The pandemic fast-tracked technology adoption but the total value of the investments declined in 2023, due to a weaker global economy.

The Philippines posted a record number of 96 venture capital deals in 2023, a 16% rise from the previous year. In its Philippine Venture Capital Report, Boston Consulting Group and Foxmont Capital Partners attributed the increase to the entry of more international investors making their maiden investments in the country.

However total deal value declined by 14% at $956 million, as average deal size became smaller, shrinking to $10 million from $13.4 million in 2022. But the report said, this is not a cause for worry. The Philippines still performed much better than the region, and showed its resilience despite a slower global economy. South East Asia experienced a 62% plunge in venture capital deals, with Indonesia and Singapore registering the biggest drops at 68% and 73% respectively.

Apart from its comparatively better performance, the country has also been enjoying a steady increase in its share of venture capital funds. Its share in South East Asia has improved to 13% in 2023, from just 5% in 2021.

Fin Tech, E-Commerce, and Business to Business Software As a Service (SaaS) sectors are getting the most interest.  The report explained that the Philippine startup ecosystem has significantly developed, thanks to the combination of digitalization [which was fast tracked by the pandemic], and proactive government support. “The post-pandemic era has ushered in a new wave of innovation, positioning the country as a vibrant hub for entrepreneurial ventures in the digital age,” the report explained.

Resilient Economy and Young Population

The report also credited the favorable reception towards the Philippines to three main factors: Strong domestic growth, a growing population, and a younger median age. The Philippines posted a Gross Domestic Product (GDP) Rate of 5.6% in 2023, the highest among major nations in South East Asia. The country also registered fertility rates above the global and regional averages, and a median age of 24.5 years old, versus the global average of 30 years old.

The study emphasized, that the Philippines reached significant milestones in recent years, especially during the pandemic. The country achieved a 72% internet penetration, and a smartphone penetration of 67%. The population’s growing openness in adopting technological solutions is seen in the growing number of Gcash users, which ballooned to 86 million in 2023, from just 20 million in 2019. Even sari-sari stores are embracing technology. The report mentioned companies like Peddlr, Growsari, and Pachworks, as some of the companies offering technology solutions, especially for this culturally ingrained microenterprise.

 According to the study, “The Philippines emerged as the fastest-growing digital economy among ASEAN member-states in 2021, sparking a wave of startups eager to capitalize on the digital market.” This interest attracted regional funds that have continued to support the country’s technological growth at present.

The study noted that the country is poised for substantial growth and encouraged, that the industry look at the example and best practices of more technologically advanced neighbors such as China, Indonesia, and India, to empower more Filipinos to adopt technology faster.  “The post-pandemic era has ushered in a new wave of innovation, positioning the country as a vibrant hub for entrepreneurial ventures in the digital age,” it said.