Stories by Maoi Arroyo on Medium

Rebuffing Buffet

Fri, 18 Jun 2021 03:02:00 GMT

Warren Buffet is the last person to whom I ever thought I’d retort “Okay, boomer” to. After all, he’s the kindly grandpa of capitalism who pledged to donate 85% (about $37.4 billion) of his wealth to charity. However, he’s also the gentleman who has adamantly opposed two proposals for annual reports on climate change and diversity initiatives , despite the push of some of his top investors. These include BlackRock Inc (BLK.N) , the world’s biggest asset manager; the California Public Employees’ Retirement System, which is the largest U.S. public pension fund; and Federated Hermes Inc (FHI.N) , an investment manager with $625 billion under management. He recently spoke to the Financial Times about “why corporations cannot be moral arbiters” saying “If they asked [the fund investors], ‘Do you want the board of directors and the managers of your companies to spend time and energy on environmental, social, and governance issues or do you want them to spend all of their time and energy on increasing the value of your shares?’ I’m rather sure that an overwhelming number of them would choose the latter.”

Mr. Buffet comes from a generation whose model is to take resources, make money, and then eventually “give back” to society. Instead of “giving back” later, why not invest in businesses that don’t “take away” in the first place? This is merely solidifying his investment philosophy of backing undervalued assets for the long term.

Let’s break it down.

An asset is considered under-valued when the price it’s selling for is below its actual value. In a truly efficient market, the price and value would be the same amount. It’s in inefficient markets where one can find assets to buy low and sell high. Developing countries and emerging markets are where we see these types of inefficiency. It’s also where the additional effects of job creation and modernizing agriculture or mariculture would help achieve the United Nation’s sustainable development goals. Every finance geek is out to make money, but why not use that cash to pull double duty? Why not make money more: more meaningful, more aligned with your values?

The new focus on environmental, social, and governance efforts or investing in the sustainable development goals doesn’t change the fact that you need to have a business case for each initiative. It reflects four particularly important things:

We are all facing a future where firms and funds must also have a social license to operate and where stakeholder capitalism will be the norm in the great reset post-pandemic. A black and white approach that pits return on investment against social impact is not only artificial and outdated, but also possibly dangerous.

The old adage that one cannot serve two masters does not apply to innovative structures like blended finance and impact investing.

Like Warren Buffet, I too manage an American fund — though a much smaller one than Berkshire Hathaway. Ignite Impact is the first Philippine-focused fund. Our first priority is still a return to our shareholders. That’s why we invest in companies that have an inherently impactful business model — companies that literally profit because they have a purpose. These companies work hand-in-hand with existing foundations and non-government organizations. Our portfolio companies don’t have to choose between impact and profit because these partners help with a large part of community development work. Such synergies have also been key to Berkshire’s portfolio.

The times, Mr. Buffet, are changing. I will always admire your solid acumen that outperformed the market by over 3,000 percent from 1979 to 2008. But the current under performance of Berkshire Hathaway post-financial crisis might just be telling you something.

The Philippine Evolution

Sat, 12 Jun 2021 02:24:00 GMT

Prior to the pandemic, the Philippines was the world’s 2nd fastest growing economy after China. But it was also the 2nd poorest country in ASEAN.

How can we be poor when we are the 3rd in the world for diversity on land, and #1 in marine biodiversity on the entire planet? Why are we still a third world country when we have so many great resources? The most common answer is because of graft and corruption. It’s simplistic, because many other countries also have this problem. Korea was a backwater after the war, and it has had many corruption scandals. Now we buy our mobile phones from them. The difference is that, despite the concerns about government corruption, Koreans invested in Korea. Taiwanese invested in Taiwan. Indians invested in India.

Unfortunately, Filipinos trust each other the least — and you don’t invest in people you don’t trust.

But why shouldn’t we trust each other? Filipinos power the world. 9% of engineers and teachers worldwide are Filipino. 20% of sailors in the world are Filipino. 25% of nurses in developed countries are Filipino. We are already world class. The whole world trusts us to build and maintain their infrastructure, to provide education, to trade their goods, and to care for the most important people in their lives.

