Southeast Asia’s tech boom has stalled. Can it find its spark again?
For the fourth consecutive year, the otherwise warm and sunny Singapore continues to battle a prolonged and crippling funding winter.
Whilst Singapore continues to attract 92% of South East Asia’s (SEA) tech startup funding, as per recent reports from the data intelligence platform, Tracxn, the overall funding raised in the region in the first half of the year has dropped by 24% compared to the second half of 2024, to just US$2 billion ($2.6 billion).
Early-stage funding has been hit the hardest and has dramatically dropped by 74% in the same time period.
The month of July saw only 12 seed and early-stage rounds, totaling just US$68 million in funding — a decrease of approximately 77% compared to June 2025 and the same month last year.
Even FinTech, the darling of the startup ecosystem in Singapore, has seen a massive erosion in seed and early-stage funding in recent times. Collectively, both stages have seen a depressing drop of nearly 63% in deal value in the first half of this year, compared to the same period last year.
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Whilst a handful of late-stage deals did compensate for the poor show at the earlier stage, what is concerning is that we have produced only one unicorn, Airalo, this year, and none of the tech companies have chosen to list on SGX.
Whilst it was heartening to see two Singapore-based companies, Concorde and Antalpha, list on NASDAQ, a third one, Mirxes, chose to list in Hong Kong instead.
The emergence of the funding winter was a global phenomenon, as the economy transitioned out of the zero-interest-rate era following the Federal Reserve's interest rate increase in the US by the end of 2021.
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Venture-backed startups, accustomed to operating in a ‘raise-and-burn’ paradigm, suddenly had to tighten their belts and find a path to breakeven and profitability, something they hadn’t built a muscle for in the era of free money.
After three years of tightening, while Western markets are gradually emerging from the funding market thanks to deeper capital pockets and the rapid emergence of AI-native startups, we aren’t yet seeing a similar trend in Singapore and Southeast Asia.
This is because of a combination of factors, including smaller domestic markets, lower purchasing power, fewer multi-bagger exits that fuel cash and confidence, and a relatively lower maturity of the venture ecosystem. Additionally, dry powder is finding lucrative investment opportunities in larger markets such as the USA, China, Japan, India and Australia.
Why the startup engine has stalled
To me, as an entrepreneur, investor, mentor, and active member of the ecosystem in Singapore for the last two decades, the situation looks grim. It appears to be in a limbo, but it presents us with an opportunity to rethink and reimagine Singapore’s priorities and objectives concerning contributing to the global technopreneurship economy.
The question that we all need to ask and reflect on is whether this is a temporary blip due to the ongoing uncertain, global financial and geopolitical situation?
Or is there a systemic change underway due to a paradigm technological shift and the evolving socio-economic fabric of Singapore?
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My anecdotal hunch says that it is more likely to be the latter.
The advent and rapid proliferation of artificial intelligence (AI) is not only eroding the moats around what were previously considered predictably scalable business models, such as enterprise SaaS, but it is also making it easier to start new ventures with far fewer people on board.
A conversation with a few serial entrepreneurs in my portfolio from Singapore revealed that their new, AI-powered ventures required only two people to get started, compared to the five to six they needed for their previous ventures back in 2019-2020.
However, even though it is theoretically cheaper to launch a new AI-powered venture, the same entrepreneurs complained to me that they had to eventually shut down their startups, as no VCs in the region were willing to lead the seed rounds, despite a few of them having bought into their thesis.
Most of the VCs were either doubling down on their existing winners or were investing in other larger markets in Asia, such as Australia, China, Japan or India, or their funds didn’t yet have mandates to invest in AI-first businesses.
The angel investors they had approached declined to invest, either because they had access to opportunities in larger, scalable markets like the USA, China, India and Australia, or had turned risk-averse, as many of them were not sure of exit opportunities, given the lack of large follow-on institutional rounds in the region.
There have been a few private exits in the last 12-18 months, but nothing to write home about. According to reports from DealStreetAsia, most venture capital funds that invest in the region are reporting below-par Distribute-to-Paid-In Capital (DPIs) and are struggling to meet fundraising milestones.
Interestingly, a couple of Silicon Valley-based investors showed interest in cutting large early-stage cheques, provided the founders moved their home base to their time zones, which wasn’t feasible in many cases.
Eventually, that was the end of the entrepreneurial zeal of a few founders, who returned to the shores of corporate roles after feeling dispirited and disheartened that their venture lacked the wings and fuel it needed to fly.
The Singapore paradox
The funding ecosystem across South East Asia has also been impacted by fraud and governance challenges, following recent episodes at eFishery and Zilingo, which have further slowed down investments and raised questions about the ecosystem's maturity.
Compared to when I embarked on my entrepreneurial journey fifteen years ago, Singapore’s cost structure has also undergone significant changes, with rising inflation at approximately 2% per annum over the same period. The island-state is often ranked as one of the most expensive cities globally in which to operate.
