For years, Southeast Asia’s startup activity has revolved around its capitals – Singapore, Jakarta, Manila and Bangkok. These cities built the infrastructure, attracted the funding and became the launchpads for unicorns and IPO dreams. But in 2025, a new wave of cities is entering the spotlight, and they’re not the ones you’d expect.
From Bandung and Da Nang to Cebu and Penang, second-tier cities across the region are quietly transforming into viable alternatives for founders, digital nomads and tech workers. They’re cheaper, less crowded and increasingly better connected both digitally and physically.
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This decentralisation marks a shift not just in geography but in the broader culture of Southeast Asia’s tech economy.
What’s driving the shift?
Rising operational costs in major cities are pushing early-stage founders to reconsider their base of operations. In Jakarta, rent and talent salaries have reached levels that rival regional counterparts like Bangkok or Kuala Lumpur. In Singapore, bootstrapping a startup is often out of reach for all but the well-funded.
Meanwhile, remote work is no longer a choice; it is now an embedded expectation. Tech teams are becoming more distributed, giving founders the freedom to choose talent over location.
Governments have also stepped in. Several second-tier cities are now offering targeted grants, digital nomad visas and startup incentives to attract high-skilled professionals. With basic infrastructure and decent internet now widely available, these smaller cities are finally in a position to compete.
Bandung: Indonesia’s creative and digital capital
Often dubbed Indonesia’s creative city, Bandung is emerging as a vibrant innovation hub. It is ranked second in the country in the 2025 Global Startup Ecosystem Index, at 261 globally, just behind Jakarta.
Anchored by the Bandung Techno Park and educational powerhouses like Telkom University, this city donates a steady supply of tech talent, entrepreneurial energy and institutional gravitas.
Local startups range from fashion tech and gaming to edtech platforms serving rural schools. The ecosystem is also nurtured by Bandung’s proximity to Jakarta, allowing founders to tap into the capital’s investor networks without being caught in its congestion.
Da Nang: Vietnam’s rising digital frontier
Once known mainly for its beaches, Da Nang is now one of Vietnam’s fastest-growing tech cities. It recently jumped 130 places in the global startup ecosystem rankings, thanks to a mix of infrastructure investments, pro-business policies and international exposure.
The city’s tech scene gained momentum from hosting international events like the Solana Summit, which put it on the radar for Web3 developers and AI startups alike. Government support has also been steady, with favourable tax rates and access to tech grants for early-stage ventures.
Crucially, Da Nang benefits from a high quality of life, with relatively low living costs, stable internet connectivity and a growing pool of tech talent returning from Ho Chi Minh City.
Cebu: The Philippines’ underrated innovation zone
Long seen as the country’s outsourcing capital, Cebu has built on its BPO foundation to become a startup-friendly ecosystem in its own right. The Cebu IT Park, a modern business district complete with co-working spaces and accelerator programmes, is home to both local startups and satellite offices of international tech firms.
Filipino founders who once flocked to Manila are now returning to Cebu, drawn by lower overheads and stronger ties to the local workforce. The talent pool is young, English-speaking and tech-savvy, a legacy of the city’s call centre boom. And with better regional flight access and digital infrastructure, Cebu’s connectivity no longer lags behind.
Penang: Malaysia’s comeback kid
Penang’s startup scene is rooted in its manufacturing past. Known for its semiconductor and electronics industry, the city is now reinventing itself for the digital age. Backed by InvestPenang and other government agencies, Penang is seeing new momentum in areas like robotics, healthtech and green energy.
Startups here benefit from access to technical talent trained in hardware and engineering, a rare edge in a region that often skews heavily towards software. The city’s cost of living is lower than Kuala Lumpur, and its multicultural, cosmopolitan vibe makes it a draw for international founders and returning Malaysians.
Not without challenges
Despite the optimism, second-tier cities still face several hurdles. Access to venture capital remains concentrated in primary hubs, and most investors are hesitant to bet on startups they can’t meet in person or support closely.
Talent retention is another sticking point. Skilled workers often view smaller cities as stepping stones rather than long-term homes, and many still migrate to capital cities for career growth.
Scale is also a limitation. These ecosystems are growing, but often lack the density of mentors, accelerators and legal support that their bigger siblings enjoy.
However, the rise of regional angel networks, cross-border accelerators and digital grant platforms is helping bridge these gaps. Programmes like Seedstars, Endeavor and Startupbootcamp are now expanding their reach beyond capitals, offering founders access to funding, mentorship and global exposure no matter where they’re based.
A more inclusive digital economy
The decentralisation of tech hubs could be one of the most important trends for Southeast Asia’s digital economy in the next decade. By spreading innovation beyond capital cities, the region stands to benefit from more localised problem-solving, reduced urban concentration and a broader base of entrepreneurial activity.
If 2023 and 2024 were about survival and recalibration, 2025 seems to be the year of reimagination. Second-tier cities are no longer playing catch-up; they’re setting the pace.
And as the tech spotlight shifts across the map, Southeast Asia’s digital future might just be brighter and more balanced than ever before.