Southeast Asian tech undergoes a funding and playbook reset

At the Tech in Asia Conference 2023 in Jakarta last October, 500 Global managing partner Khailee Ng called for a halt to the constant griping and gossip-mongering about Southeast Asian startups.

“Why do you want to bitch about them? I’m sure everyone’s going through a hard time,” he said.

Times are hard, indeed. More than two years into the tech winter, many founders in the region are grappling with the sobering reality that easy money is drying up.

Is the tech bubble bursting in Southeast Asia? / Image credit: Timmy Loen

The fallout has been particularly acute in the past two years. Data from Tech in Asia’s layoff tracker shows that at least 12,300 employees were axed from tech companies in Southeast Asia between January 2022 and January 2024. The actual number is likely much higher.

A recent report by January Capital and Alternatives.pe found that tech funding in the region dropped to just US$5.5 billion in 2023, a 30% decline from US$8.4 billion in 2022.

Tech in Asia data reveals that at least 21 startups in Southeast Asia attained unicorn status in 2021. Only eight startups achieved this milestone in 2022 while eFishery was the sole addition to the billion-dollar club in 2023.

Despite these figures, the outlook is far from all doom and gloom. The region’s population of 650 million still offers immense potential for tech disruption. Its digital economy was projected to deliver US$100 billion in revenue in 2023.

Still, one might wonder: Where is Southeast Asia’s tech ecosystem headed?

Is the party for cheap capital over?

In a June 2023 investor survey conducted by Preqin, only 31% of respondents viewed Southeast Asia as the most promising venture capital market, down from 48% in 2022 and 46% in 2021.

Meanwhile, sentiment towards India surged and surpassed Southeast Asia.

But does that indicate waning enthusiasm for the region among investors?

Analysis by Dmitry Levit, who leads Cento Ventures’ biannual SEA tech investment report, suggests a slowdown of mega deals in the first half of 2023. Such deals are worth over US$100 million and often financed by global investors.

More dry powder or drying up?

Greener pastures beyond Southeast Asia?