MANILA -- Funding for companies in the digital economy in the Philippines has dropped substantially in the first half of 2023, according to a report from tech giant Google released on Tuesday.
In their e-Conomy Southeast Asia 2023 Report, Google said investments in the Philippine digital economy reached $800 million in the first half of 2022.
But from January to June 2023, only $200 million in funding reached Philippine tech businesses, the tech giant said.
Bennett Aquino of Bain and Company, which helped Google come up with their report, said this is happening across Southeast Asia.
"Part of the reason why private funding has slowed down, is in reality because of this macroeconomic environment there’s a little bit of a mismatch on what private companies and investors see as valuation," he said.
"So the companies and the shareholders, they’re stuck on the realities of 18 months ago where they said, 'Okay, my company was earning a valuation of this much, hence I can get a value on this much.' Investors don’t see that reality, right?"
"Investors see the reality of this high interest rate environment, global macroeconomic, wars, Israel, the realities are just different," he explained.
"Even though Southeast Asia is a bright spot when it comes to high growth, fundamentals, the factors of high interest rates, high growth, geopolitical tensions and more, Southeast Asia’s not immune to that," he lamented.
Aquino also said there has been a slowdown in firm origination and due diligence activity.
"So as an investor even if I really wanted to put money into a company, there’s just a shorter list, at least this year, of potential companies looking for funding or potentially looking to raise money."
He also noted that even investors are struggling with fundraising and that 88 percent of can't get their money out.
Aquino said that funds that started in the mid-2010s are now in the late stages of harvesting, putting pressure on companies to deliver returns.
“The people at this stage that we talked to, they only partially recouped their funds, or they haven’t recouped it at all. They haven’t found an exit path at all," he said.
"If investors and funds cannot find an exit path for their money, they would be very very discouraged from raising more money and funding new startups. So if they feel like they’re money will be stuck, they’re not gonna raise money and startups and digital companies will not get more funding that they need to grow in the digital economy," he explained.
Nikki Del Gallego, Google Philippines Country Data and Insights Lead, said the Philippines must go beyond mere digital inclusion to boost the country's digital economy.
"So if you think about the 100 million people in the Philippines, right here is where we’re at if we’re talking about digital inclusion. Just having access. But where it becomes more critical is if they’re really participating in the sectors that we have seen today. Are they consumers in their own right, of digital services?" she asked.
“Usage is one thing, but having transactions, spending on it, and having goods and services through digital is another big space for us to win over," she added.
The Philippine digital economy is seen to reach up to $150 billion by 2030 on the back of growth in the e-commerce space, Google said.
E-commerce may grow to about $60 billion by 2030.