If we look back on our history, we’ll see so many chances where we could have built trust in each other after the revolution against Spain and after the EDSA revolution. We’ve had too many revolutions — and all of them are unfinished. Maybe it’s time for us to put the hard work and patient capital into an evolution. Maybe our problems are so complex and so grave that there isn’t a quick fix. Maybe we deserve more than the quick and easy solution.

Investing in our own country is the one thing we haven’t tried. What are we afraid of? Failure? There is no dishonor in failing in the pursuit of doing what is right and what is good. This is why I founded the Ignite Impact Fund. My team and I believe that the bad behavior of the few does not outweigh the integrity and track record of the Filipino people. We’re investing in the Philippines because we believe in the Filipino people and we’re putting our money where our mouth is. Post-pandemic, our goal is not for the Philippines to go “back to normal”. Normal wasn’t working. We want to evolve. If you’d like to be part of building a better normal for the Philippines. Find out more at igniteimpact.fund .

The 2021 Ocean Challenge

Tue, 08 Jun 2021 06:12:00 GMT

Today we celebrate World Oceans Day 2021. It’s a UN holiday that celebrates the major role the oceans have in everyday life. The UN hopes that the celebration can help inform everyone of the impact of human actions on the ocean and unite the world in its efforts for sustainable management of our important resources. This year’s theme is “The Ocean: Life and Livelihoods”.

As a Filipino citizen and an impact investor, this year’s celebration during the pandemic is particularly poignant. The bad news is that resolution of our geopolitical struggle for the West Philippine Sea is still up in the air. The good news is that the pandemic has allowed our marine ecosystem to recover from human activity. I was able to witness this firsthand on a trip to Palawan last January.

However, I believe that the biggest problem facing our oceans today is the lack of investments in the blue economy — or businesses that will help create jobs in our coastal communities. We are the largest archipelagic country in the world, with over 7,641 islands and 76% of the world’s coral species. 60% of Filipinos live on coastal areas but have an average income of $0.75 — $1 a day. Of the 21.9 million Filipinos in poverty, fisherfolk have the second highest poverty incidence rate (34%). How can we get people to care for the ocean when they face the daily challenge of survival, particularly during the pandemic?

The greatest impact and returns can be made from investing in:

Sustainable Fishing, Aquaculture, and Mariculture

Processing of Seafood

Ecotourism

Providing internet access and IoT innovations for maritime industries

I asked two other experts about what the biggest challenge for the ocean is and how we can solve it.

Ben Mead, founder of the Mead Foundation says:

We have learnt at the Mead Foundation is that sometimes you do not have to have all the answers before you begin an initiative. The most important step is the first step; getting started. We have an active program for coordinated marine conservation — from coral reef restoration to pawikan conservation initiatives — and these always involve a strong element of community engagement, education, and awareness. If you want to get involved, just get in touch, we would be happy to see what we can do to get you involved — so you can get started too.

Romy Trono, former Country Executive Director of Conservation International says:

While I agree with their lists, I would like to add the lack of effective, responsive, and sustainable governance and enforcement. This sounds obvious because it is indeed obvious! And it has been staring us in the face for many decades already.

Every time we identify an issue or threat, old or emerging, to our marine ecosystems, we have a propensity to undertake in-depth threat analysis, scientific studies, monitoring, which take years to complete and arrive at conclusions. And based on these studies and analyses, we organize and conduct meetings, broad and in-depth stakeholder consultations, and conduct workshops, workshops, and more workshops to develop policies based on the most recent science and threat analysis. Once the policies are approved and issued, the resource or ecosystems we hoped to save have been severely damaged already. We more often than not, find ourselves trapped in a “paralysis by analyses” phenomenon.

We have an arsenal of environmental and fishery laws which are probably among the best in the world.

