The Philippines has positioned itself sixth in the latest report from the Asean GenAI Startup Fund, with a 3% funding rate of generative artificial intelligence (GenAI). Leading the region is Singapore, boasting a significant 44% of startups, followed by Vietnam at 27%, Indonesia at 13%, Thailand at 7%, and Malaysia at 6%.
The report highlights that a vast majority of GenAI startups in the Asean region, around 92%, focus on business-to-business (B2B) solutions. Key areas where these startups are making an impact include productivity and business solutions (26%), healthcare and wellness (13%), financial services (13%), technology and AI solutions (11%), among others.
In the Philippines, Sprout Solutions attracted substantial funding and is gaining traction in the market. This company offers AI-enhanced human resources (HR) and payroll automation software designed to help businesses streamline their processes. It has recently attracted substantial funding and is gaining traction in the market.
Funding for GenAI startups in the Asean region shows that about 50% are self-funded or supported by angel investors while 41% have received pre-seed or seed funding.
Sustainable business
“This scenario presents investment opportunities as the region offers lower startup valuations compared to counterparts in the United States,” the Asean GenAI Startup Fund said in its report. “Additionally, the focus on sustainable business models and the potential benefits of being a second-mover in AI adoption are appealing factors for investors.”
The Philippines’ GenAI sector is expected to bring changes to the country’s business process outsourcing (BPO) industry, which is ranked second globally, just behind India. This sector includes call centers and creative industries. Startups are leveraging technologies such as AI chatbots and GenAI design platforms, which are facilitating a shift in the workforce, requiring upskilling among employees.
With access to enterprises, small and medium-sized enterprises (SMEs), and a large BPO sector, the Philippines has a promising domestic market for GenAI solutions, the report noted. Although the country may take longer to develop a high volume of GenAI startups over the next 18 months, there is potential for higher-quality innovations to emerge.
Funding
Microsoft has pledged to support education in the Philippines by equipping one million learners with AI skills and collaborating with the Technical Education and Skills Development Authority to train 100,000 female learners in AI and cybersecurity.
However, GenAI startups in the region face challenges. These include slow onboarding by enterprises, finding the right product-market fit, managing cash flow, competing against established companies, and lacking sales resources. The report suggests that opportunities exist in creating specialized solutions for niche markets and utilizing local expertise to develop tailored AI applications.
According to Dealroom.co, startups across Asean raised $1.4 billion in venture capital during the first quarter of 2024, marking the lowest funding levels in five years. Singapore attracted the most funding at $1.1 billion, followed by Indonesia with $151.7 million, and the Philippines with $108.8 million. While early-stage investments are rebounding to pre-2021 levels, specific data on GenAI funding remains limited.