One of the significant achievements of Davao Startup Week 2024 was the launching of the Davao Angel Investors Network (DAIN) on September 30 at Seda Abreeza Hotel.
Yes, we have angel investors here in Davao and they see a lot of potential in our local startups. Some of them have even relocated from overseas to be based here in Davao where, according to them, great opportunities are.
Investopedia defines an angel investor as “an early-stage investor in a startup.” They provide the initial seed money usually in exchange for ownership equity in the business.
There are different types of angel investors. There are the professional ones who are involved in multiple startup projects at once. There are the family and friends of the startup founders who believe in their business ideas and want to support them. Others can be wealthy individuals who are looking for a higher rate of return than can be found in more traditional investment opportunities.
Startups, by nature, are risky because they are innovations that are usually unproven in the market. Angel investors are therefore putting money into an idea that remains untested. Their reward comes when the business takes off. But if it fails, they do not get their investment back.
That is why they are called angels. They must have faith that the business idea will succeed.
Example of successful startups are Uber, AirBnB, and Bytedance (TikTok). Their angel investors are reaping great rewards for believing in their idea.
I am happy to note that most of the Davao startups I have encountered are not just innovative, they are also committed to promoting social good. And I am even happier to discover that the angel investors we are attracting here are those who are engaged in impact investing.
Impact investing is investing with the intention of generating positive social impact while generating financial returns.
One such impact investor is Priya Thachadi, co-founder and CEO of Villgro Philippines. I met Priya during the Davao Investors Mixer last month. Villgro funds, mentors and nurtures early stage enterprises that are building innovative solutions to transform the lives of the poor and marginalized.
Priya shared that impact investments in Southeast Asia have significantly increased in recent years. Compared to only $11.3 billion for a nine-year period from 2007-2016, it has now reached $6.9 billion in just a two-year period from 2020-2022 (despite the pandemic).
Another notable development is the growing startup investment in female founders in Southeast Asia in 2023. A total equity funding of $1.41 billion was secured by startups with at least one female founder. This represents 18.4 percent share from the total funding in Southeast Asia in 2023 compared to just 12.6 percent in 2022. I hope this trend of investing in women more seriously grows exponentially.
In 2023, the Philippines raised a total of $690 million in startup funding, a decrease of 14 percent from 2022, but a record year in deal size with an average of $10 million per deal.
What kind of startups attract angel investors? Usually they are from the tech industry such as financial technology (fintech), enterprise software, and hardware. However, by 2021, probably because of the global health crisis brought about by the pandemic, businesses related to health and life sciences have overtaken traditional tech investments.
Emerging growth sectors in the Philippines are in Cleantech and Agritech. This shift from hyper growth startups to sustainable ventures demonstrates that our startup ecosystem is beginning to mature and is in “the middle of a breakthrough in digital adoption.”
Key factors for growth in digital adoption cited by the Philippine Venture Capital Report 2024 by Foxmont and BCG include: (1) market demand due to pandemic; (2) global market expansion and investor interest; (3) technological breakthroughs; and (4) supportive government policies.
Based on a survey conducted by GobiCore PH Fund, majority of startups were self-funded (47.1 percent) and others received their first funding from angel investors (34.85 percent). Most tech startups received their venture funding from overseas and in 2021, 12 percent of total foreign-sourced investment in the Philippines went to startups.
Banks are not the preferred source of funds for startups because most banks look for stability and predictability instead of potential for growth of new businesses with innovative ideas.
That is why angel investors are needed so these startups can experiment, develop, and grow.
According to Priya, there are more than 3,000 impact enterprises in the Philippines now with great potential but are struggling to scale up.
Anybody can be an angel investor for as long as you have the resources (not just money) and the desire to support innovative business ideas.
In Davao City, we are exploring innovative ways to finance and nurture startups. One such way is by tapping cooperatives to be angel investors and partners in the growth of impact enterprises. Leading the way is the Golden Unicorn Savings and Credit Cooperative (GUSCC), a cooperative organized at the height of the Covid-19 pandemic to help micro and small enterprises with their financing needs. It is a proud member of DAIN.
GUSCC’s founders (full disclosure: I am one of them) are committed to impact investing and the cooperative is setting up an investment fund to help finance startups in Davao region.
Philippine Disaster Resilience Foundation (PDRF) Executive Director Veronica Tolentino-Gabaldon, also a GUSCC member, joined DAIN, too, and is encouraging startups that will develop innovative solutions for disaster response in the grassroots level.
Jonathan Traya, founder and CEO of Negosyo TAYO and a GUSCC member, has developed a local food cart franchise business showcasing innovative recipes inspired by Davao’s indigenous communities. He has also joined DAIN and is nurturing local startup entrepreneurs, especially among the youth.
Our community is growing and we need more angel investors for our local startups. Join us. We need more Davaoeños investing in fellow Davaoeños.
