SEA’s startup scene lacks a crucial layer of capital

In a little over a decade, venture capital has brought extraordinary changes to Southeast Asia. For starters, it accelerated digital adoption across a market of around 700 million people and helped build regional tech champions like Sea, Grab, and GoTo. It has also turned a once-overlooked region into a serious destination for technology investment, raising more than US$56 billion from 2016 to 2024.

Venture capital, however, was never meant to do every job in the capital stack. That’s becoming clearer as more companies move beyond the startup phase.

Image credit: Ulla

Across Southeast Asia and other non-US markets, the issue is no longer simply how to fund experimentation or early growth. Instead, it is how to finance the next stage: companies that have real products, real revenues, and real market positions, but are not yet an obvious fit for public markets, strategic acquirers, or traditional private equity.

These businesses are too mature for venture capital alone, yet too early in their institutional development, too dependent on founding leadership, or too unfamiliar to public market investors to price reliably for a listing.

The reason for this mismatch lies in where venture capital was built. The solution is not more venture capital, but the infrastructure that makes venture capital work: a sizable class of corporate acquirers willing to buy good companies before they become IPO candidates.

Many of the incumbents needed to play this role already exist across Southeast Asia, and a number have corporate venture units. The question is whether those units are being used to build acquisition pipelines or simply to chase returns.

Following the leader

The US venture model works so well because of the unusually deep financial system underpinning it.

Once a venture-backed startup reaches the point where it needs an exit event to continue its growth, the US offers plenty of avenues. These include liquid public markets, tech giants ready to make acquisitions, a big institutional investor base, and a capital market culture willing to assign exceptional valuations to growth companies.

See also: The execution gap killing corporate ventures in Southeast Asia

Under this model, a successful startup can plausibly aim for a large IPO, a strategic acquisition, or both. That’s what makes the venture math work.

No other market offers those conditions in full. China comes closest, but its capital markets are cyclical and policy-sensitive. In strong periods, private technology companies in sectors such as AI, electric vehicles, and robotics can achieve exits that feel almost American in scale.

In weaker periods, China’s liquidity dries up, exits stall, and investors sit on big portfolios of private companies they cannot easily monetize. Europe has produced world-class startups, but its exit environment remains shallower than America’s.

IPOs are at a decade low in Europe, the Middle East, and Africa, and US firms are the largest single group of acquirers. Too many of Europe’s best exit paths still lead to US buyers or capital markets.

Enter stage right: corporates