Agencies and local government units mandated to implement and enforce these policies are either remiss of their duties, ignorant about these policies, or worse, some local executives are even the ones violating the policies, e.g., they engage in activities and businesses, and approve projects that contribute to the destruction of coastal and marine environment and biodiversity and compromise the integrity of marine ecosystems

What do you think is the 2021 Ocean Challenge for #UNWorldOceansDay and how do you think we can solve it and make #ImpactPH?

How the Innovative Startup bill is good for #StartupPH — if it gets signed

Tue, 12 Mar 2019 23:46:00 GMT

As a companion piece to Maoi’s blog article on the Philippine startup ecosystem , we want to take a closer look at the Innovative Startup bill which we spent a lot of time working on. The bill *should* have been passed into law as of this writing. Maoi speculates on possible delays towards the end of this post.

What is an innovative startup?

Much like the heated discussion that occurred recently in the #StartupPH group, there was a lot of discussion between legislators and the private sector about what a startup really is. Both houses of legislation agreed that an innovative startup is any person or registered entity in the Philippines which aims to develop an innovative product, process, or business model. Whether a new business is an “innovative startup” (and therefore eligible for the benefits in this bill) or an SME (which has other benefits in law and policy) is determined by implementing agencies such as the Department of Science and Technology (DOST), Department of Information and Communications Technology (DICT) and the Department of Trade and Industry (DTI).

We have a long history of #Filipinnovation, and we’ve got an old video to prove it!

There have been vociferous opinions from members of the startup community in the Philippines that this degree of specificity is too lax for several types of businesses to fit into. We think this is fine. The role of government is to provide an enabling environment for startups to thrive in the ecosystem. It will be up to DOST, DTI, and DICT to decide which startups will be provided with support and which thrust or advocacy they want to champion aligned with the prevailing needs at that time. It’s always better not to legislate with specificity, that way the law can be flexible. We can’t put a hardline definition on a startup because this definition can vary over time.

We can easily change policy, but we cannot easily amend laws. This definition should only bother startups which need support from the government. This is especially true in the life sciences. Even if we export many agricultural and aquaculture products, 68% of the Filipino poor are farmers and fisherfolk. That’s because a lot of the tech that they need is stuck within universities. There are other viable avenues for startups or SMEs that don’t make such heavy use of technology or are in fields like IT and AI which do not need government regulatory bodies to approve their products.

Who’s running this show?

Many legislators voiced concern that the composition of the government agencies involved in this bill isn’t inclusive enough and that several departments should also be included as host agencies. We disagree — focus is key here.

Another piece of legislation, the Innovation Act of the Philippines, has a more inclusive composition of partner agencies. It literally includes every government agency possible. We echo what a fellow investor said at the technical working group meeting for that bill: “You can be optimized for inclusion or be optimized for success. It’s not that the two parameters are mutually exclusive, but such a large innovation council will be unwieldy.” It would certainly violate the Bezos’ Two Pizza Rule. The Philippines is being outpaced by our ASEAN neighbours. This is the time to speed up our efforts to become competitive in the innovation scene. We can’t be bogged down by the bureaucracy of trying to convene 17 government officials and 7 high ranking private sector members.

Thankfully the Innovative Startup bill has only 3 host agencies involved: DTI, DOST, and DICT. This leverages the existing relationships between these agencies. All three have been assisting the startup community for many years. This legislation just solidifies and empowers the different departments to include in their thrust the support for #StartupPH. Also, this bill does not exclude any agency from implementing its own startup strategies.

With this bill, DOST and DICT are given the ability to provide grants to enable startups, and DTI can now invest in startups through their government owned and controlled corporation (GOCC): the National Development Company (NDC). Other agencies can appeal through DOST, DICT and DTI to fund a specific startup they think needs support, but these agencies can also foot the bill through their own allocated budget. It then falls to other members of the ecosystem — academia, investors, corporations, and entrepreneurs — to use Freedom of Information requests to make sure that startups that get funded are legitimate startups and not some shell company. The last thing we need is a Napoles-style business model from our more enterprising political leaders.

