In the dynamic world of venture capital, the key to strategic investments lies in access to reliable data. As we reflect on the first half of 2024, it’s essential to ask: How did the VC landscape in Southeast Asia (SEA) perform?

At MAGNiTT, we are the leading venture capital data platform specialising in Emerging Venture Markets, including the Middle East, Pakistan, Türkiye, Africa, and now, Southeast Asia.

The SEA market stands as a crucial player in the global map of emerging venture markets, presenting a nuanced funding landscape in H1 2024. Our numbers show that despite facing challenges, the region’s resilience and adaptability continue to shape and strengthen its investment ecosystem, demonstrating its pivotal role in the global venture capital scene.

So, now we answer the question: What do the numbers say about the first half of the year for the VC markets in the region?

Total funding: A comparative resilience

SEA’s total funding in H1 2024 amounted to US$2,209 million, marking a 31 per cent decline from H1 2023. While this represents a significant drop, it is notably the smallest year-on-year decline compared to MENA’s 34 per cent and Africa’s 57 per cent. 

Investor activity: A mixed bag

The region experienced a slight two per cent decline in unique investors, with 447 participating in H1 2024. In contrast, MENA experienced a 32 per cent YoY increase in unique investors and displayed higher volatility in the number of participating investors over the same period.

However, international investors continue to play a pivotal role in Southeast Asia, contributing 73 per cent of all estimated capital deployed and comprising 60 per cent of the investor base. This international engagement underscores the global confidence in SEA’s long-term potential despite current fluctuations.

Deal flow: A significant slowdown

SEA recorded 235 deals in H1 2024, a 26 per cent decrease from H1 2023. 

This downturn is stark, with Q2 2024 witnessing the lowest number of deals since Q4 2017. The decline in deal flow points to a cautious approach among investors, potentially driven by economic uncertainties and shifting market dynamics.

Also Read: H1 2024 was a remarkable first half for e27, but we have only just begun

In fact, only 231 investors participated in Q2 2024—the lowest number seen in the last nine quarters.

Historical context: A peak and a trough

Reflecting on recent years, SEA’s funding landscape has experienced significant highs and lows. 

Funding peaked at US$18.3 billion in 2021 over 854 deals. However, the subsequent decline was steep, with US$7.6 billion in funding and 619 deals in 2023. 

H1 2024 continued this downward trend, marking the lowest first half in six years with a 31 per cent decline in total funding and a 26 per cent drop in deal numbers compared to H1 2023, reflecting a cooling period post-2021/2022 peaks against the backdrop of higher global interest rates. Rising interest rates have prompted international investors to focus on their home markets, substantially reducing capital flow into MEGA and late-stage funding rounds.

Sector highlights: Diverging fortunes

Digital transformation is a key driver of economic activity in Southeast Asia, with governments investing heavily in digital infrastructure through initiatives like Indonesia’s “100 Smart Cities” and Singapore’s “Smart Nation” program. This has accelerated the adoption of digital technologies in e-commerce, fintech, and healthtech. 

According to the Tech for Good Institute, the region’s online economy is expected to exceed US$200 billion by 2025. The tech-savvy population and entrepreneurial spirit further enhance this ecosystem, ensuring sustained high levels of VC activity.

FinTech remains the top-funded industry, albeit with a 32 per cent YoY funding decline. The e-commerce/retail sector faced the steepest drop, plummeting 51 per cent year-on-year due to the absence of late-stage investments. In contrast, sectors like IT solutions, gaming, and manufacturing experienced growth, driven by large deals that have injected new momentum.

A forward-looking perspective

Despite the challenges, the startup ecosystem in Southeast Asia demonstrates resilience and adaptability. The decline in funding and deal flow is a reminder of the regional venture capital landscape’s vulnerability to broader economic trends. However, the sustained interest from international investors suggests confidence in long-term VC growth within the region. 

As SEA navigates this period of adjustment, the focus on sectors showing robust deal activity could pave the way for a more balanced and sustainable investment environment.

Read the full H1 2024 SEA Venture Investment Premium Report here.

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CarbonEthics, an Indonesia-based developer of tech-enabled natural climate solutions, has completed a US$2.1 million seed round of financing led by Intudo Ventures, with participation from several strategic angel investors. 

Led by Bimo Soewadji (CEO), Jessica Novia (Chief Impact Officer), and Innandya Kusumawardhani (COO), CarbonEthics blends environmental impact and commercial impact to restore natural ecosystems, help businesses on their decarbonisation journey, and create new revenue sources.

