Kickstart Ventures Inc., the country’s most active venture capital firm based in Makati City, is working with a $200-million (P10-billion) fund to nurture promising technology “unicorns” and help innovative companies grow into regional players across Southeast Asia.
“There is a 650-million person opportunity out there [Southeast Asia]. We would like to see more Philippine companies thinking about the unmet needs across Southeast Asia, rather than just the Philippines. We would love to see more ambition from them,” Joan Yao, vice president for investments of Kickstart Ventures, says in an interview at the company’s headquarters along Paseo de Roxas in Makati City.
Kickstart, a wholly-owned subsidiary of Globe Telecom and backed by SingTel and Ayala Corp., invests in early- to early-growth stage tech startups globally. It puts in capital, market access and expertise in exchange of equity in start-ups anywhere in the world.
Since it was established with a $2.4-million seed fund in 2012, Kickstart has helped 42 companies around the world, including 30 in the Philippines. It exited mobile wallet platform Coins.ph when the latter was acquired by Indonesian company Go-Jek in January 2019.
“We have been around since 2012, investing into early-stage companies here in the Philippines, in particular with start-ups dealing with tech and digital, bringing things from offline to online, taking advantage of the movement of things to the Internet, to mobile and those kinds of trends,” says Yao, who previously worked as an investment manager for Southeast Asia at a European global impact investing firm and as a consultant of the Department of Trade and Industry where she advised on policies and programs related to MSME development, tech startups, inclusive business and social enterprise.
In 2015, Globe infused another $50 million into Kickstart. “We used that to invest $1 million to $5 million per companies anywhere around the world. We started investing in the US, Canada, Israel and also regionally—in Singapore, Indonesia and Malaysia,” says Yao.
Aside from Coins.ph, Kickstart’s investment portfolio includes the likes of Toronto-based startup Wattpad, Indonesia’s C88, Singapore’s iVideoSmart, Asian online fashion store Zalora and the Philippines’ InnoVantage Inc. (Aiah), Zap, Sprout, Kalibrr and ZipMatch.
In 2019, Ayala Corp., one of the major shareholders of Globe, announced that it would work with Kickstart Ventures by allocating $150 million in venture capital initiatives.
Kickstart is seeking companies that offer innovative, scalable and sustainable solutions for the Ayala Corp. Technology Innovation Venture or the ACTIVE Fund. It is interested in areas such as enterprise solutions, data and analytics, machine learning, artificial intelligence, augmented reality, internet of things, cloud computing, financial technology, electronic commerce, payments, logistics, customer service, automation, transport, energy solutions and water and waste management.
Yao says ACTIVE Fund is looking at supporting companies in their Series A, Series B and Series C funding rounds in their quest to become regional or global players.
“The focus of the ACTIVE Fund is global. The fund would look at Series A to C companies and would write checks of $2 million to $10 million with the first investment likely in the second quarter of 2020,” says Yao, referring to the ACTIVE Fund which will soon be deployed.
She says ACTIVE Fund has four key investment themes including “frictionless future”, “automation to augmentation”, “smart living” and “world of plenty”.
“It is about the four futures that our country and the world are moving towards,” says Yao. “We look at how solutions would make enterprises or companies run better with less paperwork or more things available quickly,” she says.
“It is also about things that will improve our experience as residents or citizens,” she says.
Bit Santos, portfolio operations director of Kickstart, says it is also about “how can we improve our quality of life in the spaces that we live in.”
“These can be technologies that help us navigate and interact with the environment. It can also be new ways of constructing the infrastructure that we interact with, that we engage with on a daily basis,” says Santos who used to be the chief technology officer of online classified platform OLX Philippines.
Yao says ACTIVE Fund is also considering investments in solutions on how to create a more sustainable world. “We address themes around energy management, whether it is energy efficiency, energy storage solutions or waste and water management. We also started to look at interesting technologies like water purification,” she says.
Santos says these solutions may also be about addressing basic needs such as education. “There are many situations where the resource we are considering is not necessarily scarce, but not well distributed like water. In many ways, it is taking what is scarce to some and making sure it is plentiful to all,” he says.
“It builds off what we have been doing for the past seven years. Where our speciality has been is really in investing in early-stage companies, trying to use technology to improve how things are done. Historically, a lot of it has been in the digital space. What is new is we are now looking at broader applications of technology. We are looking at even some hardware, not just software type of solutions or solutions that bridge online and offline,” says Yao.
Yao says of the group’s current investment portfolio, two companies have the chance to exit in the next year or two. “With these companies, it really depends if they still want to keep growing,” she says.
On whether there are local companies that have the potential to become “unicorns” or technology companies with at least $1-billion valuation, Yao says this would depend on how fast the Philippine society will fully embrace digital technologies.
“We still need to see more Filipinos come online and really become comfortable in transacting online and build this digital economy. I’d like to see more Filipino consumers come online and transact digitally. Another thing is that these companies need to expand outside the Philippines. Many of Southeast Asia’s unicorns have come from Indonesia and Singapore, and Malaysia has Grab.
If Grab had stayed in Malaysia alone, maybe it would not have become like the unicorn it is today,” says Yao.
“Entrepreneurs who have unicorn aspirations need to look at Southeast Asia as a whole market, because that is 650 to 700 million people, rather than 100 million or so in the Philippines,” she says.
Yao says hundreds of companies approached Kickstart in 2019, representing an 85-percent increase in proposals compared to 2018. Many of these proposals are about financial technology, she says.
“We continue to be interested in enterprise solutions that help businesses do whatever they do better. We also look at many different solutions in the enterprise space. Media, content and advertising are super interesting. Healthcare continues to be an area of interest, given the new thrust of the ACTIVE Fund. Solutions in energy, water and waste management are also quite interesting. These are new areas for us. And smart living, we would love to see more in those spaces,” she says.
Yao says Kickstart prefers to take a minority stake in these companies. “For us, it is not about control. We invest in companies because we believe in the management team and what they want to do. Of course, we want to have a voice in the board, whether in the board seat or as observer. We want to be a part of the discussion, but for us, it is like we invest because we believe in the team. For us, it is empowering the team and opening opportunities for them through the introduction to Ayala Group of Companies. We’d like to see ourselves as a good platform or partner for business,” says Yao.
Santos says it is also important that the founders of the company have integrity and honesty. “At the end of the day, we really invest in the founders. Over the years, in the course of doing business, the business may change, the market may change, but the people will always be there. We need to work with these people,” says Santos.