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I. Rationale
The Startup Nation Program is a partnership platform with startups that need financial
support for research and development and market validation studies of their R&D products.
According to serial Silicon Valley entrepreneur, Steve Blank, startups are organizations formed
with a repeatable and scalable business models. Such features render startups opportunities to
scale rapidly in the least amount of time, attain success at a faster rate but equally vulnerable
to rapid decline and failure. As such, startups are temporary organizations that adjust or pivot
quickly based on market demands and needs.
According to a study by the Kauffman Foundation (2010), startups have become one of the
metrics for a country's economic growth. The study further explained that while companies of
all sizes habitually create and destroy jobs in response to market cycles in the United States,
startups created more than 3 million jobs every year between 1977 and 2005. This accounted
for 50% of new jobs created in the United States. Fast rising tech countries such as Sweden,
India and Singapore have started capitalizing on the fast-pace growth of their country's startup
communities and have forged supportive ecosystems to enable startups to survive. In the
Philippines, an estimate of around 100 startups was earlier recorded in 2015 not including most
private initiated startups. Most of the startups in the country, however, are in their early stage
while only a few startups have made their exit (draft Philippine Roadmap for Digital Startups,
2015).
Looking at international benchmarks for government support for startups led to models that
foster stronger ecosystem support to a more direct funding support for startups. One example
of a direct support is embodied by the Israeli Model of Oren Gershtein. The model involves two
forms of grants provided to startups: Pre-incubation grants that help explore whether a
technology is worth investing in; and Repayable grants, that helps prove technology before
angel investors will risk their money and time. Further, repayable grants according to the Israel
model sources 85% of the total requirement from government funds and 15% from private
investment. The mechanics of providing the grant funds includes total funding allocation of $1
Million in a year worth of pre-incubation grants, which are spread over around thirty startups,
and are written-off if the products do not fly.
Following the global trend towards directly supporting startups, the PCIEERD commits to
further engagement with startups through the Startup Nation Program by providing research
and development support for the technology needs of the local startup community. The
research and development efforts should be directed specifically to improving the core
technology of the startup such as improvement of products to improve marketability, validating
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the technology by engaging lead users, or the improvement of existing processes that may
provide a new source of revenue to the startup.
The Technology Transfer Act, RA 10055 of 2009, its Implementing Rules and Regulations
(IRR), the DOST Guidelines for Grants-in-Aid Funds AO 009 series of 2017 and the PCIEERD
A.O. No. Series of 2017 on the Guidelines for the Provision of PCIEERD Grants-In-Aid Funds
for Private Organizations (PO) and Industry Partners provides eligibility for startups to access
funding for R&D.
With reference to the above policies and guidelines, PCIEERD thereby provides startup
organizations opportunities to participate in publicly funded research and to avail of the
PCIEERD GIA program as a legitimate proponent. However, the DOST System, PCIEERD
included, has always been proposal-driven and this guideline shall cover provisions on
qualifications, technology ownership and commercialization which shall form part of the
Memorandum of Agreement with beneficiaries of the Startup Nation Program.
For the purpose of this guideline, the following terms shall be defined as follows:
Tech Startups refer to a micro-sized company in its very early stages that are
organized to profit, venture and scale on a tech-based product or process; is duly
registered and/or licensed to do business in the Philippines, or otherwise with legal
personality in the Philippines.
Intellectual Property (IP) refers to intangible assets resulting from the creative work
of an individual or organization. IP also refers to creations of the mind, such as
inventions, literary and artistic works, and symbols, names, images, and designs
used in commerce.
Intellectual Property Rights (IPR) refers to those rights recognized and protected in
Republic Act No. 8293, otherwise known as the "Intellectual Property Code of the
Philippines".
6. Investors are private individuals or entities that provide private funds to startups in
return for equity.
Technology business incubators are facilities that provide space, mentorship, training
and other services to startups enrolled in their incubation program.
Incubatees are startups hosted by a TBI whether in-wall or as virtual locators. Early
incubatees are teams formed to develop the business model and/or products and
may or may not be legally registered.
III. Objectives
The Startup Nation Program shall provide fund assistance for startups to any or a combination
of the following, as may be needed after the Council's assessment of the proponent and/or
grantee:
The assistance provided under this program shall also cover technical and legal
advice in applying for intellectual property protection and expenses related to such.
Developing an intellectual property strategy will also be covered to ensure optimum
use and protection of the IP.
Availing of the program shall also require proponents and/or grantees to engage lead
users in the validation process and test run. At least two or more potential users
should be engaged during the course of the project for feedback and improvement of
the technology or product.
The assistance shall provide startups to refine their business models by establishing
product offerings or service packages, price ranges and financial targets and metrics.
Startups that will qualify for research grants shall enjoy the following benefits:
Access to funds
Startups shall have access to funds necessary for them to create, validate and scale
their technology and/or products. Startups shall be given opportunities to participate
in international startup events sponsored by PCIEERD together with the Department
of Trade and Industry (DTI). Lastly, startups shall have the opportunity to access
other fund mechanisms under the DOST system if necessary such as the patent
assistance program and venture financing programs of the Technology Application
and Promotion Institute (TAPI).