Whilst it remains one of the easiest places to start a company and conduct business, operating costs, especially those related to attracting and retaining high-quality talent, can be prohibitive.
Tighter immigration controls further limits the talent pool. Whilst we have never had a large domestic hinterland, ASEAN as a market for early stage ventures hasn’t necessarily lived up to its promise yet, given that unlike the EU, it isn’t an unified economic block. Moreover, purchasing power and spending appetite is relatively low. One has to devise a separate go-to-market strategy for each of the 11 member states, which doesn’t help scalability.
Having said so, as a startup ecosystem, Singapore ranks 4th globally with over 3,024 active startups and is blessed to have a vibrant ecosystem of university-led incubators, accelerators, entrepreneurship clubs, a plethora of grants, global conferences, community events, and enjoys active participation and support from the government, which has to be one of the most proactive and pro-business setups globally.
The question, though, is how many of them are relevant and equipped to scale globally, are future-ready to compete and dominate markets in the era of AI, and can help drive positive exit stories for all stakeholders to kickstart a sustainable, virtuous lifecycle for the startup ecosystem?
How can Singapore create the next generation of SEA’s and Patsnaps?
How can the likes of homegrown successes like Intellect and Qapita’s become scale globally?
How can Singapore rise to the challenge of creating its own version of Cursors and Lovables, new-age AI ventures based in Silicon Valley that have scaled up to US$100 million annual recurring revenue (ARR) in less than a year? Or an India-based EmergentAI that breached US$10 million ARR within just two months of incorporation?
In my view, the answer perhaps lies in Singapore falling back on its core strength of doubling down on innovation and intellectual property creation on its home turf by unlocking commercial value through a massive, accelerated internationalization drive through beachheads in large, global developed markets such as the US, the Middle East, Australia and Japan.
These ventures need to be ‘born global’ and AI-native from the outset, solving complex, real-world business problems in those demand hubs, leveraging the pioneering, deep-tech research capabilities that Singapore has been nurturing for decades.
A structure with a commercially savvy co-founder in-market to assess demand, build partnerships, and drive revenue growth, paired with a technical, innovation-focused co-founder rooted in Singapore, could be beneficial.
Alternatively, pure-play deep tech startups from Singapore could take the B2B2C route by licensing their IP through global partnerships via the 7,000+ MNCs that are headquartered here.
Either way, we need to continue to ensure that our island-city can produce and invite the best deep-tech researchers and founders, incentivise the thousands of family offices in town to invest in these ventures, protect the intellectual property generated, and, more importantly, create accelerated internationalisation pathways that capture value through scalable, commercial deals in key developed markets.
Singapore has already taken some bold strides on the supply side to develop the deep tech ecosystem through A*Star’s capability development programs, such as NATi, NSTIC, AIMfg; research partnerships with MNCs such as Sanofi, Procter & Gamble, Rolls-Royce; scholarship programmes to attract global researchers, and partnerships with venture builders such as ClavystBio and Xora Innovation.
On the funding side, SEEDs Capital has increased the investment cap for deep tech startups from US$8 million to US$12 million. Last month, NUS committed US$150 million to invest in deep tech firms, both directly and indirectly.
At the Singapore chapter of TiE, a global entrepreneurial ecosystem that I currently head, we launched the TiE Elev8 programme in partnership with HP Garage 2.0 to create a thematic accelerator that catalyses the internationalisation of regional startups innovating on the edge.
ACE.sg and the Global Entrepreneurship Congress also drive their internationalisation efforts.
Several disparate initiatives are being championed by different bodies, but a central entity is needed to bring them together under a unified national programme, creating a synergised movement akin to the Smart Nation programme, but for the accelerated internationalisation of deep tech ventures.
This could be one of the suggested workstreams that is considered by the ongoing feedback gathering efforts of the Singapore Economic Strategy Review team.
What got us here in the last 60 years will not necessarily help us thrive in the coming decades. As Singapore charts its course SG120, we must stay relevant in the global economy by taking bold bets and leveraging our unique strengths.
One of those is deepening our deep tech capabilities through a myriad of real-world use cases and taking them to the world through accelerated internationalisation.
Prantik Mazumdar is a serial entrepreneur and venture investor and acts as a digital transformation catalyst in organisations to drive sustainable change and impact. The president of TiE Singapore started his entrepreneurial journey with Happy Marketer in 2011 where he spent a decade building and scaling up one of the best and most awarded independent digital marketing services firms, until his exit in 2019, when the firm was sold to Merkle, part of Dentsu International. He is an active angel and venture investor, mentor, advisor and speaker through organisations like TiE Singapore, Jungle Ventures, Quest Ventures, NUS Angel Ventures and is an entrepreneur-in-resident at INSEAD.
Disclaimer: The views expressed are Prantik’s personal views, and not represent the organisations he’s associated with.
