Is it time to consider Philippines as an emerging center of startup innovation in Asia? Here’s the reasons

2023 was such a tough year for most venture businesses including startups.

It was harsh for Asia startup founders to endure last year with downturn of macroeconomic trend, decrease in venture capital etc.

(Reference : Venture capital market in Asia declines in 2024? Here's some data to understand the current status)

However, even though overall economic growth was under difficult conditions, the Philippines was on the front line to open up the startup innovation in the SEA market. 

The Philippines itself is rising as an emerging market. Its GDP growth was 5.6%P in 2023, which was the highest among major nations in the region. Population is increasing steadily and the median age of population is around 24.5, which is relatively young compared to other Asia countries like Indonesia, Vietnam, Singapore, South Korea etc.   

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In particular, startup innovation in the Philippines survived in 2023.

Even if the total volume of funds decreased from one of 2022, the deal volume of 4-quarter in 2023 flipped, surpassing the volume of the past 4 years.

Furthermore, the Philippine share of VC funds raised amongst SEA areas increased from 7%(2022) to 13%(2023), which means that startups in the Philippines are gaining ground relatively briskly.

As a cross-border expert, Kotaro Adachi, founder and CEO of TechShake, has emphasized that there are opportunities to expand the business in the SEA market including the Philippines for both international entrepreneurs and startup founders in the Philippines. 

Interestingly, Kotaro Adachi is a Japanese businessman who is serious on making a bridge between Japan, Philippines and the rest of the world.

He devoted his whole career to connecting foreign markets with business development, building communities. While doing so, he found unique touch points at the Philippines market and tried to open up the startup innovation to come along in and outside of this country for more than decade.

What brought him to be passionate about cross-border business between Japan, Philippines with global networks? What's behind the startup innovation of the Philippines?

Asia Tomorrow had a conversation with Kotaro Adachi about his journey across the globe, the challenges of TechShake and potentials for entrepreneurs to focus on the global market, especially counting on Japan, Philippines. 

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What I learn while selling office supplies from Japan to all over the world

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Q. Before starting working in the startup industry, traveling back and forth between Japan and the Philippines, what was your day job?

I previously worked for Officebusters, a company that sells used office supplies. Officebusters was founded in 2003, and it started out as a business to provide customers with affordable second-hand Japanese office supplies, given that Japanese products are high quality but expensive.  

When I was a student, my sister was studying in Moscow, Russia, and at that time Officebusters was exporting products to Russia. She asked me if I would be interested in joining the company. This led to me joining Officebusters in 2003 (3 months after the foundation of the company). 

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Q. You didn't start your career at a startup, which is interesting. What exactly did you do?

I started by selling used office equipment from Japan to Russia, and later took on the role of optimizing the supply chain by sourcing products from China. This allowed me to work globally, traveling between Russia, and China.

In 2006, I began building OfficeBusters' Philippines business from the ground up. For seven years, I built the brand by bringing Japanese office products to the Philippines. During my time in the Philippines, several  of my responsibilities were  business development, increasing retail outlets, and diversifying our products and sales channels. 

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Q. Of all the countries you've worked in, why did you choose the Philippines for over seven years?

Initially, I started doing research to explore the possibility of expanding into the Southeast Asian market. Back then, the Chinese economy was growing rapidly, (so) I anticipated that Southeast Asia would be a market with a lot of upside. I remember exploring various countries such as Indonesia, Taiwan, Malaysia, and Vietnam.

It was a challenge to open up new avenues for Japanese products in Southeast Asia. No matter how large the market was, there were regulations on imported and used goods, which made it difficult to enter the market. 

Among many Southeast Asian countries, the Philippines was the one that allowed used goods from Japan to be imported. That's why I came to the Philippines in 2006 and launched a new business. I partnered with LICA Group locally to explore the market potential of second-hand Japanese office equipment. 

In the beginning, I remember trying to figure out if there was a demand for second hand computers and copiers. We started from zero and grew steadily for seven years, eventually growing into a brand with 15 with 120 employees. It's not a typical startup story, but it fits into the 'venture business' category. 

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Why I started startup media business from the Philippines

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Q. I was wondering how you went from exporting used office supplies overseas to becoming a startup community builder and entrepreneur. What was the trigger?

While running OfficeBusters Philippines, I personally felt that I needed to study business further. So in 2013, I went to study abroad at IE Business School in Madrid, Spain. IE Business School is one of the most prestigious schools in Europe for entrepreneurship education. 

