International investors have taken an interest in the Philippines due to its vibrant community, eagerness to welcome innovation, and rich talent pool. But while the country has the potential to become a haven for venture capitalists (VCs) and startups, it also has its pitfalls.

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Moderated by Digital Pilipinas Festival convenor Amor Maclang, three panelists at the fintech festival gave their raw takes on why the Philippines could be a good ground for growing businesses while highlighting the challenges firms and investors have to navigate before they could fully recognize the country as an investment hub.

nChain Co-founder and Chairman Stefan Matthews believed that the Philippines is already prime for investments, having witnessed its technological advancements since 2010, even adding that the country is ready to harness the power of blockchain technology.

nChain, a global company with expertise in blockchain and a large intellectual property patent portfolio, is among a handful of foreign firms recognizing the Philippines’ potential to innovate. Matthews believes blockchain is a key driver of making a social impact, which nChain aims to deliver with its collaboration with national and provincial governments and federal agencies.

“The technology that I work with is digital transformation, and digital transformation means social impact and social impact for me is a very important thing these days,” he said. “For me, the opportunity to invest, bring my technology into this country, work in partnerships with the government and enterprise, and make a profound social impact here is what probably one of the most important aspects of my investment decisions.”

However, having the potential is not enough to get investors to come and put their money in the Philippines. One core factor that foreign entities consider is the ease of doing business, which the Philippines has been working on with efforts to streamline government operations, said Matthews.

While foreign entities undeniably play a significant role in growing the Philippines’ economy, giving job opportunities to many Filipinos, General Partner at Yolo Investments Steve Tsao said the country should also make sure to safeguard local firms, especially from companies that have already amassed huge support and established reputation overseas.

“The Philippines lacks the antibodies of foreign entrance that Indonesia, Thailand, Vietnam naturally have,” he noted. “I’m not asking for redtape, but I do think you need to give young Filipino entrepreneurs—actual Filipino entrepreneurs—a bit of room to breathe, to scale, and grow defensibilities in their businesses.”

Creador Managing Director Omar Mahmoud builds on Tsao’s remarks, emphasizing that the Philippines cannot block foreign entrance, but the government can give local entrepreneurs a competitive advantage.

“You never want to block foreign entrance coming in, but how do you incentivize? Maybe give certain tax breaks, incentives to local-based companies to help them compete,” said Mahmoud.

Singapore is a prime example of this, with its government launching numerous incentives that not only help build local competitiveness but also attract global companies to invest in the city-state.

“The Philippines has the brains; it has the opportunity, but we’re on that brink, and it’s not quite there yet,” Mahmoud said.

Matthews agreed, noting that supporting Filipino entrepreneurs—through the Block Dojo Philippines incubator program—was one of nChain’s advocacies when it invested in the Philippines.

“When you’ve invested in an incubator, your expectation is or your hope is that you generate a very successful business out of that process” that would survive the tight market competition, he added.

Tsao said it would only take one local company to achieve a billion-dollar valuation before others would follow suit, creating a positive ripple effect.

“[The] Philippines is starting with zero, and there needs to be some to be truly from here because that will cultivate, motivate, disseminate to more entrepreneurs to bring up more seeds,” he said.

Maclang clarified Tsao’s statement, saying that the unicorn the Philippines needs to create is not a corporate-backed entity, noting that the country “technically” already has two unicorns—Mynt and Voyager Innovations.

On the matter of unicorns, Maclang dared the panelists to make a fearless forecast of what local company would be the next to achieve the billion-dollar valuation.

Tsao was quick to say that it’s not about which company would be the next unicorn but who will be the investor that will cut the cheque to invest in a Filipino firm and help it achieve the feat.

Like Tsao, Mahmoud also declined to name-drop a potential unicorn company, citing his biases, but said Filipino entrepreneurs should focus not on becoming a unicorn but on things that would help their businesses survive and grow.

“I don’t look at companies and say, ‘How do I find the next unicorn?’ I’d say, ‘How do I find a good business that is solving a real customer need that can generate real, tangible money that when you factor in your cost-based, you will churn out a profit at the end?’” he concluded.

Matthews also did not provide any company names, but his bet will be on firms working on ramping up cybersecurity with blockchain technology.

Watch: Digital Pilipinas Festival 2023 highlights—Pioneering the future of ASEAN tech landscape

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