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Why South-east Asia still holds much promise for startups and venture capital

Valuations have been crushed and funding pulled back, but there’s room for optimism

IS SOUTH-EAST Asia biting the dust in the global startup race? South-east Asia’s startup scene, still very nascent, only began to bloom in the last decade. But are we lagging behind, struggling to keep pace with other global tech powerhouses? Now is the moment to critically examine our trajectory and determine if the South-east Asian startup scene needs a stern reality check.

The region’s growth potential is staggering. Forbes predicts that by 2025, South-east Asia’s technology startups could reach an astounding valuation of US$1 trillion by 2025, trebling from US$340 billion in 2020.

Indonesia, the largest e-commerce market in the region, commands nearly half the entire market share. Moreover, Indonesia’s economy is expected to grow by 4.8 per cent in 2023 and trend higher at 5 per cent in 2024, as the commodity boom wanes and domestic demand normalises, the Asian Development Bank forecasts.

However, investment in South-east Asia is experiencing a slowdown, with venture capital (VC) funding plunging by 58.6 per cent in the second quarter of 2023, according to DealStreetAsia. Startups raised only US$2.13 billion, compared to US$5.13 billion in the same quarter of 2022.

Other headwinds include higher interest rates triggered by escalating inflation. Economists have also expressed concerns regarding lower-than-expected growth in South-east Asian economies, signalling a need for careful observation and strategic planning.

Against this backdrop, the presence of VC dry powder, combined with demographic factors favouring South-east Asia, provides a ray of optimism.


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