DOST and DICT can give grants to startups

For years now, DOST has been having to defend their projects to the Commission on Audit especially when they try to fund startups as the quickest way to get funding from DOST is through a project proposal — which is meant for research. CoA is built to be risk-averse and to provide Terminator-level due diligence on government spending. If a government project is successful, the gains on the project are reported to CoA as the benefit. However, in the spirit of a grant, sometimes it isn’t clear how the money comes back to the government or how it benefits the government. ( We think the measure of government spending is how it benefits the Filipino people and that it’s not the government’s job to make a profit but to make a difference… but hey, what would we know? ) Giving DOST and DICT the specific provision to provide grants to startups and startup enablers (e.g., incubators), expands the remit of both departments to cover startups and not just R&D or IT infrastructure.

NDC: the new fund in town

National innovation systems around the world have government spending as a linchpin just to bridge the valley of death.

This is evident in the pivot of KSA (Kingdom of Saudi Arabia) to move away from oil investments to become more sustainable or Israel’s success in their own government starting its own venture fund , which catapulted Israel as the leading innovation hub in the world.

But what makes government investment necessary to catalyze the startup ecosystem? The fact that it de-risks the startup for the private sector. With clear programs such as the Startup Development Program, the government can bridge the gap in funding for a technology to effectively transfer to a scalable business model. From there, the government can directly invest in that enterprise to bring in other investors to support it.

However, for the government to properly invest in the right companies, they would need a vehicle to hold the equities they are entitled to when making an investment. At the same time, they would also need to have the right skills and talent in investing as other members of the private sector investment ecosystem. Having the NDC (under the DTI) start a venture fund, gives the department the ability to hire capable finance managers at market competitive salaries since NDC is a government-owned and controlled corporation (GOCC). The SVF will have an initial fund taken from General Appropriations under the DTI and will invest that money for the government. Under this bill, the SVF aims to co-invest the government’s money and have match funding with approved private sector investors with the startups.

PEZA Startup Ecozones

Having startup ecozones as expanded from RA 7916, acts as a sweetener for startups to locate themselves in the Philippines. A lot of successful startups, which had their start in the country, chose to locate elsewhere. Factors contributing to this decision span from the poor ease of doing business, to better tax incentives abroad that make startups more viable to succeed. The government is currently concerned with being consistent with the decision to support TRAIN and simplifying the tax procedure in the country; providing tax-incentives to startups might seem disingenuous. Having startup ecozones is at least a step in the right direction, but the friction points have to be managed first.

What about scale-ups?

We wish there was more attention for scale-ups. It’s not just about starting a business, it’s about surviving the horror of the startup journey. While we don’t want a cadre of grantrepreneurs — who go from grant to grant instead of hustling and building their minimum viable product — we also think there should be incentives tailored to early-stage startups. Maybe in another bill or perhaps we in the startup community can lobby the NDC to help.

Is it Pandora’s box?

With all of the benefits provided, is it enough: for startups to succeed, for the ecosystem to thrive, to reach the first PH-based unicorn? The reality is other countries are still more aggressive in the benefits that they provide and the investment they give to startups and SMEs. But for a low trust and risk-averse country like the Philippines, there’s always the risk that a good law made with the best intentions is paving the road to an eternal macarena type hell. As with all great laws, there are two major execution risks: non-feasance (people not doing their job) and malfeasance. Here’s hoping we didn’t open a pork-barrel alternative Pandora’s box.

Speculations by Maoi

Few people understand how bills become laws in this country , which is why one of the things we want to invest in as Ignite Impact is civic tech.

The Innovative Startup bill has already been approved by the bicameral branches last February 7, 2019. This means it should already have been routed to the president for his veto or his signature. However, as of 11 March 2019, 9 am, it was still being routed for signature with the Senate president; more than 30 days passed from its bicameral approval. In a perfect world, this bill upon being approved in the bicameral conference would have already been transmitted to the office of the president the day after it has been approved, thus allowing it for the 3rd and unpopular method of a bill becoming law: letting 30 days pass without the president signing it.