Also Read:  What is left behind in our conversation on climate change

The 5-year-old company is working to regenerate destructed forests into protected forests, combining grassroots approaches with technology. It also advances social impact by directly enhancing the livelihoods of local community partners and thriving biodiversity.

CarbonEthics offers three core solutions:

1. Nature-based carbon projects: protecting ecosystems to sequester carbon, enhance community livelihoods, and safeguard biodiversity.
2. Tree planting: supporting ecosystem rehabilitation efforts, focusing on blue carbon ecosystems.
3. Carbon consultancy: offering ESG (environmental, social and governance) and policy advisory to help clients meet carbon reduction targets and comply with relevant regulations.

One of CarbonEthics’s notable features is its holistic approach to nature-based carbon projects under the CCB (carbon, community, and biodiversity) metrics. Its projects are designed to deliver measurable benefits across all three areas beyond carbon.

The climate tech startup taps into Southeast Asia, a region projected to provide approximately 30 per cent of the world’s carbon offset supply by 2030 through nature-based solutions. 

Also Read: Climate tech startups can play a role in helping SMEs bridge sustainability, digital transformation: Paessler

CarbonEthics partners with various stakeholders from private companies, state-owned enterprises, government agencies, and non-governmental organisations to assist them in their decarbonisation journey. It has also established strategic partnerships at the international, national and local levels, such as with Form International, the Indonesian Chamber of Commerce and Industry (KADIN), and Transjakarta.

To date, the Jakarta-based venture has completed carbon project pre-feasibility studies for over 4,200,000 hectares of land with a carbon project potential of more than 1 million tonnes of verified carbon units CO2e/year, while planting approximately 288,000 biotas—mangroves, seagrasses, seaweeds, and corals.

The company has partnered with over 300 businesses and institutions, supporting 284 beneficiaries, 22 per cent of whom are women.

With this round of financing, the startup will enhance its portfolio by securing additional carbon projects and recruiting top-tier technical experts to better serve its clients’ needs. By 2030, it aims to protect and restore 8 million hectares of land under management and deliver more than 160 million tonnes of CO2e impact while creating a sustainable economy for more than 50,000 local beneficiaries and restoring biodiversity.

In 2023, CarbonEthics raised US$220,000 in pre-seed funding from Spiral Ventures and Ecoxyztem.

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How does a startup bring digital transformation to schools in Indonesia? CARDS by Cazh may have the answer.

CARDS by Cazh is a comprehensive SaaS platform designed to streamline educational institutions’ operational and academic systems. By integrating administrative and academic functions, CARDS enhances school management and allows for more efficient daily operations.

It digitises traditionally cash-based transactions, such as fee payments and student purchases, addressing common issues like poor record-keeping, monitoring challenges, and potential fraud.

On the academic front, CARDS by Cazh provides a solution for parents seeking better insight into their children’s school activities. The platform offers real-time academic progress monitoring, extracurricular participation, and financial transactions.

This level of transparency and accessibility empowers parents to stay connected and informed, no matter where they are, fostering a stronger link between home and school.

Also Read: Why GoImpact believes that education is the key to promoting ESG investment

CARDS by Cazh is one of the six promising startups in the ninth cohort of EduSpaze edutech accelerator programme, presents an excellent opportunity for startups, providing seed funding, and access to a well-established regional network of schools, universities, mentors and investors within the edtech landscape.

e27 contacted Muh. Arif Mahfudin, Founder and CEO at CARDS by Cazh, to learn more about their mission and how they aim to achieve it.

The following is an edited excerpt of the conversation.

How did your product come to be? What is the product development like?

CARDS originated from the founder’s experience observing the inadequacies in educational administration, particularly in tier-2 and tier-3 cities. The existing systems were not aligned with the needs of users (parents), most of whom are digital service users. Parents who sought convenience could not get it from schools due to the lack of technology.

In 2021, we validated our service in boarding schools. Our initial service offering in these schools included managing students’ pocket money and payments, which parents could control through a mobile app.

Our service was well-received, and the features have continued to evolve according to the needs of the schools, making it applicable across all school types, including boarding schools, private schools, and public schools.

Who are your users, and how do you acquire them?

Our service is used by the entire school community, including staff, teachers, students, and parents.

CARDS targets the B2B market by directly approaching schools through our sales team, forming partnerships with other companies, and collaborating with school organisations.

