Venture funding needed to boost software sector

The Philippines should stimulate its local software industry, via Software Venture Fund idea otherwise it would be a terrible loss if the Philippine software industry fails to capitalize on it.

Winston Damarillo, a venture capitalist and chairman and co-founder of Exist Global Inc., a software engineering service company, believes that new approach in Venture Capital (VC) concept in the Philippines should be adopted in order to maximize the "high-caliber" Filipino talents in software development.

He said Open Source (OSS), Software as a service (SaaS) and Web2.0 will drive the next wave of software start ups. Fortunately, these new companies can be built without the "classic" venture funding model and still produce VC caliber results.

Venture capitalists are those businessmen who will take advantage of a good concept or IT development product and offer to fund the idea, as well as market the product.

According to Damarillo, software is the most capital efficient business. There is a very little requirement for capital expenses and zero for inventory. The key challenge however, is harnessing people to realize their potential and exposing it to a large worldwide market.

Damarillo, who is also the chief executive officer of Simula Labs a US-based venture capital firm that caters to software start-ups that specialize in open-source technologies, said that what Simula and Exist have been doing in the last five years can be replicated.

He mentioned that the service delivery provider "starting point" does not translate to developing a good product team. Product strategy must start with the global market in mind the Philippine first approach did not work for Exist and Simula.

He added that Technical expertise must be imported initially. The talent required to compete in the global market still requires a lot of development, especially on the cultural aspects of software development. Also, global footprint is important, such as selling to North American market requires a presence in the North American market.

"I believe the best way to catch up is to provide more efficient entrepreneurial infrastructure for software businesses targeting an international marketplace," he said.

The VC model requires a "standalone" combination of technical, managerial and marketing expertise that is yet to be developed locally.

Thus, he suggested a VC fund should be available for software venture laboratory in the Philippines. Focused solely of product development for a vetted market segments and augmented with worldwide technology experts; open a product marketing facility in the US and European Union (EU) to market the products; and develop a shared pool of management team with the appropriate market expertise.

The iAyala company, attempted to start up a VC market in the Philippines in 2000. In fact, it introduced an Idea Farm model in Cebu in an attempt to gather good technologically-related ideas for business, but it later folded up.

Earlier, Filipino technologist, and IT expert Dennis Ramon Posadas urged Cebu to immediately initiate a "venture capital community" to fully realize Cebu's bid in becoming a Silicon Valley in the Philippines, and take advantage of the ample IT talents here.

"I see extraordinary talents here. Why are they not competing with the rest of the world? A venture capital concept must be organized to nurture and make your talents' invention profitable in the world," Posadas said.