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Martin Lichauco Discusses Telecom Incubators with the Philippine Daily Inquirer

Where to Start With Your Brilliant Idea

By Doris C. Dumlao and Paolo G. Montecillo for the Philippine Daily Inquirer

March 12, 2012 (Manila, Philippines)— Got any new brilliant idea for a technology venture but don’t know where to start? You may literally find the solution in your phone.

Rival telecommunication firms Philippine Long Distance Telephone Co. and Globe Telecom recently unveiled separate “incubation” programs offering seed capital, mentorship and business linkages to start-up technopreneurs.

It is seen as an opportune time for them to do so, given the renaissance of technology stocks globally in the past 12 months that has made Steve Job’s brainchild Apple one of the world’s largest companies in terms of market capitalization.

PLDT chairman Manuel V. Pangilinan recently launched “IdeaSpace,” which he says was his group’s commitment to the future of this country. “We want to help jumpstart the creation of a Silicon Valley-like ecosystem in the Philippines,” he says.

Globe incubator

Ayala-led Globe Telecom also launched its own program, “Globe Incubator,” promising an end-to-end support system integrating the ‘hardware’ of big companies with the ‘software’ of mentorship and community partnership. “There are people with the aptitude and the desire to become entrepreneurs, but they face many hurdles to giving up their day jobs. Even if they did launch their business, they may not have the training, capital, and business network to enable their startup to scale. Incubation makes resources available to those who need them,” says Minette Navarrete, head of Globe new business group.

Pangilinan says his program would support innovative Filipino technopreneurs with great ideas but would go beyond commercial products and services. The program will also include solutions that can support social development and poverty alleviation, he says. And while the program will be open to the public, it prefers start-ups from different colleges and universities.

For her part, Navarrete explains that unlike many corporate incubators, Globe incubator does not have profit or capital gain targets. “It’s not just about the money! The Globe incubator will offer seed funding, yes, but cash is only part of the story. We will make facilities available, offer education and mentorship, and introduce entrepreneurs to the people and companies who can help them expand and succeed,” she says.

Harnessing talent

MVP’s IdeaSpace targets start-ups that can scale up in the industries of water and power utilities, toll roads and transportation, healthcare, mining, telecommunications, media and food—businesses that his group is already in. The program is also open to applicants focused on solutions for other industries but have potentially significant global potential. A national competition will soon be launched to look for the first batch of IdeaSpace start-ups who will be immersed in an incubator program. There will be provision for office and IT space and facilities in Makati and in the Group’s Leadership Academy in Antipolo.

Pangilinan says the program would go beyond “angel investing” or giving capital in exchange for equity ownership. It will provide incubation and acceleration with access to: a wide group of companies to share and learn experiences from and a defined market runway and opportunities to be connected to potential investors, he says.

Aside from funding, each incubated company will go through a structured program hosted by the group’s Leadership Academy to teach them the fundamentals on how to run a successful and scalable business. Benefits include mentorship from executives from the group companies, access to resources including legal assistance and advice, operational control, and a clear partner route to markets served by any company in the group—whose range of business translates to millions of households, subscribers, motorists and others.

MVP’s program will be run by IdeaSpace Foundation, a non-profit foundation to be established exclusively to implement this incubation and will of course be supported by MVP-led companies.

Aside from PLDT and Smart Communications, it will also involve First Pacific Co. Ltd. of Hong Kong, infrastructure holding firm Metro Pacific Investments Corp., MPIC hospital group, Digital Telecommunications/Sun Cellular, Manila Electric Co., SPI Global, ePLDT, Indofood, Philex Mining, Maynilad Water Services, MediaQuest and TV5.

Globe incubator also offers start-ups access to various platforms of Globe which are usually open only to large established companies.

It targets people who are already working but are wishing to become their own boss. It aims to help its start-ups launch their company faster and provide introductions to partner companies within the Globe, SingTel and Ayala networks here and abroad to help them scale bigger.

Given the nature of the founders and backers, Globe’s incubation program targets start-ups engaged in developing new ICT applications, websites, and other tech-related undertakings.

They could equally be traditional businesses which would use technology to create a better customer experience, improve operating efficiencies or expand their reach.

While there is funding available for good ideas, Globe believes that the most successful incubators have learned from the painful lessons of the dotcom bubble bursting. It recognizes that the old fire-and-forget model of simply handing out seed capital and providing facilities is not sufficient in this day and age.

“Shot in the arm”

“This is what we have been waiting for as a venture capitalist for the past 20 years whose objective—aside from delivering superior returns to our investors in the funds we manage—is to help develop and establish an entrepreneurial ecosystem in the Philippines,” says Martin Lichauco, managing partner of Global Gateway Venture Capital (G2VC).

Lichauco, who is also managing director for Asia of global boutique investment bank Siemer & Associates LLC apart from his role in G2VC, says India and China have been successful in this regard but investors were are now looking for other countries with the same quality of talent of entrepreneurs.

“We are no longer the chosen destination just because of low-cost labor…Investors are looking at the Philippines because of the quality of work our entrepreneurs are able to deliver. On the entrepreneurial front, I can confidently say that the quality of entrepreneurs and start-ups in the Philippines has increased 10-fold,” he says.

The Philippines was outside the radar screen of investors for long but this has now changed, Lichauco says, adding that the country was now on the global map with the quality of start-ups being set up onshore.

“Smart and Globe’s incubating endeavors are a shot in the arm to the Philippine technopreneurship ecosystem, providing the local start-ups not just with funding but the right mentorship and infrastructure. This is the best validation of the quality of Philippine entrepreneurs today. Today, we find ourselves at the highest point of technopreneurship in the Philippines. Things are looking up,” Lichauco says.

The venture capitalist adds, however, that the companies funded by the telcos would have to scale up and be in a position to do cross-border transactions. “They can’t just be Philippine-centric,” Lichauco says.

Beyond PR?

The rival telcos will also have to prove that they are committed to their respective incubation programs for the long haul, that these will really benefit Filipino talent and are more than just a PR-booster.

By getting into this incubation program, the assumption is that these telcos would like to be in control of disruptive or game-changing technologies that may arise in the future.

“I see two reasons why they should engage in venture capital for technology entrepreneurs: First, they have the capital to fund these entrepreneurial investments and, second, they stand to benefit from successful investments,” says Jose Mari Lacson, head of research at Campos Lanuza & Co.

“However, there are also reasons why this seems to be more of a public relations effort than a serious thrust on their part. Venture capital investing or incubation is not their core business,” Lacson says. If the investment becomes successful, for example, a PLDT-Globe “technopreneur” invents the next Facebook, Lacson is wondering about the exit strategy.

In the US, Lacson says pioneers could easily lock up gains from the incubated company public by launching an initial public offering (IPO).

“But if PLDT or Globe is the main investor, there’s a chance they wouldn’t want to take that path. Why let go of a winning invention that can be used against you? Without an IPO, the technopreneur may eventually be diluted, bought out, or eventually become an employee,” Lacson says. He adds that in case of a buyout of a successful investment, pricing would be another issue.

While incubation may finance and encourage the generation of ideas, Lacson says investors and technopreneurs should still take heed of Plato’s wisdom that “necessity is the mother of invention.”