Despite the economic turmoil caused by the global health crisis, Southeast Asian startups have been experiencing consistent growth recently. The burgeoning startup ecosystem in Southeast Asia is facilitating and attracting more venture capital (VC) investments from the world. As a result, the recent VC trends in Southeast Asia are supporting a flourishing business landscape. 

Southeast Asia offers many opportunities for VCs, thanks to its large market size. Regional investment increased to $8.2 billion USD in 2020 from $1.2 billion USD in 2015. In the first half of 2021 alone, the region’s startup deals hit a new record, bringing in $4.4 billion USD.

A flurry of funding produces unicorns

The region’s startups enjoyed an incredible influx of capital in September 2021, with $2.8 billion USD in funding coming from at least 98 deals, an increase of 35% over the previous month. 

A number of the deals in September were quite large. Notable examples include a $578 million USD capital infusion for  Ninja Van, $400 million USD going to Advance Intelligence Group, and  $100 million USD added to the coffers of Carousell. 

Southeast Asia startups raised at least $1.71 billion USD in the first month of 2021

This latest round of funding allowed Carousell and Ninja Van to become the most recent tech firms in the region to reach unicorn status, with overall company valuations of over $1 billion USD each.   

Carousell, based in Singapore, originally debuted as a consumer-to-consumer platform for listing and selling second-hand items. It has now expanded to become an online marketplace including business-to-consumer transactions and is operating in 10 countries around the world. 

Also founded in Singapore, Ninja Van is a tech-enabled logistics firm that has become the region’s largest last-mile delivery service. Having already teamed up with some of the biggest eCommerce platforms in the area, such as Tokopedia, Shopee and Lazada, as their primary delivery service, the company’s latest funding included backing from China’s Alibaba. 

Solid expansion for startups

During the first two quarters of 2021, Southeast Asia hit a new record of 393 investments, besting the previous milestone of 375 in the first six months of 2019. The sum total of these new investments amounted to $4.4 billion USD. 

For the first half of 2021, India remained the most funded country among the emerging markets, with its startups raising $10.8 billion USD. But the nations of ASEAN tracked nicely with Indonesia the top destination for investment in the region, accounting for more than 50% of all the capital raised in the first half. Singapore followed, with 32% of funding coming to the startups of the tiny island nation. 

Holding the gaze of investors

The startup market in Southeast Asia has become increasingly attractive for the US and Chinese tech firms. Many of the largest tech companies, such as Google, Facebook and LinkedIn, have opened headquarters in the Asia Pacific region. One of the most appealing destinations is Singapore, as it has established itself as an ideal regional base for Western firms thanks to its developed financial and legal system.

With many foreign investors considering Southeast Asia to be one of the next great opportunities for growth on the internet economy horizon, funding deals are likely to continue to increase. China’s colossal tech companies Tencent and Alibaba are among the first to support early eCommerce development in Southeast Asia with heavy investments in Sea Limited, Lazada and other high-profile startups. 

American tech firms are also eager to get involved in the rapidly developing region, with giants such as Microsoft investing an undisclosed amount in Grab in 2018 and $100 million USD in Indonesian eCommerce firm Bukalapak. In 2020 Indonesia’s Gojek received $3 billion USD as Google, Facebook, and Visa joined Tencent in a Series F round of funding. 

A bright future for startups

The startup ecosystem in Southeast Asia benefitted significantly as online usage grew in 2020, with 40 million new internet users added to an already tech-savvy area. This increase brought the number of people connected digitally to 400 million, about 70% of the region’s population. The growing ratio of internet penetration here surpasses the global average.

Due to the pandemic, many people had little choice but to get online to work, buy groceries, conduct banking, or pursue education. As they adopt a more digital lifestyle, internet usage has increased to levels seen in developed countries.  

In 2020, the region’s internet economy remained at $100 billion USD gross merchandise value (GMV) despite the global recession. It is likely to continue expanding as more consumers and businesses go digital with a continuously supportive ecosystem and regulatory environment. 

Consumers have readily adopted digital payments, online shopping, web-based food delivery, and other services provided by Southeast Asian startups. The rising internet activity will trigger further changes to the VC trends in Southeast Asia and attract more talent, boosting significant market growth over the decade ahead.