Additionally, our referral programme has effectively brought in new leads from existing schools, and these new leads have a high potential to join us due to the trust and positive experiences of previous users.

Also Read: Fostering inclusion: AI’s role in SEA’s education sector

What are the most important milestones CARDS by Cazh has made recently?

From 2021 to mid-2024, we have successfully managed over 400 schools with over 80,000 students on our platform.

Our vision of transforming schools digitally is becoming more evident, with parent users reaching more than 50,000 by mid-2024. They actively transact on our platform for school fees and topping up student pocket money.

Recorded transactions reached 180,000 with a total of S$4.3 million in 2023, and we predict this will double in 2024.

We are also collaborating with several national banks in Indonesia to provide our solution to their customers in the education sector.

How does taking part in Eduspaze help your growth as a startup?

Participating in Eduspaze offers us invaluable mentorship, networking opportunities, and access to a wider educational technology ecosystem.

It helps us refine our product, expand our market reach, and accelerate our growth by connecting us with key stakeholders in the education sector.

EduSpaze has provided us with new insights as founders, helping us better understand edutech. This complements our experience in building a platform that is strong not only in administrative and financial solutions but also in providing educational features.

Can you tell us briefly about the co-founders of CARDS by Cazh? How big is your team?

We started with a solo founder and later hired our first employee, Hari Yuliawan (COO), as a co-founder.

As an early employee, Hari was involved in many aspects, from marketing to operations. His background in sales helped steer the product towards the right market. With continuous learning in organisational development, we now have a team of 24 members across development, sales, after-sales, and operations. Moving forward, the organisation will continue to grow with a focus on attracting top talent.

Also Read: Asia’s tech potential: How self-taught education is shaping the next generation of developers

Have you raised any external funding? Do you have any plans?

Yes, we have received funding from accelerators such as Indigo Incubator by Telkom Indonesia and DS/X Venture.

We are currently seeking approximately US$500,000 in funding to expand our business. This funding will be used for organisational development, product development (particularly in our Learning Management System), product and market research to enter the SEA market, and acquiring new schools across all segments in Indonesia, be it boarding, private, or public schools.

What is your big plan for 2024?

Our agenda for 2024 includes educating parents from all our partner schools. This education is expected to increase app engagement, boost transaction volumes, and improve user satisfaction and company financial performance. This initiative includes improving business processes, app design, user experience research, and selecting more affordable payment service providers.

Additionally, from a product development perspective, our development team is working on a Learning Management System feature, which is targeted for release early next year.

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Image Credit: Cards by Cazh

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Southeast Asian SMEs are the lifeblood of the region’s economy, comprising up to 99 per cent of businesses, 90 per cent of employment, and 60 per cent of GDP in many ASEAN countries. Yet, SMEs face significant challenges in digital transformation, grappling with a patchwork of payment systems as diverse as the region itself.

This fragmentation isn’t just a headache for tech-savvy startups—it’s a major roadblock to true digital transformation. As businesses, especially smaller ones, strive to go digital, they find themselves entangled in incompatible platforms and regulatory quagmires.

Across Asia, the payments landscape is divided between Asian giants competing against up-and-coming fintech unicorns, creating a confusing array of options for SMEs. The rapid pace of change forces SMEs to constantly update systems to stay competitive, creating formidable barriers to digital adoption and potentially stunting their growth in a global marketplace.

By bridging this digital divide, Asia Pacific SMEs can unlock a staggering US$38 billion in the region’s digital economy. This transformation empowers SMEs to compete directly with Western giants, streamlining international operations and accessing worldwide markets.

As these SMEs harness digital tools, they’re not just growing — they’re reshaping the global economic landscape, proving that innovation knows no borders.

Identifying the challenges

To effectively address the challenges confronting SMEs in their digital transformation journey, it is crucial to consider the broader landscape of payment systems and financial operations across the Asia-Pacific region. Many businesses in the region still rely heavily on cash transactions. This is strikingly evident compared to more technologically advanced nations like Japan, where cash accounts for 41 per cent of point-of-sale transactions. This stark contrast underscores the substantial untapped potential for digital payment adoption across the region.

The transition from cash to digital payments, however, is not without its hurdles. Existing cashless payment solutions often require businesses to use multiple terminals or systems, creating a fragmented and complex operational environment. This lack of integration is a major pain point for SMEs, with 78 per cent of SME merchants in Southeast Asia expressing a desire for a single, integrated payment solution.

