What is Equity Financing in the Philippines?

Overview

• The Philippine financial industry maintains resilience and adaptability, with a projected economic growth of 6.5%.

• Equity financing involves companies selling shares of ownership to investors in exchange for funding, allowing them to raise significant capital for growth and expansion without incurring debt.

• Equity financing options in the Philippines include venture capital investments, private placements, and angel investors.

In 2023, the Philippine financial industry thrived amidst global challenges, demonstrating resilience and adaptability. Despite factors like rising interest rates and supply chain disruptions, the sector maintains a positive outlook, with projected economic growth of 6.5%  buoyed by regulatory initiatives. 

These initiatives promote improved access to funding, cost-effective financing options, market expansion opportunities, and supportive regulatory frameworks. Thus, enabling businesses to thrive and innovate in the dynamic economic landscape.

In this article, we will tackle equity financing in the Philippines, one of the financing options businesses in the country can leverage to diversify funding sources for their operations. 

What is Equity Financing?

Equity financing involves companies selling shares of ownership to investors in exchange for funding. This allows businesses to raise significant capital for growth and expansion without incurring debt.  

Here’s how it works:

• Companies sell shares: Businesses offer partial ownership, represented by shares like common stock, to raise funds.
• Investors buy shares: Investors purchase these shares and become part owners of the company.
• Ownership for cash: The company gains much-needed capital for growth, while investors potentially profit through rising share value or dividends if the business succeeds.

While equity financing can be complex, firms like Rocket Equities can help. This Southeast Asian investment banking advisor assists small businesses by developing a compelling equity story, determining their valuation, connecting them with a network of potential investors, and negotiating deals.

Who are the Key Players in Equity Financing Transactions?

Companies seek investment banking advisors to steer complex transactions. These professionals counsel on structuring deals, ensuring regulatory compliance, maximizing financial efficiency, and crafting strategies aligned with client objectives. 

For example, Rocket Equities advised OnPoint, Vietnam’s leading e-commerce enabler, in securing a US$50 million Series B round led by Seatown Holdings International. This is the largest private funding in the SEA e-commerce enabler sector in the past five years.

What Are the Different Types of Equity Financing in the Philippines?

Equity financing provides a range of funding avenues tailored to support business aspirations and drive sustainable growth. 

Venture Capital Investments

Venture capital investments entail financial support provided by specialized venture capital firms to startups and emerging companies demonstrating notable growth prospects. In exchange for funding, venture capitalists acquire equity positions in the company and actively provide strategic guidance and operational assistance.

These investments typically target innovative, technology-driven enterprises to generate substantial returns on the company's success.

Consider a startup developing a platform for short-term lodging rentals. A venture capital (VC) firm identifies the startup's potential and provides significant funding to help scale its operations, enhance its technology infrastructure, and expand its market reach.  

In return, the company acquires an equity stake and offers strategic guidance, operational expertise, and mentorship to the founders. Over time, as the startup grows and succeeds, the venture capital firm benefits from substantial returns on its investment, exemplifying the high-reward potential of supporting innovative, technology-driven enterprises.

Private Placements

By selling shares to specific private investors, like institutions or accredited individuals, private placements bypass public stock exchanges. This method, cost-effective and confidential, enables companies to raise capital while retaining control over their operations and financial information.

This is exemplified by the recent financing of Great Deals E-Commerce Corp, which successfully raised US$30 million in growth capital during its Series B funding round. Spearheaded by Fast Group and bolstered by the support of CVC Capital Partners, this highlights the robust collaboration among key players in the equity financing landscape.

Additionally, Navegar, a private equity firm that previously injected US$12 million in Series A funding into Great Deals, further contributed to the success of this funding endeavor. This undertaking was guided by Rocket Equities.

Angel Investors

Angel investors, affluent individuals who fund startups and early-stage companies, offer their capital in exchange for equity ownership. They often play an active role in mentoring and advising the entrepreneurs they support, leveraging their expertise and networks to drive business growth.

With a keen eye for promising ventures, angel investors carefully weigh the potential rewards against the associated risks before committing their capital. Their decision-making process is guided by a thorough evaluation of the investment opportunity, ensuring alignment with their financial objectives and risk tolerance.

Key Takeaway

Equity financing in the Philippines presents a dynamic path for businesses to raise capital and fuel their growth ambitions. 

Rocket Equities is an investment banking firm specializing in capital raising, mergers and acquisitions, and buy-outs, with a strategic focus on Southeast Asia. We provide comprehensive support to fast-growing middle-market companies. For further details about Rocket Equities and how we can assist you, get in touch with us today.