Startups shall have access to technical expertise available from the pool of
researchers and scientists under the Science and Technology Network.
For the testing and laboratory needs of startups, access to the DOST laboratories
and research centers shall be provided to proponents and/or grantees of the
program.
The program shall also provide access to the services of the DOST technology
business incubators hosted by different universities in selected areas nationwide.
These services include access to mentors and the network of companies under the
TBI; the pool of experts and consultants for different areas such as training, legal
and accounting; opportunities to participate in pitching and meet-ups with investors
organized by the TBIs.
V. Funding Track
There are two funding track under the Startup Nation Program:
A Pre-Incubation Grant that caters to startups with early stage prototypes that
require assistance in product improvement, market testing, data gathering, market
validation, business modelling, IP protection and product certification.
A. General Qualifications
The Startup Nation Program shall be available for technology-based startups only.
The technologies of the startups selected under this program should fall within
the sectoral priorities and programs of DOST-PCIEERD.
The grant shall follow a competitive selection process which shall commence
upon the end of each call for proposals using the criteria set herein.
This program shall give preference to startups incubated in the TBIs of the DOST.
Startups should have a least one year demonstrated capability on the technology
and/or product/process.
B. Qualifications
C. Requirements
All requirements identified in the PCIEERD A.O. No. Series of 2017 on the Guidelines for
the Provision of PCIEERD Grants-In-Aid Funds for Private Organizations (PO) and Industry
Partners shall be applicable for startups qualified under this program.
D. Counterpart Funding
The startup shall provide counterpart funds as specified in the MOA which the
proponent undertakes promptly to make available the funds and other resources, in
addition to the government GIA funds, required in the project.
The startup shall provide funding equivalent to 20% of the total project cost in the
form of actual cash disbursement, labor cost, land for the project site, facilities and
equipment to be used in the project.
A. Equipment Ownership
Equipment purchased from the grant shall remain property of PCIEERD or the
University Technology Business Incubator (TB!) that houses the startup. Non-TBI
startups may qualify for the program if the fund request does not include equipment
or capital outlay.
B. Disposition of Income
Any income derived from business activities as a result of the project may be
remitted back to DOST or be used to fund/augment additional and/or existing R&D
activities related thereto upon approval of PCIEERD. In no case shall the income
earned under a project be used to fund a new project not related to the original
intent of the fund.
1. A notice in the MOA or Technology Transfer agreement stating that: 'The intellectual
property under this transaction was created with support from the Republic of the
Philippines under (identify the agreement/s) awarded by PCIEERD. The Republic of
the Philippines has certain rights in the intellectual property under Art. VII of the
Philippine Technology Transfer Act of 2009."
For startups granted with R&D funds under this program, an exclusive license shall
be issued as the same will provide an incentive to the startup to bear the risks of
commercial development. Before the completion of the project, an exclusive
Technology Transfer agreement should be signed.
In case the startup ceases to be a Filipino company, the PCIEERD assumes the rights
to the IPs unless the Philippine government is appropriately compensated through
continuing royalty payment or sale of the licensed technology.
Aside from complying with Rule 12, Section 1 of the IRR of RA 10055 and PCIEERD A.O. No.
Series of 2017, the Memorandum of Agreement with PCIEERD and the startup shall
incorporate provisions for revenue sharing, consistent with Rule 15 of the IRR and the following
principles:
A notice in the MOA on the revenue sharing provision shall be included as follows:
"The PCIEERD shall have a share in all revenues from the commercialization of IPs
and IPRs from the research and development funded by PCIEERD."
Royalty payments of at least 20/0 of the gross sales for the i2Tech Track and at least
3% of the gross sales for the iScale Track, shall be agreed with PCIEERD and
indicated in the Memorandum of Agreement of the Project; provided, that the royalty
payments shall not be collected for the year if the financial status of the startup has
not exceeded its break-even annual income; provided, further, that the royalty
payments due to PCIEERD shall be waived if the startup is a licensee of a state
university-owned technology previously funded by DOST and/or DOST-PCIEERD and
such arrangements already include royalty payments due to the state university.
The PCIEERD and the startup shall mutually agree upon the terms of the revenue
sharing; and agree further, that a percentage (%) of the startup's revenues subject
to the Memorandum of Agreement and upon consultation with the startup shall be
remitted to PCIEERD or reverted back for use in the operations of the TBI that
houses the startup. Provided, that the use and scope of use of revenue shares
reverted back as operation funds of the TBI shall be approved by PCIEERD.
Failure to comply with the applicable laws, rules and regulations, particularly those
governing GIA programs and projects shall be considered grounds for the termination
of the grant; and
It is understood that these guidelines are consistent with the existing Implementing
Guidelines for GIA Programs and Projects. In case of conflict, the GIA guidelines shall
prevail.
This Administrative Order shall take effect immediately and supersedes all other issuances
inconsistent herewith.