Sprout Solutions is the Philippines’ leading human resources (HR) and payroll management solutions provider, has closed its Series A round and raised approximately US$6 million of capital from investors such as Point72 Ventures, a U.S. investment firm who has chosen Sprout to be its first foray into Southeast Asia.
Other participating investors include prominent firms such as Dymon Asia, Next Billion Ventures (NBV), and Endeavor Catalyst. Existing investors, such as local firm Kickstart Ventures and Singapore-based firms Beenext and Wavemaker Partners, took part again after participating in Sprout’s late 2017 seed round that raised US$1.6 million.
Sprout Solutions is a software company that aims to help companies in the Philippines grow through their suite of back-end solutions that address HR, payroll, and recruitment difficulties.
The software-as-a-service (SaaS) company has introduced end-to-end processing and seamless automation across HR and payroll processes including employee 201 file management, attendance tracking and management, and compliance with government regulations, including automating 21 different payroll-related government forms. To date, Sprout has onboarded hundreds of Philippine-based businesses.
“The perception that the Philippines is a highly demanding investment environment has kept it off the radar of traditional Western investors,” said Patrick Gentry, CEO and founder of Sprout Solutions. Despite years of traditional Western investors shying away from the Philippines due to the challenging political and economic circumstances, Sprout has proven that achieving success as a tech startup is a matter of building a strong foundation of trust.
Growing a business in the Philippines from scratch is nothing like in Silicon Valley. The trust barrier here is so high, so you really have to focus on overcoming that obstacle before you start to see any success,” stressed Gentry “This means you need to have solid business fundamentals and solid revenue streams, but more than that, you have to do the right thing and take care of people before you can establish that trust,” he added.
Gentry noted that the primary driver of the business is all about building trust. According to him, every investment and innovation that the company has made since the beginning has been towards this goal. He attributes the company’s successful attraction of investors to this business philosophy.
To Gentry, becoming trustworthy means going out personally to meet customers to show that Sprout is a solid company, investing in getting ISO 27001 certified for information security management as well as third party certifications and training for its employees, and building a strong culture of trust within the company itself.
“It’s super exciting, because you have all these challenges that make it difficult for new businesses here, but you also have all these super high-quality tech startups beginning to appear,” shared Gentry when asked about his outlook for the country’s tech scene. “When they overcome these challenges, it’s a great indicator to capital investors that the company is really doing something right.”
Sprout represents this new generation of tech startups in the Philippines that have taken a drastically different approach. Whereas in recent years investments were based on selling big ideas or growth stories, investors now require real business plans, actual revenue, a path to profitability and put significant emphasis on being responsible, accountable, and reliable.
“Sprout’s innovative, technology-enabled platform helps companies of all sizes in the Philippines streamline and analyze their HR processes, while also offering a compliant and modern employee-centric experience,” said Pete Casella, Partner, Point72 Ventures. “We are pleased to support Sprout’s continued growth, product expansion, and mission to empower local businesses.”
Sprout is Point72 Ventures’ first investment in Southeast Asia, and NBV’s first in the Philippines. This reflects the growing interest in the Philippine market as an attractive location for injecting capital.
“Our lead investor, Point72 Ventures, brings a lot of strategic value as they have several portfolio companies in other parts of the world that are analogous to Sprout. We are really lucky to have top-notch Southeast Asia based investors – Kickstart Ventures, Beenext, and Wavemaker Partners – have been a big part of Sprout’s success already and continue to play a big part in our growth,” Gentry noted.
The corporate environment in the Philippines is quickly transforming to become much more conducive for new businesses to thrive. Not only is this helping the development of Philippine tech startups, it’s also putting the country on the global map for foreign investment interests.
The government is pursuing startup-friendly regulation, such as the Innovative Startup Act and the Ease of Doing Business Act, while new local venture capital groups are starting to appear, such as Aboitiz Equity Ventures (AEV), JG Summit’s JG Digital Equity Ventures (JG DEV), and Seaoil’s Novel Capital.
“What we’re doing is facilitating this massive migration from analog to digital, and this is going to have a huge impact on how Philippine society will function in the future,” revealed Gentry. “I love that international investors, both regionally and around the world, are taking notice and backing our vision. I’m really looking forward to the next five years in the Philippines – we’re going to see an amazing transformation in that timeframe.”