Founders, funders, and bayanihan in the fourth industrial revolution

By Santiago J. Arnaiz, SparkUp Editor

WHEN Keller Rinaudo founded his drone-based delivery start-up Zipline, it was with the lofty dream of building “an instant, automated logistics system for the planet.” It was 2014 and, at the time, AI-powered robots were commonplace only in the warehouses of the world’s tech giants: Alibaba, Amazon, and the like. But Mr. Rinaudo felt that the technologies of the future were being wasted on delivering tennis shoes and pizza. Instead, he believed “the long-term impact of that technology is providing universal healthcare to every person on the planet.”

Today, Mr. Rinaudo oversees the largest commercial autonomous logistics system in the world, delivering emergency medical supplies and relief packages to remote communities. Like his drones, Mr. Rinaudo is constantly travelling to far flung regions, finding new ways to partner with local governments and private institutions, taking his futuristic solution to as many places as possible.

“People in Rwanda today say ‘Yeah, of course we have drones that deliver blood. How else would you solve that problem?’” Mr. Rinaudo said. “It’s amazing how fast it goes from science fiction to totally boring.”

While the team is headquartered in California, Zipline’s operations are halfway across the world in Rwanda, Ghana, and — following a meeting last month with the Department of Health and Department of National Defense — the Philippines.

It’s across the Philippine archipelago that Mr. Rinaudo believes Zipline will truly come into fruition as a game-changer in autonomous logistics. With their drones, Zipline will be able to send payloads of vital cargo across various bodies of water, instantly connecting remote islands otherwise considered unreachable in emergency situations.

The Philippines is a vast country, with an equally vast array of social ills, borne out of generations of band-aid solutions and neglect. Infrastructure gaps, wealth inequality, disproportionate allocation of private and public funding — all these and more constitute a nation rife with complex, interlocking problems.

But where there are problems, there are also opportunities. Just as Zipline hopes to address Philippine infrastructure gaps with artificial intelligence and robotics, the fourth industrial revolution presents a nearly bottomless toolkit with which enterprising firms might tackle the issues that plague our country.

And it’s in that intersection of emerging technologies and societal need that we’re seeing the rise of a new breed of enterprising pioneers: Start-ups.

LEADING THE CHARGE
As of 2017, Impact Hub Manila CEO Report 2018 found that Metro Manila alone was home to over 500 registered start-ups. In the same year, global investors funneled over $100 million into Philippine start-ups, outpacing the growth of the community’s Singaporean and Indonesian counterparts.

Since then, the local ecosystem ballooned, with more than half the current roster of start-ups founded in the last two years. Earlier this year, global business ranking report Start-upBlink found that the Philippine start-up ecosystem jumped up 16 slots to 54 out of 100 countries surveyed.

Today we see dozens of case studies of independent, homegrown companies that have leveraged their innovative business models to raise significant institutional funding, create thousands of new jobs, and quickly achieve liquidity.

Coins.ph, a regional success story that made headlines after its $72 million acquisition by Indonesian tech giant Go-Jek, drew massive support by allowing users to invest in cryptocurrencies. FlySpaces, another homegrown company, is now Southeast Asia’s leading provider of serviced office and co-working spaces, with locations all over the region. Similarly, Edukasyon.ph is now one of the fastest growing ASEAN-based education technology start-ups, with over one million monthly users covering more than 40 percent of Filipino students with internet access.

“The Philippines has incredible potential to be a leading start-up hub,” said Katrina Chan, Director of QBO Innovation Hub, a public-private initiative supported by the Department of Science and Technology, Department of Trade and Industry, IdeaSpace, and J.P. Morgan. “We are starting to see more elements come into place — increased investment activity, growing public -private support, rising interest in entrepreneurship — which makes me believe that the Philippines can live up to its promise and… rival the biggest names in the region in the next few years.”

Whether homegrown or foreign, start-ups are thriving in the Philippines and, in turn, the community is helping the Philippines thrive. But in order to understand how to best bolster that growth, it’s important to first understand what exactly that community looks like.