As a daughter of a former legislator, I assure you that once a bill is submitted for a bicameral approval, the average lawmaker can’t wait to take credit for a job well done and transmits the bill to the president as quickly as possible to get approval. The 30 days that this has been waiting for the Senate president for it to be signed, is like being 30 days late for a project submission or being delayed a month with your homework.

The coldly calculating part of me can only think of three reasons why this hasn’t become law:

1 We’re not important: The #StartupPH ecosystem isn’t important enough to politicians because they don’t realize that SMEs are the lifeblood of our domestic economy. Large companies pay taxes wherever it’s convenient — usually in the Cayman Islands. Startups are too busy trying to build a repeatable, scalable business model to do much tax avoidance. We really just pay what we’re told. Our leaders should realize this, but we should also take a more active role. We spend a lot of time talking at other people, but not enough time talking to each other to figure out what we need as a whole.

2Non-feasance: everyone has focused on the elections and both houses of legislation are not currently in session. Ideally, bills should be routed by staff attached to the House of Representatives and the Philippine Senate (ie, not the staff of any individual legislator but one paid by us, the taxpayers). Ideally. Sigh.

3Malfeasance: The President has signed other bills in a speedy fashion, and they were good laws like the universal health care act. While universal health care has been a thrust of multiple administrations — Dr Romualdez during the Estrada administration and afterwards Benigno S. Aquino when he was a senator — the bill that was passed had reelectionist Senator JV Ejercito as its principal sponsor. I don’t know where the bill is in the legislative process , but I wonder who’s stalling it and if it’s because its primary author is Senator Bam Aquino, a globally recognized social entrepreneur even before he became a legislator.

Ultimately, this bill should have become law on March 9, 2019. It has the potential to catalyze the entire ecosystem. There is no material reason any administration should veto this bill. And really, if it’s just a matter of signatures then this is exactly the friction holding the #StartupPH ecosystem from achieving escape velocity.

This story was made with contributions from RP Duterte and KM Magtubo .

RP Duterte is an associate at the Ignite Impact Fund with corporate experience at Isla Lipana & Co., the Philippine entity of PriceWaterhouseCoopers (PwC), with a focus on tariff classification, and technical research and academic street cred as a teacher and a program developer in the Ateneo de Manila High School. He spearheaded the consulting project to assist the Philippine government with the Global Innovation Policy Accelerator funded in part by the Newton Agham Fund of the UK government.

KM Magtubo was a community doctor in remote and underserved areas of the Philippines and was a researcher at UP Manila where she pioneered the use of telehealth devices. Combining medical and academic experience with her training as a Leader in Innovation Fellow (Oxford, Asian Institute of Management, and the Royal Academy of Engineering), KM takes care of health tech and technology commercialization as an associate at the Ignite Impact Fund.

Maoi Arroyo is a multi-awarded serial entrepreneur, impact investor, and educator. She was selected as a Young Global Leader of the World Economic Forum in 2015. She is the principal of the Ignite Impact Fund , the first Philippine -focused impact investment fund. Follow Maoi on Twitter at @maoiarroyo.

For more information on Ignite visit us at igniteimpact.fund

PH startup ecosystem primed for growth

Mon, 04 Mar 2019 23:49:00 GMT

Innovations don’t grow in a vacuum. Like any living thing, their growth is dependent on what the ecosystem can support. To fully capitalize on the opportunities for growth in the Philippines, we have to deepen existing partnerships both within the country and abroad. Many technologies are simply born in the wrong place — and many Filipino startups do not have the resources to scale and benefit others. The Philippines is the 10th fastest growing economy in the world and was the best country for global investment in 2018 according to a recent study by Wharton . Yet the same study ranked our entrepreneurship 51st out of 80 countries, and we have plateaued in the 70s in the Global Innovation Index . The Philippine growth story is neither inclusive nor powered by innovations.

I’ve conducted research on the national innovation system for the last 6 years, and the roles and friction points can be summarized as follows:

It is “ less bureaucratically fun in the Philippines ”, which is why there aren’t more funds in the Philippines. The national government has made a concerted effort over the last decade towards this end.

