The Philippine startup ecosystem has attracted significant investment in recent years, yet questions remain over how effectively public funds are being deployed to support emerging businesses.
For Franco Varona, Managing Partner at Foxmont Capital Partners, the challenge is not simply finding more money. It is creating a system that allows government funding to attract private investment while reducing the risks associated with backing individual startups.
Speaking at Philippine Startup Week 2026 in Quezon City, Varona made the case for a Fund of Funds model, in which government capital is channeled through professionally managed venture capital funds rather than invested directly in individual companies.
Recently appointed as a private sector representative to the Innovative Startup Act Steering Committee, Varona shares his views on the shortcomings of the current system, the reforms he believes are needed, and what these changes could mean for the Philippine startup economy.
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Q: The Philippine startup ecosystem has grown considerably over the years. What do you see as its biggest obstacle today?
At Foxmont, we’ve always believed that in an emerging market like the Philippines, the single most dangerous bottleneck isn’t talent, and it isn’t ambition. It’s ambiguity. When there is ambiguity between founders and investors, deals stall. When there is ambiguity between government and private capital, money sits idle. For eight years, our role has been to act as that missing layer of trust—between founders and LPs, between domestic ventures and foreign institutional capital, and between the public sector and the market. Today, that bridge needs to become a highway.
Q: Where does the current system of government startup financing fall short?
Let’s be completely candid about where the system breaks down today.
On one side, you have our government agencies—DICT, DTI, DOST, and the National Development Company. They have a clear, genuine, legal mandate to foster a vibrant startup economy. They have public budget allocated to support innovation. But government agencies are fundamentally not structured, staffed, or compensated to evaluate seed-stage risk, build tech cap tables, or run operational portfolio management.
On the other side, you have exceptional, battle-tested Filipino founders. They aren’t just looking for a grant check to build a prototype; they need growth equity, follow-on syndicates, enterprise customer introductions, and ruthless operational guidance to scale regional businesses.
Because public institutions are not built to act as venture operators, we end up with one of two outcomes:
- Millions in allocated public capital sit completely idle in agency accounts due to bureaucratic paralysis and fear of audit.
- Capital gets deployed directly into single startup bets—where, as we all know in venture, early-stage risk is inherently high.
Q: Why do you believe direct government investment in individual startups is problematic?
Let me state this plainly: Civil servants should not have to be venture capitalists.
When a civil servant or public agency writes an equity check directly into a single early-stage company, every startup failure carries a 100% loss exposure on that line item. It turns taxpayer pesos into political liabilities, invites audit scrutiny from COA, and makes agency heads terrified of taking the very risks required to back frontier innovation.
Civil servants should not have to be venture capitalists. They shouldn’t have to pick between two AI startups or decide whether a fintech’s unit economics justify a pre-Series A valuation. That is an unfair burden to place on public officials.
The legal foundation is already locked in under RA 11337—the mandate is sitting right there. DTI, DOST, and DICT are already authorized to de-risk investment and deploy capital via vehicles like the Startup Venture Fund. We do not need to rewrite our vision. What we must overhaul is our execution model.
Q: How would a Fund of Funds address these problems?
The opportunity before us is to shift from single-company exposure to an institutional Fund of Funds (FoF) framework.
This aligns directly with global capital rebalancing principles. Instead of the government attempting to pick winning and losing startups from a committee room, public capital is committed into private, professionally managed, accredited venture capital funds.
Those private VC funds perform institutional-grade due diligence, negotiate commercial terms, take board seats, and deploy that capital across a broad, diversified portfolio of dozens of high-growth companies.
What does this structure achieve?
First, it eliminates concentrated political and financial risk. When public money sits across diversified, professionally managed portfolios, a single startup failure does not wipe out public capital or make front-page headlines as a failed government bet. Downside risk is cushioned by portfolio diversification.
Second, it crowds in private, foreign, and institutional co-investment. This is the multiplier effect. When the Philippine government anchors a Fund of Funds, it can mandate reciprocal investment by saying, you must invest that dollar—plus private matching capital—directly back into high-potential Philippine startups. We don’t just spend public budget; we use it as a catalytic magnet to pull international dry powder into Manila, Cebu, and Davao.
Third, it puts operators in the trenches with founders. Founders don’t just receive capital; they gain access to seasoned venture partners, shared playbooks, governance best practices, and the institutional backing needed to scale sustainably. Public participation remains 100% visible, fully accounted for, and professionally managed.
Q: Are there examples of this approach working in other Asian countries?
