Philippines-based early-stage technology incubator and accelerator IdeaSpace Foundation announced that it will be piloting an equity-free funding model for technology entrepreneurs it will help support.
The move is in line with the the Philippine government's Startup Roadmap in August last year, which aims to increase the number of tech startups in the country to 500 by 2020.
The non-profit organization, which is funded by the country’s biggest companies, including Metro Pacific Investments Corporation (MPIC), Metro Pacific Tollways Corporation, PLDT, Meralco, and Smart Communications, has helped 38 startups in the last four years, seven of which have received external funding from angel investors.
Each team that it takes into its incubation program receives up to 1 million pesos ($20,868.11) in funding, which consists of up to 500,000 pesos ($10,434) in cash, and non-cash benefits including office space, communication, software support, training and classes, and mentoring from executives of companies under First Pacific, in exchange for a 20% stake in the newly formed company.
Goldy Chu Yancha, associate director for business development and partnerships, said the equity approach could be limiting for startups and as such, the new structure is put in place to encourage interest and boost the annual startup competition.
“From an investor standpoint, the decision is two-pronged, but the more important one is to be able to maximize our ability to help entrepreneurs. We realize that as they grew, sometimes it can be a stumbling block that from the get go they have only 80% ownership of the company versus a hundred percent,” she said.
Diane Eustaquio, executive director of IdeaSpace Foundation, stressed that the incubation program has always been a corporate social responsibility (CSR) effort from the beginning and the only reason why they took equity from the first startups they supported is to look at the sustainability of the foundation.
“Now the challenge is on us to look for funding sources in the coming years,” she said. “IdeaSpace was really put up so we can provide support to entrepreneurs who have no access to resources to launch or take their ideas to reality. We are sticking to that main mission.”
The foundation has a 500 million peso ($10.4 million) five-year commitment to grow the local startup ecosystem.
Dustin Masancay, associate director for ventures, said in 2015, the startup competition received 1,200 entries from 18 countries. Ten were finally selected to receive full support and some are on its way to product commercialization.