Southeast Asia’s venture capital funding falls back to 2016 levels

SOUTHEAST ASIA: Southeast Asia’s venture capital industry has fallen back to levels last seen in 2016, the pre-unicorn era—a time when Grab had just become a billion-dollar company and there were hardly any other unicorns in the region, Asia Tech Review reported, citing a new report from Singapore’s Cento Ventures.

“Worryingly, that’s for both the amount of dollars spent and the number of deals completed,” the technology news website noted.

The funding surge during the pandemic, when investors turned to remote deal-making and chased opportunities across new sectors, has since faded. Back then, the region looked promising, with Grab and Gojek preparing for public listings, Sea’s stock soaring, and businesses from digital stock trading to neobanks and quick commerce gaining traction. However, figures now show that while other emerging markets such as Latin America and the Middle East have recovered, Southeast Asia has failed to rebound and continues to lag behind.

The report noted that narratives about Vietnam becoming the next China or the Philippines being a key growth market have not materialised as expected, although digital financial services (DFS) in the region made up nearly three-quarters of all venture capital funding in the second half of last year.

Centro Ventures noted, “Signs of life are reappearing—mainly in digital financial services (DFS)—but the rebound is badly lagging peers. Even in the best case, Southeast Asia will be at least a year behind the recovery curves of India and LatAm.”

While it pointed to progress in mergers and acquisitions (M&As), particularly smaller deals, it said more acquisitions alone may not solve the problem.

Investor confidence has already been hit, with Grab’s shares trading at about half their debut price and Gojek valued at roughly a quarter of its peak. Beyond that, Southeast Asia also lacks a strong pathway to IPOs, making it harder for investors to secure the exits they need.

Meanwhile, Hong Kong’s pipeline of tech listings remains busy, and India is moving forward with significant IPOs from major firms. /TISG

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