We know this works because our Asian neighbors have already written the blueprint:
- In Singapore, the program is called Startup SG Equity: There, they Deployed $2.34 billion total across more than 330 tech startups. But crucially, $1.95 billion of that (so nearly 85%) was private capital crowded in by partner funds—lifting startup contributions to 2.4% of Singapore’s national GDP.
- In India, it’s called the Fund of Funds for Startups: There, they channeled $1.23 billion in state commitments through alternative investment funds, which multiplied into $2.23 billion directly deployed across 1,170+ startups, decentralizing tech innovation far outside of Tier-1 metros and driving a 4.0% GDP contribution.
- In Malaysia, it’s called Penjana Capital & Jelawang Capital: Allocated $184 million in public allocations to attract international venture managers, creating over 82,000 high-skilled jobs and generating $245 million in direct startup GDP contribution.
Every single dominant startup ecosystem in Asia built its maturity on the back of a state-anchored Fund of Funds. The playbook is proven. And despite the fact that the Philippines doesn’t have its own fund regulation for private capital and therefore funds like ours need to domicile in Singapore, neither the Innovative Startup Act nor NDC’s own charter says its capital must go directly into Philippine companies: the Act only requires that the startups it invests in operate in the Philippines, and the charter expressly allows NDC to hold shares in companies “of this or any other country.” It is time for the Philippines to run it.
Q: What concrete steps are being taken to introduce this model in the Philippines?
To move this from a compelling idea into active national policy, we are not relying on hope. We are executing a three-route, pragmatic strategy across short, medium, and long-term milestones.
Route 1: Maximizing Existing Rails (Immediate / Target End-2026)
We do not need to wait for a three-year legislative cycle to begin deploying risk-managed capital. We are actively working right now with the National Development Company (NDC) to pivot their existing Startup Venture Fund away from direct, high-risk equity checks and into a Fund of Funds modality. Under Section 3.1.1 of our signed Memorandum of Understanding between NDC and Foxmont, NDC has formally agreed to explore and consider investing through a Fund of Funds structure. We can pilot this framework, establish governance precedents, and deploy capital under existing administrative mechanisms today.
Route 2: Statutory Clarification (Medium-Term / Target Q1 2027)
In parallel, we are working directly with congressional champions who understand that startup modernization is economic modernization. We are aligning closely with Representative Tony Roman on House Bill No. 610. Our singular goal here is legislative precision: ensuring clear, unambiguous “Fund of Funds” statutory language is codified directly into the law. This gives every public agency and state enterprise the bulletproof legal mandate they need to commit public funds into qualified, private venture funds without fear of regulatory ambiguity.
Route 3: The Philippine Startup Fund of Funds Act (Long-Term Institutionalization)
For the enduring long term, we have drafted and introduced a comprehensive policy paper and bill to the House Committee on Economic Development to establish a dedicated, permanent state vehicle: The Philippine Startup Fund of Funds Corporation. I have been actively presenting this roadmap across Cabinet agencies. This will institutionalize public venture capital for the next thirty years—ensuring that regardless of changes in political administrations, the Philippines maintains a sovereign commitment to backing homegrown innovation.
Q: If this framework is successfully implemented, what could it mean for the Philippine economy?
When we institutionalize this Fund of Funds framework across the Philippines, the economic dividends are transformative:
- Expanding Startup GDP Contribution: We can realistically expand our tech ecosystem from roughly 3% of national GDP today to 5% to 8%, turning technology from a peripheral story into one of the country’s main growth drivers. That’s the same economic contribution as BPOs, or remittances.
- Scaling Ecosystem Valuation: We can scale the total enterprise value of Philippine tech startups from $6.4 billion today to between $40 billion and $70 billion-plus, minting our next domestic unicorns and regional category leaders.
- High-Skilled, Tech-Enabled Jobs: This is our greatest social dividend. We can scale technology employment from 200,000 workers today to over 1,000,000 high-skill, tech-enabled careers—retaining top Filipino engineering, product, and operational talent right here at home.
- Catalyzing Foreign Inflows: By serving as a trusted institutional counterparty, we can lift foreign venture inflows from under $1 billion annually to $3 billion to $5 billion every single year.
- Regional Inclusion: Most importantly, professional venture deployment democratizes capital beyond the Metro Manila bubble, channeling early-stage checks into regional founders across the Visayas, Mindanao, and Northern Luzon.
This blueprint puts Humans at the Center by pairing founders with operators who have built companies themselves. It leverages Technology at Speed by equipping our ecosystem with institutional rigor. And it achieves Innovation now.
The views and opinions expressed in this article are those of Franco Varona and do not necessarily reflect those of The Independent Investor.