After completing my MBA program there for about two years, I took an internship at Pegasus Tech Ventures. Pegasus Tech Ventures is a global venture capital firm founded in Silicon Valley in 2011. 

I had the opportunity to attend an in-person event at TechCrunch, during a short stay in the U.S. The event was vibrant with the summer heat. I was impressed to see 400-500 founders and investors networking here and there. 

Then I noticed a long line of people on one side of the venue. When I asked them why they were standing in line, I got this response. 

‍"This is the line to exchange business cards with editors to get their stories featured in TechCrunch."

The editor told me that just by having your name and story featured in a prominent tech media outlet, you can increase your audience by 1000x or even 10,000x.

This business model of tech media creating a startup ecosystem through contests (events), content, etc. was fresh and interesting to me. Later, when I moved back to the Philippines, I took this concept as a vision for my new business. 

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Q. And that's how TechShake got started. 

That's right. So in 2014, there was a startup boom in the Philippines. Obviously, the number of startups was increasing. And with that, there was an upswing in startup incubation or VCs.

We realized that we needed to shine a light on these startups and identify opportunities for business or investment. That's why we started offering startup team interviews, acceleration, and events, as well as consulting and HR services. 

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Q. Can you tell us a bit more about TechShake's business model?

TechShake's strength is that we can act as a bridge between Southeast Asia, including the Philippines, and the world, including Japan. We help global enterprises access the Southeast Asian market, run startup acceleration programs in collaboration with the Japanese government and companies, or help them recruit talent locally. 

(Reference : TechShake) 

We have particularly focused our business on growing the innovation ecosystem in the Philippines. 

The Philippines still requires more venture capital, technology, and entrepreneurial talent. The reality is that the top 10% of talented people are choosing to go abroad instead of to the Philippines. It's a kind of "brain drain" for the Philippines.

TechShake has been trying to boost the Philippine entrepreneurship ecosystem to bring those talented people back to the country. 

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Q. I'd love to hear how TechShake is fostering the startup ecosystem specifically.

First of all, we've been hosting Ignite, a premium conference for startups since 2017, where we bring together entrepreneurs from around the world to pitch their businesses. We also do a lot of events and programs on the side to connect Philippine companies to overseas and international entities to the Philippines. 

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How to build the 'startup media business' from scratch

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Q. How did the Ignite conference get started? 

Ignite was commissioned by a Japanese consulting farm. Together with Dentsu, a Japanese creative agency, we decided to organize a pitching contest for entrepreneurs in the Philippines. Brainsparks joined us as a partner to incubate startups in the Philippines. 

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Q. It's unique that a Japanese company approached you to organize an innovation conference in the Philippines. 

Until then, there hasn't been a lot of space for Philippine entrepreneurs. For business networking, founders usually have to travel overseas to Singapore, Hong Kong, etc. in order to participate in business conferences. 

Even so, it's only something that 100-150 entrepreneurs can do. It means that too few people have access to quality information and networks. I viewed this as a significant problem (in terms of developing the economy by growing the business ecosystem). I recognized that we should try to run a global conference in Manila, Philippines. 

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Q. What has been the overall response to Ignite?

Ignite has done well as an event brand - we've grown from 500 attendees to 2000 in two years. We're seeing more than 1000 attendees for our online conferences. Influential figures like Ramon Lopez, former Secretary of Trade and Industry of the Philippines, have spoken at the event. 

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Q. With so many startup events around the world, what are the competitive advantages of Ignite?

First of all, I would like to emphasize that the Ignite brand is a 'premium business conference'. 

No matter how promising Southeast Asia is, I don't think you can contribute to the ecosystem if you can't create business opportunities at an event there.

That's why I emphasize the 'composition' of the participants who come to the conference. Ignite has centered on bringing real business decision-makers and practitioners to the event, including startup founders, VCs, and global corporations (looking for opportunities to collaborate with startups).

Secondly, Ignite is a place where Philippine and global players (including Japan) create business opportunities. For example, Japanese corporation Glico launched their Edtech product, Glicode, during the Ignite conference to expand into the Philippine market. 

Ignite also hosts many open innovation programs that bring together international enterprises and local startups.

For example, the global oil company Shell has introduced Shell LiveWIRE, a social investment program to support young entrepreneurs. Another program was a competition for Filipino, Indonesian, and Vietnamese startup founders to win prizes and the opportunity to collaborate with German company Merck Group.

We believe that this conference in Manila, Philippines is meaningful because it translates into real business impact. 

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Q. You seem to be putting a lot of effort into connecting global corporations with Southeast Asia, including the Philippines. 

