Kaya prides itself in being a thesis-led investor. We develop conviction around key verticals and business models, and evaluate whether investing in an existing play or building from scratch—in cases where no play exists—is the superior approach.While we remain sector agnostic, here are the seven investment themes keeping us excited lately, reflected in the 44 investments we’ve made over the past 2.5 years.
Digitizing the exchange of goods and services has been a core investment thesis since Kaya’s inception. With Lazada and Shopee bringing about the marketplace revolution in Southeast Asia, our prediction is that vertical-specific B2B and B2C marketplaces and aggregators will usher in the next wave of innovation in trade. These companies consolidate goods across a particular supply chain on a virtual platform to facilitate commercial transactions online between buyers and sellers (marketplaces), with some acting as the retailers themselves (aggregators). With the success of global players targeting specific industries like Etsy (arts & crafts), Instacart (groceries), GoDirect Trade (aviation), GHX (healthcare), and Flexport (supply chain and logistics), we see abundant possibilities for homegrown startups to scale into regional champions by honing in on unique local dynamics.In our view, the best marketplaces and aggregators are superior to incumbents in at least one of three dimensions: price, assortment depth, and speed of delivery.
There has to be a compelling reason for a customer to use a vertical marketplace versus going directly to an offline supplier or a horizontal marketplace. We are particularly excited by companies that serve industries with inherently fragmented and opaque supply chains (e.g. construction and real estate, agriculture, automotive) given the added utility of convenience and transparent pricing. We are on the lookout for companies tackling underserved sectors and with the potential to grow beyond the standard take rate monetization model that most marketplaces employ. We see this best achieved by players with a truly nuanced grasp of industry needs and the operational capability to streamline supply chain inefficiencies across the value chain. Some examples of additional value added services include communication and inventory management software as well as embedded finance and logistics offerings. These features can help transform marketplaces beyond traditional buying and selling hubs into holistic, end-to-end platforms.
“X as a service” refers to any business model in which a company provides clients with services, without requiring them to own the underlying infrastructure or house them on premise. Perhaps the most well known application of this term is in software, with global companies such as Google, Dropbox and Salesforce serving businesses the world over through the power of the cloud. Whereas SaaS is typically the first billion dollar sector to rise in mature markets such as the US, Israel, Canada, and Australia, it has taken a backseat in emerging economies—that is, until now. We feel that we are at an inflection point of SaaS in the Philippines. Following the golden triangle of eCommerce, fintech, logistics, we have strong conviction that SaaS will be one of the next industries to take off, thanks to stronger digital rails, mobile penetration, and digital behaviors that have endured from the pandemic. In a 2022 survey conducted on Filipino businesses by OpenGov Asia, more than half of the respondents reported implementing more cloud-based IT solutions following the peak of the pandemic. SMEs, which account for 99% of registered businesses in the country, are particularly seeking SaaS that enables process optimization, workforce flexibility, and technology stack enhancement.
Contenders that can offer solutions in these areas with a superior user experience or a more affordable price tag have the right to win, whether they take a localized approach or seek to go global from day one. See our latest SaaS report for an in depth look at this theme.On the other hand, while infrastructure as a service (IaaS) is typically used in the context of cloud computing service providers, we take a more liberal definition and see the applicability of this business model to eCommerce enablers and managed service providers as well. A business that saves its clients the hassle of having to buy hardware outright or build a business unit in house, while charging recurring revenue on an as-needed/on-demand basis, delivers tremendous value by enabling the latter to operate on a lean, asset-light basis and free up precious capital for other areas of the business.
It has never been easier to start a direct-to-consumer (D2C) brand, yet it has also never been more competitive to do so. While near ubiquitous access to China’s supply chain has leveled the playing field between behemoth retailers and aspiring entrepreneurs, online marketing channels are more saturated than ever. Gone are the days when brands could simply rely on a single channel (typically their brand.com) to drive sales. Social media marketing has evolved from gamechanger to table stakes.Indeed, we feel strongly that for any D2C brand to succeed in the present consumer landscape, they must take an omnichannel approach to distribution. In addition to being present on high traffic online marketplaces and key offline locations (where relevant), such brands must also be in tune with and able to effectively implement the latest trends in selling and community building, including shoppertainment, live selling, and loyalty programs. The most savvy brands will be able to take advantage of the large swathes of customer data and traffic to help their brands cultivate more intense customer relationships. Ultimately, we believe that the brands that will endure are those that not only have a winning product, but the ones that are able to establish a robust sales playbook. The challenge to crack? How to build brand equity, achieve strong customer lifetime value, and scale sustainably in a world of ever increasing customer acquisition costs.
