Gobi Partners Startup Report 2025: Corruption Dampens Investor Confidence in Startups
The widespread corruption scandal and lapses within the Philippine government and governance practices have contributed to a 32 percent drop in funding raised for local startups, according to a report by venture capital firm Gobi Partners.
Based on the Philippine Startup Ecosystem Report 2025: The Next Wave of Innovation, deal volume also went down by 54 percent year-on-year in 2024, with founders shifting foucs toward profitability, operational discipline, and sustainable growth.
This all comes after the Marcos administraton declared war on corruption, after it was discovered that several infrastructure contractors were supposedly colluding with lawmakers to fatten their respective pockets with funding for substandard or fictitious flood mitigiation projects.
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The VC firm also said that global tigthtening along with the aforementioned scandals were to blame for the contraction in funding and a drop in deal volume.
On the bright side, startups now contribute to about three perecent of the country's gross domestic product and employ about 200,000 people.
Startup activity has also been expanding beyond Metro Manila, with clusters growing in the metropolitan cities of Cebu, Davao, Iloilo, and Cagayan de Oro. The Gobi report says that this mainly involves early-state and private-investment-reliant ventures.
Based on the report, there is also an emerging "Intelligent Era" that is powered by artificial intelligence across industries such as financial technologies, health tech, logisitics and BPO sectors.
The report also broke down waves of Philippine startup players starting with the pioneers part of the "Early Builders" cluster (2010-2014), prominent movers in this new space are now what you would call "Resilient Builders" who had to navigate the post-pandemic cooldown, and now the emerging "Intelligent Era" defined by the rapid adoption of AI, autmoation, and intelligent data use across industries.
"At Gobi, we view innovation as a force for inclusive growth across Asia,” said Thomas G. Tsao, Co-Founder and Chairman of Gobi Partners. “The Philippines has the talent, resilience, and creativity to shape the next chapter of Southeast Asia’s innovation story.”
Dampened investor interest?
With the recent corruption issues plaguing the country, Philippine Ambassador to the US Jose Manel "Babe" Romualdez has said that these are dampening US investor interest.
He told a radio interview last month that the country risks $100 billion to $150 billion in lost potential investments if these scandals remain unresolved.
Based on the US State department's 2025 Investment Climate report, corruption remains a major barrier to foreign investment in the Philippines as it is a "pervasive and long-standing problem in both the public and private sectors" in the country.
Transparency International's 2024 Corruption Perceptions Index placed the Philippines 114th out of 180 countries, trailing its neighbors Malaysia, Indonesia, and Vietnam. The World Bank and the International Monetary says that corruption costs Manila's economy about P600 to P800 billion yearly in lost productivity and misallocated spending.
Despite this, Manila is still set to strengthen its position as a burgeoning hub for startup growth, posting about $1 billion in funding for startups each year in the past two years, based on a report by Foxmont Capital Partners and BCG.
But based on the 2025 Global Startup Ecosystem Index by StartupBlink, the Philippines dropped four spots in the annual index to 64th out of 100 countries. The country’s annual ecosystem growth rate was the lowest in Southeast Asia.
Another local venture capital company, Kaya Founders, earlier announced it has raised about $25 million in the final close of its fund as the firm sets its eyes on expanding its already diverse startup portfolio across industries and sectors.
The Philippines is also seen as a burgeoning tech hub and a Silicon Valley of sorts and a space of diversity with Female founders now representing about 36 percent of startups, up from just 17 percent a decade ago.
"With greater public support and scale-up financing, these startups could significantly expand their contribution to national growth and employment," Gobi Partners said.
