In Southeast Asia’s tougher VC market, governance is no longer boring
For much of the past decade, Southeast Asia’s startup story was told through speed: faster user growth, faster market entry, faster fundraising, faster expansion. In 2025, that narrative met its limits.
The region’s venture capital market has entered a more selective phase, according to the Southeast Asia Startup Funding Report for 2025 published by DealStreetAsia and Kickstart Ventures. With startup fundraising falling to a seven-year low, investors are no longer rewarding growth stories on faith. They are asking harder questions about controls, compliance, board oversight, cash discipline, and regulatory exposure.
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In other words, governance, which was once treated by many founders as an administrative burden to be tidied up before a funding round, has become a competitive advantage.
That shift matters deeply in Southeast Asia, where founders do not operate in a single, harmonised market. They build across economies with different licensing regimes, tax rules, labour laws, data policies, foreign ownership restrictions, and political realities. In a funding winter shaped not only by interest rates but also by geopolitics, the startups that can prove they are trustworthy may find themselves at the front of the queue for scarce capital.
Trust becomes the bottleneck
The clearest evidence of this reset can be seen in climate and agricultural technology.
On the surface, climatetech appeared resilient in 2025. It accounted for 15.4 per cent of total deal volume in Southeast Asia, up from 13 per cent in 2024. But beneath that headline, capital moved unevenly. Mitigation-focused sectors, such as renewable energy and waste management, raised US$563 million across 60 deals. Climate adaptation, by contrast, fell sharply to just 16 deals and US$43 million.
The pain was concentrated in agritech, where deal volume dropped 57 per cent and deal value plunged 79 per cent. The problem was not that Southeast Asia suddenly stopped needing agricultural innovation. Quite the opposite: the region remains highly exposed to food security pressures, extreme weather, and the productivity gaps of smallholder farming.
The issue was trust.
The report notes that investor caution in adaptation was intensified by governance concerns after several high-profile fraud cases in agriculture. For limited partners, those episodes reinforced a simple lesson: even sectors with strong long-term demand can become difficult to back if transparency is weak.
“LPs are now demanding stronger accountability, greater transparency, and more rigorous startup governance standards before reallocating capital to funds,” said Minette Navarrete, President and Managing Partner of Kickstart Ventures.
That demand is flowing down the chain. Venture funds are under more pressure to show discipline to their own backers. Startups, in turn, are being asked to prove that their numbers, contracts, reporting lines and internal controls can withstand scrutiny.
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In a looser market, gaps in governance could be patched later. In this market, they can stop a deal from happening at all.
The founders treating governance as infrastructure
Some founders in the region are already treating governance not as a defensive exercise, but as core operating infrastructure.
At Eezee, a Singapore-based e-procurement marketplace, compliance is built into the company’s day-to-day model. Procurement is a sensitive corporate function: buyers need clear records of who approved what, when, at what price and under which terms. Eezee therefore tracks transactions end-to-end, using real-time dashboards and audit trails across four countries.
Co-founder and CEO Logan Tan describes the company’s approach through clear separation of duties, careful hiring and direct reporting to the board. “We have a strict separation of duties — what I call ‘you can’t eat the food you cook,’” he said, referring to the need for multiple approvals on payments and transactions depending on their value.
Tan said Eezee reports its financial, operational and business metrics to the board “without sugarcoating”. That may sound basic, but in a region where many startups scaled quickly across borders before their internal systems matured, it is not always the norm.
The same principle applies in more technically complex and regulated sectors.
Transcelestial Technologies, which develops laser communications systems, works in areas that intersect with telecommunications, space and defence. For such companies, governance is tied directly to customer confidence. Enterprise and government clients do not only evaluate product performance; they also assess reliability, security, oversight and continuity.
Rohit Jha, Co-founder and CEO of Transcelestial, said the company maintains broad oversight from its board, leadership team and employees, with open sharing of wins, losses and operational challenges. In sectors where a single misstep can damage trust with regulators or customers, transparency is not a cultural nicety. It is a risk-control mechanism.
Geopolitics enters the investment memo
Governance is also becoming more important because Southeast Asian startups are operating in a more complicated geopolitical environment.
Inflation and interest rates still matter, but investors are increasingly focused on structural risks: US-China rivalry, supply chain protectionism, cybersecurity threats, data localisation rules and fragmented regulation across the region. These factors affect where startups can expand, which customers they can serve, how they source components and whether they can move data or capital across borders.
This is particularly relevant for Southeast Asia because the region is economically connected but politically and legally diverse. A fintech licence in one market does not guarantee an easy path into another. A supply chain that works in Vietnam may face different constraints in Indonesia or the Philippines. A data product that scales in Singapore may need significant changes before entering markets with stricter localisation rules.
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As a result, investors are no longer underwriting only total addressable market and revenue growth. They are also assessing whether management teams can navigate regulation, protect customer trust and adapt to sudden policy shifts.
Navarrete described experienced leadership as the “steady hand on the tiller” in such an environment. That phrase captures the mood of the current cycle. The market is not closed to ambitious startups, but it is less forgiving of improvisation.
Why corporate capital is gaining weight
This also explains the rising importance of corporate-linked venture ecosystems.
In a difficult fundraising market, strategic investors can offer more than money. They can provide distribution, procurement credibility, regulatory knowledge and access to established operating platforms. For startups trying to sell into heavily regulated sectors — banking, telecoms, energy, healthcare or infrastructure — that support can be as valuable as capital itself.
Ayala Corporation, one of the Philippines’ oldest conglomerates, illustrates this model. Its venture arm, Kickstart Ventures, gives the broader group exposure to emerging technologies across areas such as fintech, telecoms, renewable energy and enterprise software. For Ayala President and CEO Cezar Consing, good governance, execution and portfolio selection are not optional extras but table stakes.
Globe Telecom follows a related path through internal venture building via 917Ventures and global strategic investing through Kickstart. Globe President and CEO Carl Cruz said the company looks for technologies that can improve its network, customer experience and internal efficiency.
For startups, such partnerships can act as a form of institutional validation. Transcelestial’s backing from investors including Japan’s NTT Finance and Australia’s Paspalis Capital, for instance, gives it not only funding but also credibility in markets where local relationships and trust matter.
The next phase of Southeast Asian VC
The region’s funding reset is painful, but it is also forcing a healthier conversation about what durable companies look like.
The last cycle rewarded speed. The current one rewards proof. Founders need to show clean reporting, responsible capital use, realistic expansion plans and boards that ask difficult questions. Funds need to show LPs that they can spot not only market opportunity but also operational and governance risk.
Also Read: Fintech, DeFi and applied AI define Southeast Asia’s new venture discipline
That does not mean Southeast Asia’s startup ecosystem has become less ambitious. It means ambition now needs stronger foundations.
For founders, governance is no longer a box to tick before due diligence. It is part of the product they are selling to investors, customers, regulators and partners. In a fragmented and geopolitically exposed region, trust may be the most valuable currency left.
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