Paolo Villonco – Venture Capitalist and Funding

Welcome back to another episode of the Outsource Accelerator Podcast. My name is Derek Gallimore and this is part two of our chat with Paolo Villonco of Ignition. In part one if you haven’t heard it I encourage you to do so. That is episode number 60 where we discuss the origin of Ignition which is a co-working and innovation hub here in Manila. And as well Paolo’s origin and journey which includes a Stanford education and experience in Silicon Valley. So really interesting journey in this episode we discussed with Paolo the venture capitalist and funding aspects of starting a business over here and adding value to the skill sets in the Philippines. So, this is relevant to everyone because it’s all about getting the best skills into your business. So, really interesting conversation and join us as well. The part 3 which is coming up soon.

Paolo: The Phase one is just really creating the fundamentals, bringing in these fundamental best practices down to an SME level. But at the same time what we want to do also as Ignition is bridge that network as well give that exposure of VCs internationally, highlight some of the innovation that’s being done in the Philippines. But at the same time also expose Filipino entrepreneurs to what it means to be a world class. What it means to be global. Because you know one of the biggest things I learned while I lived in San Francisco and the Bay Area was that ideas are cheap. Like it’s all a huge part of, it is the starting point of anything but execution is where, is what separates really the successful people from not successful people. I mean that sounds so basic and intuitive but then it surprises me and I surprise myself how I don’t appreciate that as much. And I think in the Philippines we have, we overemphasize ideas too much. We’re too selfish and that we think I own the idea and I own, I must own everything or to the extreme, I have the capital and I own everything. There’s no in between. It’s hard to find somewhere in between. Whereas in a more sophisticated innovative environment people know that you know there are billions of people in this world. Your mind, let’s say if I see an opportunity in a particular industry, it’s highly unlikely that I’m the only one who thought of that.

Derek: Yeah.

Paolo: Right. And you know I need a team to really fine tune that idea and create something and continuously innovate. Right.

Derek: As Peter Thiel says there’s very few original ideas, there are just the evolution of an existing idea anyways so it’s more a progression than a kind of a hallelujah moment.

Paolo: Yeah. I believe in that.

Derek: And so how do you compare the startup scene to here to that of Silicon Valley. And as well you’re talking about a sort of world class Philippines. I do find here that people daren’t dream big. You know everyone in Silicon Valley everyone thinks they are going to have the next unicorn which is probably a bit the wrong way. Whereas in the Philippines I try and encourage people to not think about launching a business in the Philippine market but take on the world because you’ve got a lower cost base here and you’ve got equal skill sets so you know build a product that takes on the world.

Paolo: Sure. I mean there are two things. I also advise the department of science and technology on their innovation initiatives and that is the big question like how do we, how do we transform the Philippines into an innovation-based economy from a cheapest labor economy. Right. And really try to encourage us to be global which is not going to happen overnight. It is a process and so there are many issues. But let me highlight two things which I think are quite interesting. The mindset of investors, Filipino investors is very different from that I think in Silicon Valley. Like here, I don’t think a Facebook or Google would have ever been created because in the Philippines the mindset of an investor is more like private equity rather than venture capital because they’re thinking what is, what are the numbers like. I mean in terms of revenue when will I get my return of investment. What is the cash flow like? And that is those are the milestones for success.

Derek: Which isn’t a bad way to think. I think Silicon Valley has maybe gone a bit too far away.

Paolo: I agree. It’s gotten a bit too far. But over there it’s more like which I think some investors could share that similar view it’s more like. How fast and how many people can you get on your platform. Because they understand that once a community is built, once people are used to your platform and your excellent that people get. So, it’s part of their daily lives. Google is part of anything any information that you want right now. Like I say I want the best chocolates hot fudge sundae, you see I’ll probably Google that instead of before, ask friends or read up get a book. So, people are just so used to these platforms. And I think the investors over there appreciate the fact that you know there’s a certain point where money is automatic like, if I have a billion people on my app, of course, I’ll be able to monetize that.

Derek: That’s a long-term view, isn’t it?

Paolo: Yes

Derek: Instead of spending 100 million on a bridge and then you could you burn that money over the next 50 years instead of. I think here, in the Philippines is still an expectation of an ROI three years kind of thing you know because. And which is amazing because there is potential to get huge ROI here. Whereas I think in the West all the margins are compressed and there’s so much more competitive. So, if you get an ROI in 10 years, you’re lucky whereas people here can still get 3-year ROI so it’s difficult then to convince them to invest in a true 20-year ROI on a startup.

Paolo: True. I mean I think there is, it’s somewhere in between. Right. The problem is the types of innovation because of this mindset of an ROI is very limited because people are thinking along those lines and not willing to experiment. Because when you come up with new ideas that you know that people will appreciate but you don’t yet know how to monetize it. In other places, people would invest in it. Here in the Philippines they wouldn’t because there’s no clear path to earn. But you know to each his own. I mean for me I respect investors. I mean that’s your money. Nobody should be able to tell you how you want to invest it.

Derek: And they take on the risk as well.

Paolo: They take on the risk. Right. So, I still respect that and I don’t think one is really better than the other. But I think that’s one of the fundamental differences in terms of investor mindset. Another thing that I, right now like I’m a bit of an advocate of is you know like trying to expose the Philippine government to investing in technology or startups that Filipinos have or the Philippines has a competitive advantage on.

Hope you enjoyed that.  And that is episode number 62 and part two of a three-part chat with Paolo. So, the first episode is number 60. So, do go listen to that. If you want any of the show notes it is at outsourceaccelerator.com/62. If you want to ask us anything please do so at [email protected]