In fact, we have more than 20 partners overseas. We've tried a number of programs that help startup entrepreneurs and assist them in expanding globally. 

For instance, we've worked with the Tokyo Metropolitan government to provide mentorship, events, and pitching sessions for Tokyo based startups  to tap into the outside Asian market.

Conversely, we've also built bridges for global companies to enter the Japanese market or connect with the Japanese innovation ecosystem (Global Acceleration Hub, J-Bridge Program, Plug and Play Japan).

And in partnership with Korean accelerator Y&Archer, we've organized an exchange between Filipino and Korean startups.

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Is it time to spotlight the SEA market for business and innovation?

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Q. TechShake aims to link Southeast Asia, including the Philippines, to the rest of the world. How do you foresee the future of the Southeast Asian market? 

ASEAN countries, especially the Philippines, Indonesia, and Vietnam, are growing rapidly, especially in terms of population growth.

In 2023, the Philippines is projected to have 130 million people. According to the United Nations, population growth in the Philippines will account for more than half of the world's population growth in 2050. Meanwhile, the Philippines' GDP is nearly three times larger than it was 20 years ago. 

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In this relatively buoyant economy and atmosphere, young people are at the center of the population, driving consumption and exerting their influence. 

Japan and South Korea are among the countries with shrinking populations.

While big cities like Tokyo may be fine for the time being, other parts of the country are facing depopulation issues. That's why businesses in shrinking societies have no choice but to go global. In the future, more startups and aspiring entrepreneurs will look for business opportunities in international markets. I expect Southeast Asia to be their main stage.

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Q. What are the biggest challenges for startups, entrepreneurs looking to enter Southeast Asia?

Regulations are probably the biggest challenge. Indonesia, for example, has tightened regulations on foreign companies.

They are very protective of their domestic market. Recently, they have imposed stricter restrictions that require foreign entities to have a minimum amount of capital to operate in the country. Despite the government's full support for economic growth, there is still a sense of prioritizing the domestic economy. 

This is the reason why it is essential to have a local partner when entering the Southeast Asian market, a trusted ally that has roots in the country and acts as a bridge between the global market and the home country.

If you're an entrepreneur looking to go global, you should start by learning how to network and build partnerships locally. That's actually why we see so much demand for TechShake. 

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Q. What are TechShake's plans for the future? 

The vision of TechShake is to connect the ASEAN region with the rest of the world. 

I think the two regions are still disconnected. I didn't know about the Philippines until my first visit 17 years ago. I was only familiar with political issues. But when I arrived in Manila, I noticed the youth and economic vitality. It completely changed my perception of the Philippines. I saw common misconceptions, my misunderstandings unraveled. 

My goal is to be a bridge person, to reach across these gaps and connect people. I believe that actors in this role are absolutely necessary to accelerate collaboration. 

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In order to create synergies between different countries, markets, and companies, we need to create a "circle of value".

Southeast Asian startups, including those from the Philippines, can visit Korea for business opportunities and tech talent. On the other hand, Korean companies can partner with Southeast Asian startups to grow their business. If value can be circulated in both directions, we expect the 'relationship' to change. 

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Q. What value can be exchanged between Southeast Asia and global partners?

Southeast Asia is in a unique environment where innovation and lack of infrastructure coexist. 

It's well known (as you may have heard) that people in Southeast Asia may not have a bank account, but they use digital wallet apps. This points to two things. One, the ASEAN market has a lot of room for innovation in the digital/mobile space. Two, there are still "social problems" that demand more investment in basic infrastructure like bank accounts. 

The Philippines still needs to improve and develop fundamental infrastructure, such as water facilities. I certainly perceive that there is a business opportunity for companies that solve these problems in developing countries.

Therefore, businesses of all types, from innovative tech startups to global corporations, can come to the ASEAN market. What they can solve, the opportunity for growth is here. 

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Q. Finally, what kind of entrepreneur do you want to be in the future?

I'm still working on my plans on a personal level. I have a long-term vision that I want to help Southeast Asian startups in general, as I've been contributing to the Philippine business ecosystem for a long time. At the same time, as a Japan-based entrepreneur, I want to contribute to Japan as well. I hope that TechShake can be successful as a business, but also contribute to the Asian market and society. 

The startup ecosystem is still on the path to greater potential. We need more talent, capital, and technology to encourage challenges. In that vein, I also have a personal interest in venture investing.

At the end of the day, I want to work in the "venture business" for the rest of my career. I love what I do now, and want to do more of it even as I grow older. 

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Written by Jinny (Underdogs)

UNDERDOGS ORIGINALS

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