Can the Philippines Breed Camels Instead of Unicorns?

Gobi Partners
9 min readNov 20, 2020

For the last decade, experts have called Southeast Asia the next big playground for startups. Home to more than 655 million people, most of whom are young, productive, and looking to spend — pundits have certainly enough reason to believe so. In the process, the region produced 11 unicorns, two of which are almost at decacorn status.

Still, few have exited, or have gone public as their neighbor Chinese unicorns have, that some worry the region may be creating a multi-billion bubble. In the latest Tech In Asia 2020 Report for the region, investors have expressed uneasiness on the almost decade-long non-profitability of the region’s unicorns. As the report said: “Exits are also a crucial part of any healthy startup ecosystem, as they are the validation of a growing, investable market.”

Even those who may not have reached the coveted billion-dollar valuation have hardly turned a profit. Startup IPOs are less than 50, while M&A deals are few and far between.

The trend begs the question — is the region championing the wrong measurement of success?

In the Philippines, the last big exit was GoJek’s acquisition of in the first quarter of 2019 for about $70 million. In the latest Philippine Startup Survey of global consulting firm PwC (PricewaterhouseCoopers), it was revealed that seven out of 10 startups in the country are either in the pre-revenue phase or earning less than P2 million ($40,000). But as one of the last countries in the region yet to produce a unicorn, the Philippines may take this trend, not as a glaring warning light, but an encouraging nudge in a new, enlightened direction.

Vie for ‘camels’ not unicorns
The country may heed the growing sentiment of a new crop of investors in Silicon Valley who advocate for startups to think not as unicorns, but as camels.

“Camels are able to survive for long periods without sustenance, withstand the scorching desert heat, and adapt to extreme variations in climate… These startup camels offer businesses in all industries and sectors valuable lessons on how to survive through crisis, and to sustain and grow in adverse conditions, even if the metaphor isn’t as flashy,” said Alex Lazarow, a global investor in a column at the Harvard Business Review.

Lazarow, an investment director at global VC firm Cathay Capital, coined the term just when global unicorns started tightening their belts in April, at the start of the pandemic, in a bid to “optimize operations” resulting in massive layoffs.

While the term has not quite taken off just yet, the underlying principle behind it — to build long-lasting startups over overvalued ones — is a sentiment that has been incubating in the minds of investors even in Southeast Asia.

“The goal [of startup ecosystems] should never be to build unicorns. The goal is to solve a problem,” said Thomas Tsao, co-founder of Asian VC giant Gobi Partners. “The valuation [of a startup] is only a byproduct of how effective your solution is vis-a-vis the problem.”

Biggest independent VC fund in the Philippines / Building a pioneering Filipino-focused fund

This principle is what is guiding Tsao as Gobi, along with young Philippine-based VC Core Capital, builds up the $10-million Gobi-Core Philippine Fund.

Launched in 2018, it is one of the largest independent VC funds to come out of the country in a while. Tsao said the Philippines reminds him of how China was in the early 2000s, fraught with infrastructure challenges but filled with hungry, entrepreneurial citizens.

“From my experience in China, it’s evident that there is no better way to empower a country than to unleash the power of local entrepreneurs. That’s what we saw happen in China. They showed innovation and entrepreneurship are not monopolized in Silicon Valley,” Tsao added.

Gobi launched a China-focused fund in 2008, amid a global financial crisis and was one of the first to bet on the country that most thought was only good in creating copycat startups. Still, Gobi came out a winner as one of the biggest digital startups it invested in received a buy-out offer in less than four years.

The VC hopes to recreate this success in the young, nascent startup ecosystem of the Philippines, and once again, with a crisis amid its way. The only difference this time — the firm is coming out more optimistic than its first run-in with a global recession.

“Even before the pandemic, the Philippines was already ripe for development. But with the crisis, massive changes are imminent, as the pandemic only helped speed-up the market’s reception for innovation. More are embracing digital solutions and services,” Kay-Mok Ku, Managing Partner for Gobi Southeast Asia, added.

Renewed focus amid the pandemic
The latest e-Conomy SEA report of Google and Temasek revealed 95 percent of new online service users in the Philippines — those who only used app or online-based services for the first time during the pandemic — are planning to continue to do so even after the worst is over. Most of the new users also reside outside of the metropolis, signifying that digital services are no longer just common in urban cities where the Internet is almost always available.

Perhaps the best example to prove the country’s accelerated digital adoption is the local market’s wide acceptance of virtual money.

The latest e-Conomy SEA report of Google and Temasek revealed 95 percent of new online service users in the Philippines — those who only used app or online-based services for the first time during the pandemic — are planning to continue to do so even after the worst is over. Most of the new users also reside outside of the metropolis, signifying that digital services are no longer just common in urban cities where the Internet is almost always available.

Perhaps the best example to prove the country’s accelerated digital adoption is the local market’s wide acceptance of virtual money.

