As Southeast Asia’s tech funding sinks, the search is on for a new identity

The first quarter of this year wasn’t rosy for Southeast Asian startups.

The number of seed to series C startup deals has hit the lowest mark in three years. Spooked by devaluations in India and the US, investors tell Tech in Asia they’ve tightened their purse strings.

“2016 was a reality check year for everyone,” Jeffrey Paine, managing partner of Golden Gate Ventures, tells me.

According to Tech in Asia’s data, ecommerce investments appear to be down for two straight quarters, though they still form the bulk of deals in Q1. Fintech, while highly touted and now seeing more deals than ecommerce, has not experienced meaningful gains yet.

What is going on?

“It’s not a matter of lack of funds from VCs. There are still a lot of funds available,” says Christopher Quek, managing partner of Tri5 Ventures.

He’s right – it’s not like Japan’s aging population and stagnant economy is going to solve itself, which means Japanese investors will continue to look at Southeast Asia with hungry eyes.

What investors seek now is clarity – in terms of what the next opportunities are. Once that happens, dealflow will pick up again, Chris adds.

What these investment themes are isn’t clear yet. It seems ecommerce and payments are no longer fields that startups can play in, as global and regional tech giants push for consolidation.

See: Southeast Asia’s fintech pivot

So what’s next? Venture funding, like any industry, is cyclical. So a rebound in Southeast Asia seems like a certainty. But what will the rebound look like? Will a single category dominate the dealflow, much like how ecommerce once did?

Real estate seems promising. Two such startups, 99.co and MetroResidences, raised series A rounds recently.