Emerging startup trends in the Philippines

The Philippines has emerged as Southeast Asia’s most exciting startup ecosystem in recent years, poised to become the next regional tech center after Singapore and Indonesia. At Kaya Founders, our investment strategy particularly centers on three key trends that encapsulate why the Philippines is an exciting market today: frictionless business enabled by artificial intelligence (AI)-powered platforms, the rise of tech-enabled consumer ventures, and the transformative power of embedded credit.

Frictionless business: AI-powered platforms reshaping industries.

The adoption of AI-driven solutions is rapidly transforming the country’s largest industries. A generational shift in business leadership has ushered in digitally native leaders who are embracing AI to streamline processes in areas such as customer service, content creation, and supply chain management.

This trend positions the Philippines as fertile ground for AI-powered business-to-business platforms. Startups that leverage AI to drive efficiency and productivity, particularly in sectors like health care, commerce, and financial services, are poised to enhance traditional operations and unlock growth.

Two of Kaya Founders’ best-known portfolio companies are Etaily and Local, which both enable businesses, retailers, and merchants to more efficiently and effectively sell their products online across the different channels and marketplaces in the Philippines and across Southeast Asia.

Tech-enabled consumer ventures: Harnessing an emerging middle class.

With household consumption representing 71.6 percent of GDP—significantly higher than the regional average of 55 to 60 percent—the Philippines is undeniably a consumer-driven economy. Yet, unlocking this potential requires a nuanced understanding of a diverse and evolving consumer base.

Two segments dominate this rising middle class: “power users” who prioritize convenience and are willing to spend on experiences and “value-focused users” who are driven by discounts. These dynamics have fueled the rise of digital shopping models like live and social commerce, where startups are reshaping how consumers discover, engage with, and purchase products.

Despite challenges in payment infrastructure and logistics, the opportunity to deliver affordable yet aspirational products through seamless digital platforms is immense, particularly for younger, digital-savvy consumers.

Embedded credit: Closing the financing gap.

Within the realm of fintech, perhaps the most compelling opportunity lies in embedded credit. According to the recently published Google, Bain, and Temasek’s e-Conomy report, lending drove 22 percent of the revenue of digital financial services across Southeast Asia last year, growing annually at a rate of 35 percent. Yet the credit gap in the Philippines remains vast—estimated at $221 billion for micro, small, and medium enterprises, the largest in the world as a share of GDP by some measures and affecting three-fourths of Filipino adults without formal credit access.

Embedded finance models are addressing these gaps by integrating lending into everyday platforms, making access to credit more convenient and contextually relevant. Startups like OneLot and Netbank are at the forefront of this transformation. OneLot has enhanced dealer onboarding and introduced flexible loan products, while Netbank’s Banking-as-a-Service solutions integrate digital banking into supply chains and salary payments.

A maturing ecosystem.

Venture capital funding in Southeast Asia has surged, with $72 billion deployed in the past five years—three times the volume of the preceding half decade. Yet, what makes this moment particularly exciting is the shift toward capital efficiency and profitability.

The Philippines, in particular, has emerged as a beacon of opportunity, bucking global trends of declining late-stage funding. Institutional investors and development finance institutions such as Asian Development Bank, International Finance Corp., Texas Pacific Group, Kohlberg Kravis Roberts, and a range of others have made late-stage investments in the country. Meanwhile, a growing pool of credible, experienced founders is fueling momentum in the early-stage segment.

The fundamentals of the Philippine market resemble the early growth trajectory of Indonesia’s and Singapore’s tech ecosystems. As digital adoption expands from early adopters to widespread use, the impact on the broader economy will only deepen.

Unlocking the Philippines’ potential.

The Philippines’ tech ecosystem is at an unprecedented inflection point, but unlocking its full potential will require a concerted effort across stakeholders. Entrepreneurs, investors, and other business leaders must work together to address infrastructure challenges, build talent pipelines, and scale solutions that meet the needs of businesses and consumers alike.

At Kaya, we remain committed to identifying and supporting the next wave of Philippine startups poised to transform industries and revolutionize the economy and country in the future.

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Paulo Campos and Raya Buensuceso are the founding managing general partner and managing director of Kaya Founders, respectively. Kaya Founders is a venture capital firm that invests in early-stage startups in the Philippines and Southeast Asia. They have invested in 50+ companies to date across a range of industries including eCommerce, financial services, health care, agriculture, and more. You can reach them at hello@kayafounders.com.

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Business Matters is a project of the Makati Business Club (makatibusinessclub@mbc.com.ph).