The biggest winners to come out of the country’s startup ecosystem in the past year are its two leading e-wallets, PayMaya and GCash, both of which are supported by Chinese tech giants, Tencent, and Ant Financial Group. In October, GCash said the firm is expected to surpass the P1-trillion mark for the total amount of transactions processed through its service. For a country that loves cash — less than half of the adult population save through banks — the acceptance of these e-wallets is truly a success story.

Smaller startups have shown encouraging gains in their industries too.

Newer, more recent startups like PayMongo and Kumu, have reported accelerated growth in their operations, with the latter doubling its user base from the start of the year to more than five million by October.

Insuretech Maria Health, one of the first licensed online insurance aggregators with a 100% focus on health insurance, has seen a five-fold increase in insurance uptake during the pandemic.

Health app Aide which consolidated hospital services in a single app has seen a 600 percent growth in service requests.

Meanwhile, long-established firms like have seen its business model thrive amid the crisis with its platform’s user engagement doubling in the past year. That they attracted more students during the pandemic underscored the need for a platform like theirs, in the increasingly digital world.

The sudden rapid growth of healthtech and edutech startups are not exclusive in the Philippines. The two industries have been dubbed the newest frontiers in the regional startup scene by the e-Conomy SEA report as the adoption of technologies offered by the two have tripled and quadrupled respectively in the region.

If anything, the past year has become a reality check, that startups need not just hype about the amount of funding they have raised. And that those that provide essential, if not, marketable products and services will be the ones to remain in the space.

So it’s no surprise that these days, as the aforementioned report has echoed, investors are looking for “sustainable, profitable growth.”

Shaping startup culture
And with how startups are moving at the moment in the Philippines, the country may rise not to be a home of unicorns, but of camels instead. But for this momentum to continue, key players in the community have to commit and show up to lay the groundwork for startups to excel.

First and foremost would be government response.

The country’s Science and Trade departments have launched several initiatives from recent years, taking cues from neighbors like Singapore and Indonesia which have shown government support can make or break a startup community’s lifespan.

Perhaps one of the biggest government endeavors for the community is the formation of QBO, a private-public incubator that has supported a slew of startups in its four-year reign. It has spearheaded surveys contextualizing the ecosystem, staged seminars, and events to raise awareness for the community, and have become the government’s ears and eyes on the ground as they bridge entrepreneurs with policymakers.

Other government projects like the Science department’s startup grants have also been constant for almost a decade, as agency provides seed funding and other technical support for up-and-coming startups.

Still, all eyes at the moment are on how the Startup Law’s provisions are going to be realized. A year after it has been made into law, there has been little progress on its implementation, no thanks to the COVID-19 pandemic setting back the government.

But once the country eases into the new normal, community stakeholders will be on the lookout for the Startup Law’s provisions as the policy is set to be one of the most impactful to the startup ecosystem in recent memory.

Meanwhile, the moves of incubators, angel investors, and local VCs will also prove to be crucial in shaping the community’s culture. That most are found to look for sustainable business models is a good sign that it isn’t just looking to create a bubble. Still, talk is cheap. The next thing to watch out for is if they put money where their mouth is.

There’s plenty of reasons to be optimistic though.

At the moment, some of the most active names in the space like QBO, Kickstart, Brainsparks, and Gobi-Core, are backed by people who have long been entrenched in the community. They know, firsthand, what kind of support founders would need, more than funding. The aforementioned VCs, for example, have most of their local startups invested in either already turning profit, or on the cusp of.

Some of the biggest startups at the moment like Kumu, have also demonstrated that the success of consumer startups need not be measured by the number of users, but in other more crucial factors, like profitability. Kumu founder Roland Ros says the startup is already near breakeven — amid a pandemic!

It echoes what Gobi’s local partners, Core Capital have shared about the crucial role of big movers like investors play in a nascent startup community: that what giants celebrate have a ripple effect even to the smallest players.

“When we launched, we realized we now have a role in building the culture of the startup scene in the Philippines… And we hope that when entrepreneurs find out the existence of investors like us, they’ll know there is someone who funds businesses that are trying to solve basic questions for the market. They may not give the biggest returns, but if it works, it’s still worth it,” Core Capital Managing Partner Ken Ngo said.

If more investors and founders champion the same values, the Philippine startup community may find itself not only with a working ecosystem but one that builds long-lasting businesses. We may not be ready for unicorns, but with the Filipinos’ ingenuity, resilience, and diskarte — camels may be what we will find.

About Gobi Partners
Gobi Partners is one of the longest-standing venture capital firms with a Pan-Asian presence across North Asia, South Asia, and ASEAN with over US$1.1 billion in assets under management (AUM). The firm, headquartered in Kuala Lumpur and Shanghai, supports entrepreneurs from the early to growth stages and focuses on emerging and underserved markets.

Founded in 2002, Gobi has raised 13 funds to date, invested in over 270 startups and has grown to twelve locations across Bangkok, Beijing, Ho Chi Minh City, Hong Kong, Jakarta, Karachi, Kuala Lumpur, Lahore, Manila, Riyadh, Shanghai, and Singapore.

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