The bill harmonizes the efforts of different government agencies and introduces vital changes for Philippine startups. Benefits and exemptions include fast-track business registration, intellectual property registration assistance, investment incentives, and travel subsidies. These are to be extended to entrepreneurs as well as mentors, investors, and business incubators. Through its visa provisions, the bill seeks to enable the free flow of talent and capital into the country that will enhance not only the quantity but also the quality of businesses that succeed. Current rules on visa and foreign ownership of Filipino companies restrict foreign collaboration , which curtails their potential for learning and success. The bill also creates the Startup Grant Fund which will be provided to and administered by DOST, DICT, and DTI to provide initial and supplemental grants-in-aid for startups and ecosystem-enablers, as well as a Startup Venture Fund under DTI which will be used to match private capital. These funding mechanisms will provide start-ups with a relatively risk-free runway to develop their products and services and make their business more attractive to downstream investors here and abroad.

Jump-starting our ecosystem will require multi-stakeholder alignment, persistence, and political will. I’m not saying it will be easy, but I do promise it will be worth it. There are many deeply undervalued assets in the Philippines, most notably in sustainably developing our natural resources outside Metro Manila.

2019 is a banner year for gaining traction and building critical mass in the Filipino innovation community.

I recently participated in a discussion on potential areas for partnerships for growth in terms of innovation and entrepreneurship at the US-Philippine Bilateral Relationship conference organized by the Asia Foundation and the Ateneo School of Government. This panel included Christina Laskowski (President of the Science & Technology Advisory Council — Silicon Valley ), Katrina Chan (Executive Director of the QBO Innovation Hub ), and Dado Banatao who developed semiconductor technologies that are used in 30% of every computer and is Chairman of the Philippine Development Foundation . It was a high-powered discussion backed by a combined 40 years of experience which separated the ecosystem by innovation supply and demand.

Banatao and Laskowski led the topic of fixing the supply of Filipino technologies by advocating more investment both in the R&D budget for academia and in capacity building. Development can be more inclusive by shifting from an emigration-based strategy that emphasizes training workers for export to one that rigorously educates high-level innovators. Both Filipino-Americans also emphasized the need for Filipino entrepreneurs to have bigger visions and the grit to accomplish them. Chan focused on the need for hustle and a bias for action that is necessary for a startup’s survival. Highlighted examples of bilateral initiatives that have succeeded are US AID STRIDE which supports many supply-side efforts in academia, and DOST has a current partnership with the IC2 Institute (University of Texas). We also went into tougher issues such as why most Filipinos don’t invest in the country.

Many of these international reports are based on hard data but they are also culled from the perception of key opinion leaders. Banatao pointed out that given the substandard rankings, it’s perfectly logical for most investors to be risk-averse. Chan and I proposed that a way forward for US-PH partnerships for innovative growth would be to have investors from hubs like Boston, Research Triangle Park, and Silicon Valley share best practices with local angel investors. This would enable us to learn how to better manage and mitigate risks related to investing in early-stage firms. Laskowski also proposed that both countries should start more programs to harness the Filipino diaspora effectively.

Key industries for the Philippines to focus on would be its top exports IT and electronics, but also deeper tech such as the internet of things (IoT) and artificial intelligence (AI). Laskowski is still bullish about the potential for health biotech and agritech that will harness our natural competitive advantage and promote sustainable development. AI and robotics can modernize agriculture, as well as help us leapfrog in upcoming fields like Ocean tech — which encompasses aquaculture and marine biological engineering. This strategic focus by all players in the ecosystem will increase our value in the global economy and build a better future for all Filipinos.

Maoi Arroyo is a multi-awarded serial entrepreneur, impact investor, and educator. She was selected as a Young Global Leader of the World Economic Forum in 2015. She is the principal of the Ignite Impact Fund , the first Philippine -focused impact investment fund. For more information on Ignite visit us at igniteimpact.fund and follow Maoi on twitter at @maoiarroyo.

A version of this article was published on 22 February 2019 in the Manila Bulletin.