Thursday, April 10, 2008 Start-up funds from government
THE need for start-up capital funds is the main problem why some potential business models remain unrealized for some entrepreneurs in the country, said a US-based Filipino venture capitalist.
Eric Manlunas, founder and managing director of the Frontera Group LLC that is based in California, said that it is not enough for the government and private sector to offer spaces and facilities to enable promising entrepreneurs to participate in global technology entrepreneurship, especially when the country already has the skills to offer.
These days, venture capitalists (VCs) are looking to fund start-up companies with products or solutions that are Internet-related or involved in clean technology, life sciences or biotechnology and software development, which the Filipinos have an advantage in, skill-wise, said Manlunas.
In fact, Cebu is home to a venture-backed software company, Morph Labs.
To address the lack of capital funding, Manlunas said that the “government and the private sectors need to invest in capital formation programs.” “And this needs to be taken seriously,” he added.
Most prolific
Manlunas was the guest speaker during the Innovation Forum held at the Cebu City Marriott Hotel last Wednesday.
He said the country can learn from Israel and Russia, whose governments came up with “matching fund programs.”
Israel and Russia, Manlunas said, are considered to be the most prolific markets for VCs.
In the Philippines, the government can match every peso put in by an investor in capital formation programs.
Within three to four years after the matching fund has been set up, the government should come up with regulations to make sure that 80 percent to 90 percent of the funding will be invested in early-stage tech-ventures. For security, the government can also get a VC fund manager to register with the Securities and Exchange
Commission and pass certain qualifications.
Even when considering the percentage of inflation, Manlunas is confident that the return of investment will be higher, especially when there is commitment on the part of the stakeholders.
Corporate venture funds
Large corporations can also set up corporate venture funds, which will give them a headway into “the next big thing.”
Universities and colleges can also play a role in the technology business ecosystem by putting up “seed funds” for homegrown ventures. “This will encourage students to pursue their ideas more,” Manlunas said.
He said more jobs would have been created had a necessary investment ecosystem been established in the country.
Manlunas also said the VC model is a tried and tested tool in business since most of the known technology brands started out as venture-backed companies. These include Amazon, Yahoo!, Netscape, Google!, eBay, Netflix, YouTube, Paypal, Skype and MySpace.
The Innovation Forum, held last Wednesday, was the first session done in Cebu. The forum was organized by Philippine Council for Advanced Science and Technology Research and Development (Pcastrd) under the Department of Science and Technology and the Technology Business Incubator program of the University of the Philippines Visayas Cebu College’s Department of Computer Science. The Ayala Foundation Inc. (AFI) also sponsored the activity.
Guillermo Luz, executive vice president of the AFI, said that they have conducted eight similar forums last year in Metro Manila.
Luz also said that this is the first forum that somebody from the venture capitalist sector is the one talking to the “techies” since they noticed that “the missing key ingredient has been money.”
AFI also supports the endeavor since it wants entrepreneurs to invest in the country and still participate in a global business environment, he said. (DME)
