Short of financing, startups turn to IPO

Survey finding

Filipino startups are confident and optimistic to scale up operations with majority setting their sights to go public (initial public offering) and expand overseas over the next five years, but are hounded by the lack of capital.

The 2017 Philippine Startup Survey, the first startup study in the country conducted by Isla Lipana & Co./PwC Philippines showed that 95 percent of 106 respondents out of 200 active startups intend to expand overseas initially in the ASEAN region in the next five years.

A majority of 63 percent of startups also planned to list in the stock market in the next five to seven years in the within five years.

This capital raising objective is related to the startups’ concern on the lack of capital. Survey results showed 88 percent of respondents are financially challenged. The other top two challenges among startups are regulatory requirements (54 %) and general economic/business conditions (50 percent).

For instance, 63 percent of respondents want to raise equity financing to finance their growth. A total of 94 percent said they are ready to welcome investors in the next three years.

Alex Cabrera, chairman and senior partner of Isla Lipana. & co/PwC Philippines, said “financing is a challenge constantly hounding startups.”

But Cabrera also noted that startups are not just looking for someone willing to invest with their money “but someone who can be a strategic partner.”

The startups said they are going to spend the money for product development (39%), marketing initiatives (29%) and hiring more talent (15%).

Strategies for growth in the next three to five years are to improve existing products or services (84%), introduce new products or services (79%), and enter new territories outside the Philippines (61%). Some 63% are planning to conduct an IPO in the next five to seven years.

Some 95% are planning to enter new territories in the next five years.

New markets to tap are other areas in the Philippines (56%), Indonesia (59%), Thailand (57%), Malaysia (55%), and Vietnam (52%).

To help startups build sustainable businesses, the top focus areas for improvement are tax incentives for startups (59%), ease of doing business (59%), and access to capital (55%). (BMC)