THE START-UP ECOSYSTEM
Pop culture is saturated with hero stories of visionaries reshaping entire industries with their revolutionary ideas. One imagines the founder leading a scrappy team of developers, bootstrapping their projects out of garages and studio apartments. While the reality of start-ups in the Philippines is not nearly as romantic, it is, at least, infinitely more interesting.

Today, there are at least 20 major incubators and accelerators offering mentorship and seed funding opportunities to start-ups in metropolitan cities across the country. Additionally, there are at least 30 angel investor and venture capitalist groups actively seeking new Filipino start-ups to fund and help scale.

And it doesn’t stop there. Many schools have launched their own business accelerator programs, to complement their management and entrepreneurship curriculums. Institutions like Ateneo de Manila University and the Asian Institute of Management boast robust accelerators, while modern schools like MINT College connect their students to the start-up world through partnerships with global networks like Impact Hub.

As with any major societal venture, the government plays a key role in creating the scaffolding against which entirely new industries are being built. Earlier this year in May, the Senate passed on third and final reading the Innovative Start-up Act, which aims to create a more conducive environment for start-ups to grow in the country.

“These are start-ups that provide unique and relevant solutions to our problems, from daily hassles, like finding a taxi during rush hour, to improving the delivery of healthcare, providing support for our farmers, and addressing unemployment,” said Senator Paolo Benigno “Bam” Aquino IV, the bill’s primary author. Under this act, start-up founders can expect tax breaks and expedited processes for securing business permits and certifications.

According to the Senate, the measure also includes a provision for the establishment of a P10 billion “Innovative Start-up Venture Fund” that entrepreneurs can apply for through the Department of Science and Technology.

Elsewhere in the executive branch, start-ups have found even more direct partners in offices such as the Department of Trade and Industry and the Department of Information and Communications Technology. Through their affiliate agencies both national and local, these departments have created innovation centers, competitions, workshop programs, and grassroots projects all directed towards equipping Filipinos with the tools needed to respond to the nation’s needs through entrepreneurship.

A COMMUNITY EFFORT
While the self-organizing founders of the local start-up scene have benefited greatly from academic and government support, it’s in strategic and funding partnerships with corporations that many of these founders have been able to take their businesses to the next level.

“Corporations really want to work with start-ups,” said Minette Navarete, vice chairman and president of Kickstart Ventures. Kickstart Ventures is one of the country’s leading venture capital firms, a subsidiary of Globe Telecom backed by Ayala Corporation and SingTel.

According to Ms. Navarete, large corporations benefit from the creativity and excitement that start-ups bring to the table. Whereas corporations like Globe Telecom and Ayala have the resources to fund large ventures, start-ups are agile enough to develop and scale solutions at a pace traditional firms just can’t keep up with. Far from the narrative of disruptor versus disrupted, corporations in the Philippines play a vital role in creating spaces for start-ups to flourish.

Building the Philippine start-up community is a tripartite effort that calls on the government, the academe, and private institutions across the spectrum to work together in unprecedented new ways. To pull that off requires no shortage of creativity and open-mindedness — a paradigm shift towards collaboration that, if properly structured, could see not only the start-up community, but the nation as a whole, flourish.

In choosing to expand into the Philippines, Zipline’s founder Keller Rinaudo echoed what many start-ups have already known about the local ecosystem. It’s not just the wealth of opportunity that firms like his can capitalize on, but the spirit of collaboration that permeates every facet of the local start-up community.

With the government’s scaffolding of legislative and executive support, the academe’s thrust towards equipping the next generation of business leaders with the business and tech know-how to thrive, and the entrepreneurial spirit that drives Filipino founders forward into the fourth industrial revolution, it’s no wonder why firms across the globe have their eyes on the Philippines.

“Many people think the next big technological applications of our time will come out of places like Japan or the United States,” Zipline’s Mr. Rinaudo said. “But it’s precisely the [countries] that embrace innovation that end up leapfrogging ahead of even developed nations.”