Interview with Rocket Equities: Startup Funding in the Philippines amidst the COVID-19

April 15, 2020

By Vincent Rondot & Mark del Rosario of Rocket Equities
Rocket Equities, a Manila-based corporate finance advisory firm for fast growing mid-sized companies in Southeast Asia

*Arranged from left to right. (leftmost) Carl Garcia - Senior Associate at Rocket Equities, Mark del Rosario - Partner at Rocket Equities, Vincent Rondot - Senior Vice President at Rocket Equities, (middle left) Steve Sy - Founder of Great Deals, (middle right) Javier Infante - Managing Partner of Navegar, Inigo Geronilla - Senior Associate at Navegar, Bharat Keswani - Analyst at Navegar, (rightmost) Phoebe Flores - Operations Officer at Navegar

The Philippine startup fundraising scene looked promising in the beginning of 2020, marked by the USD12M capital raised by the leading Philippine e-commerce enabler, Great Deals E-Commerce, advised by Rocket Equities, a Manila-based corporate finance advisory firm for fast growing mid-sized companies in Southeast Asia. Fast forward two months later, everything seems to have changed with the global COVID-19 pandemic and the quarantine of the entire country.

SVCA: With the IMF declaring a global recession, how are startups affected in the Philippines and are there still opportunities for investments?

Vincent Rondot (SVP, Rocket Equities):

The short answer is it really depends; does the business depend on face-to-face interactions, can it leverage the internet instead?

Despite the current confinement, there is light as tech startups can capitalize on surges in online activity. Looking back at previous medical-related outbreaks, the SARS pandemic in 2003 actually catalyzed the dazzling growth of a then-small Chinese e-commerce company called Alibaba.

SVCA: Do you have examples of companies positively impacted in these sectors?

Mark Del Rosario (Partner, Rocket Equities):

  • Yes, definitely, sectors such as: Esports: large consumer brands are increasing their marketing spend to reach younger customers
  • Ecommerce & Logistics: digital logistics will cater to the growing needs of both e-commerce and social commerce merchants for order fulfilment and last mile deliveries
  • IT Outsourcing Services: SaaS solutions and outsourcing services will see growing demand from businesses looking to better manage their cash flow in these difficult times

SVCA: What is the appetite for investments of financial investors with the COVID-19 crisis?

Vincent Rondot (SVP, Rocket Equities):

Financial investors will continue to be hungry for deals in Southeast Asia and in the Philippines.

Firstly, dry-powder; the unspent capital of VC funds in ASEAN reached US$1.5 billion at the beginning of 2019. In the Philippines alone, two major conglomerates launched their VC arm in mid-2019: Ayala set up a US$150 million tech fund to be invested by Kickstart Ventures and JG Summit Holdings plans to invest $50 million USD in tech startups via JG Digital Equity Ventures. Last February, Navegar, hit its target for its new fund at US$150 million.

Secondly, discounted valuation; the COVID-19 crisis has pommeled the stock market. Valuation multiples of the S&P 500 has dropped back to the level of 5 years ago! This is a great opportunity for cash rich professional investors.

SVCA: Finally, how would you summarize your view about the state of startups funding in the Philippines now and in the coming months in light of the COVID 19 crisis?

Vincent Rondot (Rocket Equities):

Despite the COVID 19 pandemic and the resulting global recession, Philippine internet-based and tech-driven companies with attractive growth and defensible value propositions especially in Esports, Ecommerce & Logistics and I.T. Outsourcing Services will still attract investments from cash-rich domestic and Southeast Asian investors.