We’ve seen firsthand how Southeast Asian climate tech startups are building resilience in the past few years and have been fueled by venture capital, which helps these businesses to grow beyond the regional scale.
However, as VC deals across the region are slowing down and mega-rounds are unheard of these days, founders are forced to face reality where one, capital is no longer “cheap”, sustainability is not optional and growth is no longer subsidised.
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Interestingly, the funding climate in both early 2024 and 2025 has shown mixed results. The total investment in Southeast Asian startups dropped by over 50 per cent year-on-year, with early-stage funding especially hard hit.
Why is this shift happening? And is this a signal that the region’s tech ecosystem is being reshaped, hopefully for a better one?
A shift towards pragmatism and alternative capital
In response to this shift, a lot of these startups are turning to alternative forms of capital. For example, family offices and operator funds are filling some of the early-stage void. These kinds of sources often have longer-term horizons, which then allows the founders to build their businesses with less pressure for rapid exits.
Another interesting shift, the revenue-first models are seeing a resurgence. For the longest time, startups have always prioritised user acquisition above all, but now, they are rethinking what sustainable unit economics actually look like.
For instance, in both Malaysia and Thailand, SaaS platforms in HR and logistics are surviving by keeping monetisation early and overheads lean. While in the Philippines, several fintechs have chosen strategic debt financing rather than equity dilution, which allows them to grow their loan books without ceding control.
Another great example is Indonesia’s Mekari, which scaled its suite of SME tools with minimal outside funding for years before raising a meaningful round. Even some of the region’s earlier success stories, such as Ninja Van or Carousell, are now more focused on cost discipline rather than the overall market conquest.
The risk of over-reliance on external capital
What this period is exposing is how deeply reliant Southeast Asia’s tech ecosystem has been on external capital and the distortions that have been created. Yes, we can agree that for years, startups were incentivised to chase growth at all costs, which often burned through millions to acquire users who were never going to convert.
In contrast to that, VC funds, the majority of which are headquartered in China or the US, were benchmarking local startups against global metrics and fully ignoring the low-yield nature and fragmented Southeast Asian markets.
So, this over-dependence led to a number of unhealthy behaviours such as inflated valuations, misaligned exit expectations and premature scaling. Even in some cases, it also meant that founders gave up too much equity too early, which then reduced their incentive to stick through long-term cycles.
Without easy capital, startups are now being forced to return to basics. This includes components such as pricing strategies, realistic path-to-profitability plans and even paying attention to customer retention.
With that said, the VC pullback also has its own risks. Yes, it is promising, but capital-intensive sectors, such as climate tech and healthtech, may struggle to survive without patient funding. On top of that, there is also the concern that early-stage innovation could be stifled if first-time founders can’t raise enough to test and iterate.
So, the region will need to support systems to bridge this gap and new financial instruments, possibly from government-backed funds, regional LPs or even corporate venture arms that are willing to invest with a longer-term view.
Towards a healthier, more durable ecosystem
Despite all the challenges that come, this correction might be what Southeast Asia’s tech ecosystem needs, even if the last cycle was driven by FOMO-fuelled deal-making and “frothy” capital, which is still rewarding style over actual substance.
This current slowdown is somewhat forcing a reset, which is one where founders are asked to show their discipline, exits are driven by value creation and VCs are expected to provide more than just money to fund.
The signs are already showing and these show that the transition is yielding a more durable ecosystem. Regional investors are starting to recognise that Southeast Asia’s diversity demands different kinds of success metrics and that growing a USD50 million profitable company in Kuala Lumpur or Manila may be more meaningful than chasing unicorn status in Silicon Valley.
In addition to that, this new phase will more likely favour founders with operating grit and not just the usual pitch deck flair. It will also reward startups that can maintain optionality in their funding paths, build real relationships with customers, as well as weather market shocks.
We can say that Southeast Asia is entering a post-VC era and leaving the post-startup era or at least, a world where venture capital is no longer the only way to grow, build and succeed. So, if the ecosystem can fully embrace this shift, what comes after that could be a more inclusive, resilient and balanced tech scene for the long term.