Funding for Southeast Asian-Based Startups Dives to Lowest in Five Years, Says Report
Most startups across Southeast Asia have gotten off to a rocky start this year. A study from the Singapore-headquartered media company Deal Street Asia revealed fundraising for startups are the lowest it's been in half a decade.
Startups in the region secured a total of $1 billion in the first quarter of 2024, down 41 percent from the same period last year. The funding was also less than half the $2.2 billion in the fourth quarter of 2023. Overall, startups locked in 180 equity deals, lower than the 193 rounds the year before.
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"After a deep correction in 2023, expectations were high for a rebound in venture capital investments in Southeast Asia this year," the report said.
It added, however, that the ongoing global liquidity crunch, as well as its impact on valuation and investor appetite for late-stage investments or big-ticket funding rounds, may have driven the steep decline.
Only five late-stage deals were sealed by Southeast Asia-based startups from January to March, based on the report. Also, not a single venture raised $100 million, a first in more than five years.
Southeast Asia peaked in funding in the fourth quarter of 2021, with venture-backed startups raising a staggering $8 billion. The momentum was sustained until the first three months of the following year, when the region witnessed 312 equity funding rounds; but fundraising had gone on a downward trend since.
Across all startups, venture capital funding for e-commerce hit a record-low, even with improvements in consumption in the past few months. The study pointed to investors shying away from capital-intensive bets as the major cause. Ten e-commerce startups raised only $18 million in the first quarter—a far cry from 2021, when the sector raked in up to $1.2 billion. The funding drought was particularly felt in Indonesia, which has traditionally been the primary investment destination.
Capital drought seen to persist
Worse, things may still not be looking up for Southeast Asian startups in the coming months, according to the report.
The late-stage capital drought is projected to continue, with financial headwinds such as the geopolitical turbulence strengthening in the Southwest Asia and North Africa (SWANA) region, as well as the United States-China decoupling. Experts, however, are still optimistic.
“We are fortunate that Southeast Asia remains relatively stable, despite the geopolitical turbulence happening throughout the rest of the world. In many cases, the region’s neutrality has benefited from some of the developments,” Susli Lie, a partner at Monk’s Hill Ventures, said.
Southeast Asia, as cited in the report, is seeing a surge in domestic consumption, with travel picking up and the middle class expanding — “insulating the region against some of the incoming headwinds.” At the same time, the global supply chain diversification away from China is another factor paving the way for more foreign investments to flow into the region.
