Building a startup in a developing country: The pitfalls and opportunities

The Internet has completely changed the landscape of entrepreneurship and perhaps the ones most affected by this are the startups. Being a startup can be fun and rewarding but it also entails countless challenges.

For Internet and tech startups, there is no place like Silicon Valley, the leading hub for high-tech innovation and development in the US. It’s like the Neverland of tech entrepreneurs where there exists a robust, active community of early adopters and a healthy pool of investors ready to pour cash into promising companies that could potentially be the next big thing. Unfortunately, not all startups have the luxury of being in Silicon Valley. Fortunately for these companies, not all startups have to be from Silicon Valley to be successful.

In the spotlight: The Philippine startup scene

We’ve heard of tons of successful startups from countries like US and Europe, but we’ve barely heard of any success stories from developing countries. That doesn’t necessarily mean there aren’t any. An interesting country to dig deeper into would be the Philippines, which some might not have even heard of, but in fact has a very Internet and mobile-savvy population.

So what’s it like being a startup from a developing country? Well, they’re definitely missing out on all the comforts such as seed funding, collaborative work spaces, access to a mentor base, VCs and Angels, dedicated business training, as well as visibility via networking and pitch events.

To be quite frank, the startup ‘scene’ in the Philippines is almost bordering nonexistent, considering the size and reach of its niche. They’re definitely lacking the right kind of leadership and exposure to gain attention from the rest of the world. It’s a shame, because it’s a country rich with talent and unique ideas but local startups often fail to launch due to the unfavorable circumstances of growing in a resistive environment. I don’t mean to undermine Filipino startups at large, in fact there are a few that stand out – and one in particular has caught my attention.

I spoke to Eric Su, co-founder and developer of PicLyf, a visual-content focused publishing platform – or picture blogging, if you will. The company is a small group of Internet geeks-slash-entrepreneurs based in the Philippines, who have endured countless challenges, and is now on its way to success.

The Filipino startup community

I first asked Eric about the startup community in the Philippines, which he told me is very fragmented. There are a bunch of folks in Manila who are trying to sustain one with regular meetups like Roofcamp, and blogs like StartupPhilippines.com. The city of Cebu is also undergoing a fantastic birth of one, mainly through the efforts of Caresharing co-founder, Marc Buenconsejo, and his wife Rose, who is also the editor of Techboba.com. There are actually some fantastic startups like InSync, Infinite.ly and Cashcashpinoy but the problem is that most of these Filipino founders aren’t actively helping foster a community.

When it comes to the government, there are hardly any initiatives – if at all- that support the industry. It doesn’t come as a surprise because it’s common for developing countries to have more pressing issues for the government to address. So, that’s out of the question as well.

When it comes to investors, Eric shares that most of the few that there are only invest in late-stage startups – they don’t risk investing in fresh ideas. So, most are forced to bootstrap, which prevents them from generating a big bang that creates an impact.

“Almost all the initiatives related to startups you see in the Philippines are in fact driven by a selfish ulterior motive,” he said. “You don’t see that personal, sincere drive to help fellow entrepreneurs like in Silicon Valley which is i think is one of the core ingredients to make a high value innovation hub.”

Being a startup in a “harsh environment”

I asked Eric what’s it like being a startup in the Philippines, and he answered:

Being a startup in the Philippines is just like what I imagine a startup in Silicon Valley would be like except you get ALL the comforts and advantages stripped away. Besides missing the obvious things like venture capital & angel investors, you are also missing a healthy pool of early adopters or people who support startups, as well as key hires with built-in technical expertise.

This ultimately means that startups in countries with nascent communities, such as the Philippines, are substantially harder to manage. It’s a huge disadvantage compared to the scene in nearby Southeast Asian countries like Singapore, which already has a good number of angels and early stage funds in their startup ecosystem and a government that openly, and demonstrably supports scalable tech ventures with grants and friction-reducing initiatives.

Location matters but it’s not everything

Eric thinks, however, that these constraints could also be used to a startup’s advantage.

I happen to think the constraints help shape startups into something unlike the world has ever seen before if they are not killed by the harsh climate first.

True enough, despite these unfavorable conditions, PicLyf was able to take off. In fact, it will be representing the country in the upcoming launchpad for Asian startups – Echelon 2011. For a startup that had to endure the challenges of surviving in the “harsh conditions” of a developing country, it’s quite impressive.

I asked him what their secret of success is and he answered:

By just not dying. We have been near-death more times than I care to remember. We’ve had a lot of adventure at every corner – from constant blackouts, 1 week cash in the bank, people who wasted our time, and bad hires. Luckily, we have a small group of early users who have carried us through the tough times.

One thing that is vital in PicLyf’s success is the optimism and persistence of its founders to transcend the given constraints and see them as opportunities. Starting up in a developing country can also mean cost effective manpower and operational expenses, not to mentions lots of chances for new products to be introduced because of the maturing market and unsaturated industry. PicLyf was able to capitalize on these.

It’s definitely a challenge because Filipino startups are forced to see things in a global perspective from the get-go. Unlike China, which is fond of the ‘copy now, innovate later’ strategy for local startups, it wouldn’t be viable for Philippine startups to use that strategy because the market of local tech consumers hasn’t quite hit the point where it’s sustainable on its own.

Tips for Aspiring Filipino Startups

Here are some of Eric’s tips and words of wisdom for aspiring Filipino startups:

Basically, plan everything around your survival first and foremost. This might mean bootstrapping, part-timing the startup or better if you can, bake the business model in so well that it’s profitable on day one. The only reliable sources of funding you can rely on here would be from your friends/family or customers.

Do factor in training and retaining teammates (aka early employees). Optimize for cash compensation right away and don’t expect hires to value equity. Tailor your technical choices to the local skill pool to minimize hiring risk and lastly, and most importantly, have fun and be sure that being in startup is what you want.

It may not be a huge feat — especially for people who are used to the exposure of international media and big time investors — but PicLyf’s success can be seen as a huge step for the local tech industry in the Philippines. Hopefully, it brings new hope to aspiring developers to believe that it is actually doable and also, a call for tech influencers in the country to take the initiative in forming a solid local tech startup community.

A startup’s location or birthplace can indeed play a huge role in its success but at the end of the day, it’s all about delivering a good product, which should be the end goal of startups in the first place – regardless of location.