Despite global macroeconomic headwinds, financial technology continues to be the most funded venture capital investment sector across Southeast Asia today. This is no different in the Philippines, which boasts over 280+ fintechs engaged in payments, e-wallets, lending, remittances, insurance, and other services. The evolving landscape has grown remarkably on the back of maturing digital infrastructure and supportive regulatory frameworks, and has pushed the mission of greater financial inclusivity countrywide center-stage. Recent studies show that there are still 488 cities and municipalities in the Philippines that remain unbanked and a majority of the >60 million rural population still lacks access to full-fledged financial services. There is tremendous potential for the expansion of digital financial solutions if this untapped market is unlocked.
We recognize that the most obvious step is to continue building inroads within consumer-facing fintech, but this is easier said than done given the present multitude of choices for e-wallets, payment gateways, and microloans. In our view, companies tackling this space have to be sufficiently differentiated, whether it be in their core value proposition, the strategy they employ to acquire and retain customers, their future growth roadmap, or otherwise. We are also setting our sights on solutions addressing gaps in B2B financial services, particularly on tech-enabled supply chain finance. We believe this solution to be a key to small business productivity, providing liquidity, optimizing working capital, and helping to take the pressure off operational risks.
The Philippine healthcare industry demonstrated resilient growth in 2023, driven by enhanced consumer spending, strengthened public-private partnerships, and growing infrastructure investments across the health system. Nonetheless, quality and reliable healthcare remains a privilege reserved only for high income A/B classes, with a majority of the country’s health needs staying underserved.We are focused on building and investing in solutions that improve access and affordability to both healthcare services and health and wellness products, while propelling innovation in these categories forward. Our belief is that direct-to-consumer plays which address gaps in the market for basic medical items such as scrubs and oral care toothbrushes, and online-to-offline clinic networks that attract customers through online channels and direct them to physical service centers, will achieve the greatest success in the coming years. On the founder front, we advise healthcare entrepreneurs in the earliest stages of building to clearly identify a distinct target user group for their business. We are moving to a world where verticality wins out, and the vastly different priorities across consumer groups, whether this be women, pets, children, healthcare professionals, or the elderly, call for distinct and focused solutions.
From nurses in the United States to engineers in the Middle East, it is no secret that the Philippines’ top export is its people. A tenth of the population works overseas, and they contribute roughly the same share of the country’s economic output, with annual remittances reaching a record high of $36 billion in 2022. If we were to consider remote work done within national borders for international clients, this number would be exponentially higher.A young, talented, and English-speaking populace has always been the Philippines’ greatest asset, and we are looking for companies that are able to harness technology to support and create new opportunities for remote, borderless work. This includes everything from platforms enabling freelancers and creators to reach new audiences to crossborder payroll solutions ensuring that workers get paid on time and with minimal transaction fees.We are also keeping a close eye on employer-of-record (EoR) businesses—third party services that operate as an employer on a client company’s behalf, specifically global and regional companies targeting expansion into the Philippines. Although EoRs do offer the cost-reduction and swift setup benefits typical of traditional outsourcing, we see this model as more scalable and particularly agile in leveraging remote and fractional workers—groups that are rapidly growing in rank.
Over the last two decades, the Philippines has established itself as one of the most important business process offshoring destinations globally, offering a broad range of services from customer support, marketing, and sales, to IT services, human resource management, and administrative operations. With the blossoming of various technologies in recent years, most notably in the realm of artificial intelligence, we believe the BPO industry is entering its next phase of evolution: “BPO 2.0,” as we like to call it.Our view is that the advancements in technology (i.e. robotic process automation and AI-driven modalities) synergistic with the global outsourcing industry will be best applied to existing outsourced business functions as an additional technological layer. BPO workers are here to stay, but with the aid of more advanced tools that can drive efficiency and take on the repetitive, thankless parts of their jobs.
