SEA startups got $5.5b funding in 2023, lowest since 2018: report

Photo credit: Gunawan Kartapranata, via Wikimedia Commons

Although the tech winter persisted, Southeast Asia’s tech sector still made 855 investment deals in 2023, according to a January Capital report. This is higher than the 760 deals in the year prior, and the second highest since 2018.

However, the region’s startups collectively only raised US$5.5 billion last year. It’s more than a 30% fall from US$8.4 billion in 2022, and is the lowest total capital raised since 2018.

The report, which was done in collaboration with January Capital’s affiliated platform Alternatives.pe, compiled data on over 20,000 companies from 2017 to 2023.

Much of the decline, though, had to do with later-stage deals. In 2023, both deal count and investment amount shrank for series B and C+. In contrast, early-stage (seed or series A) ventures remained robust, with an uptick in deal count and capital invested.

In terms of markets, Singapore and Indonesia were the primary beneficiaries. The city-state, in particular, witnessed the biggest increase in deal flow and capital investment in 2023.

The report also found that pre-money valuations remained largely stable at the seed stage. Series A, however, faced a downward re-rating, likely reflecting a trend of investors evaluating startups more rigorously.

Deal sizes at the seed stage hovered around US$1 million to US$2 million, with series A being consistent in Singapore and Indonesia but fluctuating in other ASEAN markets. Series B deals aligned with historical norms, settling in the US$10 million to US$20 million range.

However, there were significant year-on-year changes for series C+ deal sizes due to fewer data points.

Sector-wise, the SaaS, healthcare, and ecommerce sectors saw the most substantial increase in deal count, driven by investors channeling funds into proven business models. Fintech and ecommerce continued to dominate funding, while healthcare, F&B, and AI sectors showed positive growth from 2021 through 2023.

Notably, ecommerce deal count reverted to pre-pandemic levels, with capital investment in the sector falling below US$750 million, primarily due to the absence of mega financing rounds. Fintech valuations decreased across all stages, mirroring global trends, with series A valuations being greatly affected.

Valuations declined across most sectors too, especially at the seed and series A stages, with the most significant drops found in ecommerce and fintech. In contrast, SaaS and F&B valuations remained resilient.

See also: Why Grab’s shares declined despite its ‘strong’ Q4 results