PHL startup founders seen to favor profitability over growth — report

By Miguel Hanz L. Antivola, Reporter

Philippine startup founders are shifting their priorities to profitability over growth due to the decline in local investments and expect lower valuations this year, according to a study.

About three in four founders have pivoted to reduce their dependency on investor funding, according to the 2024 Philippine Startup Founders’ Outlook study by local startup focused communications firm Uniquecorn Strategies and market research company The Fourth Wall.

In terms of priorities for the year, profitability topped the list at 70%, followed by customer experience (55%) and product development (55%).

“While the immediate challenges in funding and valuation are evident, the founders’ focus on profitability and expansion indicates a proactive approach to navigating the complexities of the current economic climate,” Dean Bernales, founder and chief executive officer of Uniquecorn Strategies, said in an emailed press statement on Wednesday.

“The pandemic’s lingering economic impact continues to shape strategic decisions, with founders navigating a tightrope between growth aspirations and the harsh realities of funding,” he added.

Startup investment in Southeast Asia declined after an uptick in 2021, as reported by Deal Street Asia and Kickstart Ventures. The first quarter of 2022 recorded about $5 billion in deals, down from a peak of $8 billion in the fourth quarter of 2021.

Startup tech fundraising declined this year due to adverse market conditions, according to Gobi-Core Philippine Fund, which provides early-stage venture capital.

In its Philippine Startup Ecosystem Report, Gobi-Core said that the year-to-date fundraising in the Philippines is running 40% below the year-earlier level.

Startup founders noted profitability (55%), raising funds (50%), and talent acquisition (40%) as their main challenges, coupled by an inability to identify helpful government policies for the industry (55%).

An increased investment in digital infrastructure (70%) is a public initiative expected to drive the growth of the funding environment, they added.

While 20% of respondents have reached profitability, more than half (55%) still expect to reach the goal in the next one to two years, even thinking to expand in the region for a new market (60%).

“As 2024 unfolds, the Filipino startup ecosystem shows signs of balancing immediate pressures with long-term strategic goals,” Mr. Bernales said.