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Diosdado “Dado” Banatao, a Filipino technology innovator and venture capitalist in Silicon Valley, says Filipino entrepreneurs should understand their target market if they want to compete globally.
“The fundamental thing that we always use or a few things we look for a company to invest in is whether that company understands markets. How they are able to define a product to a given market.
They have to understand the dynamics of that market, velocity of revenue, size of the market, dynamics of whether it is growing or not, and volume of the market,” Banatao says during the Anvil Business Summit 2016 organized by the Association of Young Filipino-Chinese Entrepreneurs at Marriott Hotel Manila in Pasay City.
Tallwood Venture Capital founder and managing partner Diosdado Banatao
Banatao says a lot of failures in start-ups are simply because they miss the market requirements and they come up with products only to realize that no one will buy it.
He also cites the importance of innovation in growing a company and the economy.
“You have to compete on performance, price and a lot of other tangibles like consumption. At the end of the day, performance is the first criteria because the pattern is that you buy a gadget. Some technology comes in, you’re out. So that’s the reason why innovation is more important, how you create a product that no one can compete with for some time,” Banatao says.
Banatao, a son of a rice farmer from Cagayan province, speaks from experience. “When I became an entrepreneur, I estimated that no one will be able to compete with me right away because of the dramatic architecturing that I did on the PC [personal computer], reducing 300 components into three,” he says.
Banatao refers to the first PC chip set he invented, which became the first product of his company that still exists in almost all devices today.
Banatao left the family’s farm to train as a commercial airline pilot with Philippine Airlines, when he found no “true design jobs” in the Philippines after graduating with a degree in Electrical Engineering from Mapua Institute of Technology.
He pursued a Master’s degree in Electrical Engineering and Computer Science at Stanford University, “continuing [his] love in engineering, especially in mathematics and physics.”
He co-founded three technology startups including Chips and Technology, which he says is the fastest growing company in Silicon Valley in terms of profit.
“That’s an indication that if you have good design, you will sell your product. That’s a good lesson as an engineer when we’re trained to design, to create products. It’s coupled with an application that is very important for productivity,” Banatao says.
In his third company, “[he] modified one more time the architecture of the PC and that was the beginning of graphics acceleration.”
“That was the beginning of Windows and Microsoft where they were trying to come up with an operating system with a user interface much like what’s coming from Apple,” Banatao says.
“We defined a lot of the interfaces in the graphic subsystem in the PC which is still there today. When you write applications, we defined all of those things for the system,” he says.
Banatao has become a venture capitalist for more than 20 years now. He funds companies, which is something that “the Philippines is severely lacking.”
He says Silicon Valley “is what it is today because of entrepreneurs and investors.”
Banatao says five or 10 of Silicon Valley’s largest companies’ revenue could exceed the Philippines’ gross domestic product. Despite the Philippines’ six percent GDP growth in five years, Banatao says he doesn’t think it is sustainable.
“I don’t see the fundamentals of really forming those large corporations that can scale itself up in the same way that other countries have been using organizations or companies that are founded on a lot of explosive growth to innovation,” Banatao says.
Mentioning the gap between the rich and the poor, he says that the only way to disrupt the gap is to “create something through innovation.”
“I know there are a lot of very rich people here. There’s nothing wrong with being more rich but when you have enough and you live here, there is an obligation. I believe that one can help society in a big way,” he says.
“Do not just do charity. This thing about corporate social responsibility is mostly charity. We did our research in gift-giving. Charity destroys societies. It does not work. So when you do your corporate social responsibility, do something that leverages the mind of the receiver. Education is a good example. It is creating an opportunity for those brains, for those minds to produce. I think that we do have the responsibility,” Banatao says, briefly addressing the lag of education in the Philippines compared to other countries.
“We really need to up the capability of our universities. We are lagging way behind other countries even just in Asia in the capability of educating our engineers,” Banatao says.
“We’re as bright as anyone. I’m just an average guy. I went to Silicon Valley and got trained by the environment itself. We have to have that here in the Philippines. We’re not lacking in intellect,” he says.
He says among Southeast Asian countries, the Philippines is ahead only of Cambodia now. “A few years ago, we were leveled with Vietnam until it grew and went up in terms of welfare and other things.”
“Growing an economy is something that is so hard to do and in all my biddings when we started PhilDev [Philippine Development Foundation], almost every conclusion of growth in a sustainable way is about innovation. Entrepreneurship, if you think about it, is really what makes the mind, the intellect, the design capability more valuable than money,” Banatao says.
Banatao was a venture partner at the Mayfield Fund. He also held positions in engineering and general management at National Semiconductor, Seeq Technologies, Intersil and Commodore International.
He is currently the managing partner at Tallwood Venture Capital, a venture capital firm in Silicon Valley. Tallwood invests in unique and hard-to-do semiconductor technology solutions for computing, communication and consumer platforms.
His life illustrates a true rags to riches story. “My family was poor but only because I trained myself, I can do these things today. I think that is a lesson for all of us,” he says.