SEA VCs diverge on paths to AI gold

With additional reporting from Jofie Yordan

When early-stage VC firm Analog Ventures began its due diligence for a seed round investment in energy startup Blue Whale Energy last year, its analysts had an epiphany: Various industries and sectors – from energy to biotech – are enjoying a boost in productivity and investor interest, thanks to AI.

Blue Whale, a virtual power plant that helps solar power-enabled buildings sell their extra capacities to the grid, is capitalizing on a growing demand for energy-efficient solutions in Singapore.

The company exemplifies a growing trend of early-stage VC firms in the region that are concentrating their investments in AI startups, or in adjacent sectors like robotics, semiconductors, and energy.

While Analog previously focused on SaaS and fintech players, it has only backed AI-adjacent firms since its investment in Blue Whale. Going forward, AI-adjacent sectors will remain its key focus.

Several VC firms tell Tech in Asia that the AI boom has prompted lengthy discussions on how the tech will affect their investment mandates. For some, this has meant moving their capital to AI development hubs like the US, leaving Southeast Asian startups with a new playbook for fundraising within the region.

Jumping on the AI train

When Manila-headquartered Kickstart Ventures launched its US$180 million fund in 2020, it picked startups both in and out of Southeast Asia that had products and services that could be brought home to the Philippines.

Before the AI hype, these included local consumer firm Pickup Coffee and Singapore-based fiber optics maker Transcelestial.

Since 2022, however, Kickstart has turned its attention toward AI companies. This is in response to demands from its limited partners (LPs), listed conglomerate Ayala Corporation and Bank of the Philippine Islands, the country’s second-largest bank.

“Our mandate has always been to find technologies in and out of Southeast Asia whose technologies could be scaled with the help of, and could help our limited partners,” Kickstart Ventures general partner Mike Mate tells Tech in Asia. “AI is probably the biggest and most applicable example of that kind of technology.”

Kickstart’s two latest AI investments, both based in San Francisco, have the potential to fulfill this mandate. One of them is Lydia.AI, an insurtech startup that uses AI to help financial institutions improve their underwriting capabilities. The other is inference platform Featherless.AI, which sells API access to open-source AI models.

Keeping capital in SEA

AI as a tool, not an investment thesis