Despite this demand, over 70 per cent of these merchants remain trapped in a cash-only reality, revealing a massive, untapped market for comprehensive financial services. Addressing this, KPay’s Smart POS Terminal consolidates major e-payment methods into one system, simplifying operations and aiding the transition to a cashless environment.

Also Read: Why fintech companies should learn about customer retention from e-commerce companies

Despite progress, significant challenges persist in the payment landscape. This fragmented landscape and the prevalence of cash transactions exacerbate delayed payments, cash flow volatility, and increased administrative burdens. SMEs in Hong Kong, for example, dedicate an exorbitant amount of time, over 2,298 hours annually, to outdated financial management methods, costing an average of HKD 160,000 per SME.

These inefficiencies strain resources and divert merchants’ attention and investment away from market expansion efforts. Merchants surveyed in KPay’s study are actively seeking innovative payout methods to tackle pressing challenges such as manual input errors (46 per cent), time-consuming expense management (33 per cent), and cumbersome invoice handling (31 per cent).

These inefficient processes strain resources and divert merchants’ attention and investment from expansion efforts. These challenges impede SMEs’ ability to operate with the speed, accuracy, and professionalism needed to compete effectively in the marketplace.

Cash flow management remains a critical operational concern for the majority of small businesses worldwide, with 61 per cent struggling to maintain healthy cash flow. Nearly two-thirds of small business owners report that the time it takes for funds to process after receiving a payment significantly impacts their cash flow. Delays in payment processing can lead to financial strain, which often become life-or-death situations for SMEs.

These challenges necessitate financial management solutions supporting SMEs’ growth, such as KPay’s unified platform integrating pay-in and pay-out solutions and tools for settlements, the Fast Payment Account (FPA), a financial mangement platform which provide comprehensive account management, automated reconciliation and multi-currency global remittance. This will go a long way in simplifying cross-border transactions for merchants with growth aspirations. Fintech solutions can level the playing field for this, empowering SMEs to compete in the market.

The role of fintech

As these challenges continue to hinder SME growth and efficiency, innovative fintech solutions are emerging as powerful tools to bridge the digital divide. Digital payment solutions and financial management tools ease the transition from traditional to digital operations.

More than just faster transactions, SMEs today demand fully integrated platforms that offer a comprehensive financial product and service suite. Over half (56 per cent) of SMEs surveyed by EY believe that integrated platforms better support their current stage of development.

Also Read: Bridging the financial inclusion gap in Asia: The role of fintech

Fintech solutions can meet this expectation by creating seamless end-to-end pay-in and pay-out journeys, significantly reducing inefficiencies and improving cash flow management. KConnect, our business operations platform that unifies SaaS applications and management tools to provide actionable insights, is one solution intended to accelerate SME digitalisation.

The role technology plays in uplifting SMEs in Asia Pacific

Technology is a critical enabler for SMEs to navigate the digital landscape, with payments being one of the first and most crucial touch points in their digital transformation journey. As businesses take their initial steps towards digitalisation, a robust and efficient payment system often forms the foundation for broader technological adoption.

As SMEs across the region confront unique financial challenges, digital transformation has become crucial to enhance efficiency and drive growth. As a leading fintech solution provider for SMEs, KPay understands the hurdles that these emerging enterprises face. Centralising management, automating processes, and digitising workflows are vital steps in this journey, and these have guided the development of our pay-in and pay-out solution.

Our strategic collaborations also reflect this. For instance, our partnership with Airwallex enables swift and cost-effective international transfers, addressing the needs of businesses operating across borders. Likewise, our collaboration with DBS SME Banking integrates essential banking services into our platform, offering SMEs a comprehensive approach to managing their finances.

The positive impact of our platform is evident in our clients’ success. Our payment options have improved customer experience and operational efficiency. At Yat Lok, a renowned Hong Kong restaurant, has seen significant improvements in customer experience and operational efficiency by utilising our instant and comprehensive payment options.

Meanwhile, Little Prince Art has utilised instant transaction data from our merchant app, allowing the merchant to make more informed business decisions and swiftly address planning needs across its branches, fueling its growth.

The future of SMEs in Asia ultimately depends on their ability to digitally transform their businesses, which requires continuous innovation and support from fintech solution providers. By bridging the digital divide, we can unlock SMEs’ potential and contribute to economic growth. The road is long ahead, but at KPay, we ensure that no business, no matter how small, is left behind in the evolving landscape of commerce.

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Editor’s note: e27 aims to foster thought leadership by publishing views from the community. Share your opinion by submitting an article, video, podcast, or infographic.

