MANILA, Philippines – When founders set up their startup’s operations in the Philippines, they inevitably do so in the capital of Manila. When founders do the same in Indonesia, they go with Jakarta. The same goes for Malaysia, Vietnam, and other countries in Southeast Asia – founders almost always default to their respective capitals.
It would be inaccurate to call the location of headquarters a choice, as founders seldom think of alternatives. The bulk of resources in a tech ecosystem is almost always concentrated in the capital, including everything from coworking spaces and startup events to angel investors and venture capital firms.
But some startups across Southeast Asia are bucking conventional thinking by establishing their headquarters in a secondary city. This centrifugal force is particularly acute in the Philippines, whose economic ascent in recent years has given way to a whole slate of secondary cities all capable of supporting and empowering tech startups.
Here are 4 case studies on the advantages of looking to the countryside:
Battle-test your product in a smaller market
As taxi-hailing platform Micab regularly interfaces with government agencies, no one would have thought twice if the company chose to headquarter out of Manila. Instead, Micab founder Eddie Ybañez first built Micab in his native Cebu.
By rolling out in Cebu first, Micab was able to stress-test the product in a much smaller market of taxis and passengers. The taxi-hailing platform was thus able to dramatically improve the user experience before the company deployed nationwide in 2018.
Like Micab, startups should not only think of their minimum viable product; they should also think of their minimum viable market. Where can the company launch to gain enough quality product insights before committing to a full nationwide launch?
Improve retention of talent
Although TaskUs now has offices in Manila, the company began in the neighboring province of Cavite. This choice by founders Bryce Maddock and Jaspar Weir was strategic. It allowed TaskUs to avoid the intense competition for customer service representatives in the capital that tended to leave other companies with incredibly high attrition rates.
By locating in Cavite, TaskUs had much higher retention, which inevitably contributed to the company’s rise.
Other startups who look to underutilized talent pools can experience the same benefits: It’ll not only be easier to hire the best and the brightest, but it’ll be easier to keep them for the long haul.
Develop an exclusive talent pipeline
Top tech companies routinely battle it out for graduates from the top four universities in Manila. Such competition is, of course, time- and resource-intensive. FullSuite, located in the coworking space Calle Uno in Baguio, is able to avoid this problem.
The company now counts well over 60 accountants and other business professionals. With Baguio being a college town, FullSuite can get hires from the best universities in the area. They’ve also established partnerships with the universities for internships and entry-level positions.
These types of feeder programs are easier to sustain outside the capital since local universities, professional organizations, and other institutions are concerned about the successful placement and gainful employment of their graduates and members.
This could be done by presenting the company to them as an employer of choice that’s competitive in their own field.
FullSuite, for instance, offers a benefits package, along with free catered lunch daily and monthly meet-and-greets for the local business community.
Tap into non-traditional tech investors
While Manila may have a bulk of venture capitalists, they tend to look for similar metrics. This thinking eschews startups who may benefit from smart money that may not be in the capital.
Kezar Innovations is comprised of 4 startups in Batangas, a city famous as a short beach jaunt away from Manila. These startups under Kezar provide a 3D printing service and a mobile app development service. The two other startups deal with creating educational toys and continuing a travel and restaurant sustainability rating application.
The tech company has been able to fundraise from traditional venture capitalists as well as a slew of non-traditional investors through their varied startups, owing to its presence in Batangas with its still nascent tech community. Kezar was even able to secure P7.6 million worth of seed investments in less than a week for Kezar3D, its 3D printing service, when it announced an open funding round.
Go forth and prosper
Secondary cities across Southeast Asia clearly have a lot of potential advantages for tech companies to build their company there, as demonstrated by these Philippine examples.
If initial presence presence in these areas hasn’t been established, companies can still find ways to benefit from them by providing an opportunity to tap their market.
Manila-based livestreaming platform Kumu, for example, has helped bolster the value of local talent. Through their platform, content creators in the Philippines can earn income in real-time with their livestream.
This approach is what founders can embody, not only in their choice of location but across every aspect of their business: Where others see nothing, you recognize opportunity. – Rappler.com
Kim Co Lim is a graduate of Bachelor of Science in Management Accounting in University of Santo Tomas. She finished a diploma course in Ateneo Graduate School of Business – Certified Securities Specialist Course; and is a graduate of Founder Institute Manila, a Silicon Valley-based accelerator program.