Silicon Philippines: Is it real?

Michael Alan Hamlin

Posted on October 2, 2011

Deep-pocketed investors are again in a frenzied fight to fund Silicon Valley Internet startups on the back of LinkedIn’s successful IPO, Facebook’s surprisingly sustainable rapid growth internationally, and Twitter’s increasing popularity. Investors are anxious. “Suddenly everyone wants to invest in Silicon Valley,” Bill Gurley, a partner in venture firm Benchmark Capital recently told reporter Monica Langley for a report published in The Wall Street Journal.

“It’s game-on all the time,” Mr. Gurley seemed to gush. “The frothy market is creating a velvet-rope effect,” Ms. Langley wrote. “AngelList, a website where entrepreneurs and investors match up, says it has turned away 3,000 potential investors in the past year. ‘We don’t let in brand-new angels who aren’t trusted members of the community,’” site director Naval Ravikant explained. The purpose is to shield entrepreneurs from “pushy” investors.

For tech entrepreneurs in the Philippines, the a frenzy of investor largess must seem like an impossible dream. Venture capital firms typically complain that the ideas they are presented with here aren’t up to Silicon Valley standard. Or, that the technical and management expertise of startups doesn’t provide the comfort levels investors are looking for. But the real reason seems to be that they aren’t located in Silicon Valley, or some other hotbed of entrepreneurship.

One of the investors cited in Ms. Langley’s story plowed almost $12 million into a Silicon Valley-based startup—“pegging its valuation at $60 million”—that does nothing more exciting than ordering “a car service from a cellphone.” The Philippines has plenty of “buzzy” startups that save for their location here might attract similar valuations. They include innovative smart phone app developers, a hugely popular auction site, and software developers.

And then there is a company called Morphlabs, which calls itself a “leader in converged Dynamic Infrastructure solutions for the Enterprise.” While I’ve tried to recast that description into somewhat more everyday English, I haven’t been entirely successful. The company provides remote servers—“in the cloud”—and operating environments that other companies can use to develop software applications.

The Silicon Valley company developing the car service ordering solution—Uber—would probably find Morphlabs’ mCloud Data Center Unit solution useful for quickly and cost-effectively configuring development servers on which Uber can develop and refine its offering. In a demonstration recently in Manila, Morphlabs engineers showed how quickly, and seamlessly that’s done.

To understand the advantage of mCloud, consider that in the past startups and other companies developing software applications had to purchase servers, operating systems and software, and other technology infrastructure before they could begin work. That could take weeks or even months to do, and some serious capital outlays. With mCloud, it takes about 15 minutes, and software developers only pay for space and operating environments they need as they need them.

There are other companies that provide such services, but mCloud is one of the best, according to judges involved in assessing entries to the Best of InterOp Awards in the cloud computing category last year. It was one of three finalists, including multinational technology giant IBM. The InterOp Awards is organized by InformationWeek Analytics, a “premium content service for technology leaders.”

Earlier this month, Morphlabs announced that it has raised $5 million in Series C funding, led by investors in Japan and Indonesia. In all, Morphlabs has received approximately $12 million, according to its CEO, Winston Damarillo. His company will use the new funds to “fuel immediate deployments in the ASEAN region as well as select deployments in North America.” These deployments enable partners to sell the mCloud solution to their customers.

Why has Morphlabs been at least reasonably successful in raising venture capital compared to the average technology startup in the Philippines? One reason is probably Mr. Damarillo’s track record. (Disclosure: Morphlabs is a client of my firm.)

He founded Gluecode Software, an open source application infrastructure company acquired by IBM in 2005. Another company, Logicblaze, which provided open source development support, was acquired by Iona Technologies in 2007, and yet another startup, Webtide—which helps developers using a Java technology—was acquired by Intalio, a firm that also offers open source cloud solutions as Morphlabs does.

Mr. Damarillo also founded Exist Software, which develops enterprise and other software solutions for FORTUNE 500 companies in the finance, healthcare, telecommunications, entertainment & media, transport & logistics, and software & technology industries. Like Morphlabs, Exist is located in the Philippines, and its solutions are developed by Filipinos working primarily in Manila and Cebu.

Or maybe it’s just the “X-Factor.” The determination to demonstrate that the Philippines not only can be, but is, a place where world-class technology solutions and products are created.

(Michael Alan Hamlin is the managing director of TeamAsia and a Manila-based author. His latest book is High Visibility: Transforming Your Personal and Professional Brand. Write him at mahamlin@teamasia.com and follow him on TwitterFacebook and LinkedIn. Copyright © 2011 Michael Alan Hamlin. All Rights Reserved.)

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