Join us on Instagram, Facebook, X, and LinkedIn to stay connected.

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In today’s competitive landscape, brand visibility and customer engagement are crucial to success. KINTO Singapore, powered by Toyota Financial Services Singapore, exemplifies this by effectively leveraging conversational commerce. KINTO Singapore partnered with Omnichat, a leading Southeast Asian chat commerce platform, to enhance its customer engagement strategy. This strategic implementation showcases the power of conversational commerce in amplifying conversions and fostering meaningful customer interactions.

Streamlining customer interactions for improved efficiency

KINTO Singapore previously faced the challenge of managing customer inquiries across various platforms, including its website and social media channels (Instagram and Facebook). This fragmented approach led to a more-than-optimal customer experience. By consolidating inquiries from various channels into a single platform, KINTO Singapore’s customer service team achieved unprecedented efficiency via Omnichat’s “Customer Service Mojo” feature. 

Chatbots have been well implemented to handle frequently asked questions, providing instant support and freeing their human agents to focus on more complex issues. KINTO Singapore also used chatbots to capture and analyse customer information via every click; the company gained invaluable insights into customer preferences, behaviours, and demographics. This combination of streamlined workflow and intelligent automation dramatically enhanced KINTO Singapore’s customer service capabilities, thus improving overall customer satisfaction.

Targeted campaign promotion drives conversions and brand loyalty

KINTO Singapore strategically harnessed the power of WhatsApp broadcasts to connect directly with its target audience with WhatsApp Games and coupons. By delivering exclusive deals and promotions through this platform, the company precisely targets customers at various stages of their journey, including welcome offers, test drive promotions, exclusive VIP discounts, insurance, and car care. The company successfully increased test drive conversions and fostered a sense of exclusivity among customers. This personalised approach drove engagement and cultivated a loyal customer base eager to participate in future campaigns.

Also Read: Move over social commerce: The conversational commerce renaissance is here

Effortless order processing for enhanced ROI and customer satisfaction

Omnichat’s “Chat to Order” functionality revolutionised the car rental booking process for KINTO Singapore customers. KINTO Singapore can monitor both the number of customers attended to by individual sales representatives and the number of customers who booked test drives following interactions with these representatives.

By seamlessly enabling customers to place orders and specify their preferences directly through WhatsApp, KINTO Singapore streamlined operations and reduced the burden on its customer service and sales team. This frictionless booking experience not only enhanced customer satisfaction but also contributed to increased sales and revenue.

Evert Ong, Chief Operating Officer of KINTO Singapore, said, “When KINTO Singapore launched the daily rental service, we realised we needed a more effective way to engage with our customers. Instead of following the conventional mobile app development route, we leveraged WhatsApp—one of Singapore’s most widely used apps. This allowed us to explore various capabilities for engagement and productivity improvement. Initially, adoption was slow, but after integrating machine learning and continually fine-tuning our approach, we lowered our cost per lead. Our response time to inquiries has improved significantly, leading to better customer retention. The Omnichat team has been exceptionally supportive throughout this process. From pre-sales to implementation and ongoing enhancements, they have consistently demonstrated a deep understanding of our business and have responded promptly,” 

Omnichat is aiming to fuel its next stage of growth with a Series B funding round next year

Alan Chan, CEO and Founder of Omnichat, stated, “KINTO Singapore’s experience illustrates the transformative power of WhatsApp Business Platform for businesses in Southeast Asia. Consumers here are accustomed to and value WhatsApp’s convenience and familiarity.  We are committed to working closely with Meta to unlock the full potential of the WhatsApp Business Platform for businesses of all sizes in Southeast Asia. By leveraging Omnichat’s platform, KINTO Singapore has streamlined customer interactions, significantly reduced costs, and improved customer retention.”

Omnichat is making significant strides in the Southeast Asian market and has ambitious plans for global expansion. To support its next stage of growth, the company is planning a Series B funding round next year. The funding will be instrumental in advancing its AI capabilities through accelerated R&D and driving strategic market entry into North America and Europe.

“We see exciting developments in AI and automation that will further enhance conversational commerce’s capabilities. Integrating AI-powered chatbots will enable businesses to offer 24/7 support, personalise customer experiences at scale, and automate repetitive tasks. Additionally, advancements in data analytics will allow businesses to gain deeper customer insights, enabling them to tailor their offerings and messaging for even greater impact.”

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This article is sponsored by Omnichat.

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