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.
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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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The post Navigating the shifting landscape of Southeast Asian funding: An analysis of H1 2024 trends appeared first on e27.