The Philippine startup scene could be Asia’s best kept secret

Dado Banatao is probably the most successful Silicon Valley technopreneur you’ve never heard of. Some say that 30 percent of every computer today carries technology and ideas that originated from this unassuming Filipino.

Many of his compatriots have left their mark on the technology world as well. There’s Peter Valdes, who started Tivoli Systems in 1989, then led the company to an IPO in 1994 and eventually sold it for US$743M. Another good example is Dennis Mendiola, who founded Chikka Asia, the creator of Chikka Messenger, an instant messenger with about 38 million users.

Raw talent is not lacking in the Philippines — many entrepreneurs have succeeded in spite of the lack of a startup ecosystem. But now, a concerted effort is made by the country and its people to replicate and localize the Silicon Valley model back home. The hope is that as more funding and support emerge in the Philippines, more of the nation’s talent will find success within its borders.

To fully understand the challenges of creating a successful startup ecosystem in the Philippines, one must start with this number: As of 2010, there are about 9 million Overseas Filipino Workers (OFW), making up almost 10 percent of the local population.

It’s a brain drain on a unimaginable scale, big enough to become an industry, and, ironically, a market for saavy entrepreneurs to tackle.

The cause of this problem is the lack of work opportunities for educated Filipinos, said Christina Laskowski, president of STAC Silicon Valley, an organization that works with the government to encourage technological innovation in the Philippines.

“There were no PhD programs for engineers until four or five years ago.  Therefore individuals interested in pursuing further studies left the country and for the most part did not return,” she said.

Many local companies weren’t hiring engineers and scientists either. Across the country, the glut in educated students isn’t matched by equivalent jobs, causing many to find work overseas that undervalue their paper qualifications.

Lack of employment has kept poverty level high, at over 30 percent of the population. Compounded by rapid population growth, poverty discourages the development of skilled talent needed to support a thriving technology startup scene.

Corruption, inefficient government bureaucracy, and poor infrastructure are the other major obstacles hampering economic development and dissuading investors from putting money into the country, said the 2011 Global Competitiveness Report by the World Economic Forum.

But the economy is making a turn.

“Now at long last, the Philippines looks poised to resume a period of strong growth,” wrote Ruchir Sharma, chief of the Emerging Markets Equity team at Morgan Stanley Investment Management, in his book “Breakout Nations: In Pursuit of the Next Economic Miracles”.

He noted that the current President, Benigno ‘Noynoy’ Aquino III, may have the right amount of reform momentum to bring about change. The population’s proficiency in English is a huge advantage which has led to the country to become a top choice for business process outsourcing, a US$9B industry employing 350,000 people.