial impact and effects on operations, a potential global recession, and difficulties in funding.

Of the respondents surveyed, 36% also expressed concern about reduced workforce productivity, which may be partially attributed to the country’s slow internet connection.

But according to Atty. Alexander Cabrera, chairman and senior partner at PwC Philippines, this may be a case-to-case basis. “For instance, in our business, I think the productivity level is up… for the primary reason that people don’t have to travel. So the travel time going to the office and to clients are no longer needed.”

He also believes that productivity spans a wide array of activities that don’t only achieve revenue generation. “It’s also upskilling people and activities… R&D, thought leadership, [and] even developing critical relationships.”

2. Startups are implementing countermeasures to compensate for loss.

The crisis has challenged many founders’ creativity, employing various ways to keep their startup afloat. 51% reduced their level of operations, while 36% implemented cost reductions (aside from employee costs) and prepared a business continuity program. Almost half of the surveyed startups even started offering a new product or service.

On top of these internal measures, startups are also looking to acquire funding from other sources. These include government grants and subsidies, equity financing, and bank loans and financing.

3. Some startups have uncovered opportunities amidst the crisis.

However, the situation isn’t completely bleak for several startups, with 21% saying that they even experienced an increase in demand for their products and services.

It may be assumed that these are startups from the logistics, education technology, enterprise services, financial technology, and healthcare sectors, since they have been critical to making life convenient for consumers under quarantine.

The pandemic also saw new players such as food market startups and on-demand delivery service platforms. For Ellard Capiral, CEO of sniper advertising firm AdMov, it will inspire further innovation among budding entrepreneurs.

“This situation will create a new breed of startups, and will probably change how we do business in the long run,” he said. “Startups need to adapt to the new needs and behaviors of people. They should not expect that things will go back to as they were before COVID-19.”

4. Startups need additional funding and other forms of support to normalize their post-quarantine operations.

A harrowing 20% of the surveyed startups found that they only have enough cash and capacity to sustain their business for more than a year. Given this, they’re calling to the government to implement helpful measures that will help boost and bolster their operations.

Their top suggestions include loans with a longer grace period and relaxed credit requirements, tax incentives, and incentives for startup investors, such as tax holidays, that will encourage them to accelerate fundraising activities. “I hope the government will provide strong and deliberate financial assistance to all startups in the same way it has implemented its strong enforcement of the ECQ,” one founder said.

Founders are also carrying other kinds of considerations on top of funding. 76% need a wider customer base to secure more possible revenue sources, while 61% that are experiencing growth in their startup require additional talent to support it.

“The negative effects of the pandemic may persist up to a year after the lifting of the ECQ,” said a founder. “It is therefore important to develop support systems as well as funding options and collaborations with big firms to support the SMEs, since SMEs account for more than 66% of employment in the Philippines.”