Equity funding for Southeast Asian startups plummeted by 20.7 per cent year-on-year to US$1.85 billion across 229 deals in the first half of 2025, marking the weakest period in terms of both deal volume and value in over six years, per a new report.
The “Southeast Asia Startup Funding Report: H1 2025”, produced by DealStreetAsia in partnership with Filipino VC firm Kickstart Ventures, highlights a cautious investment landscape significantly influenced by prevailing macroeconomic uncertainties and increased scrutiny of governance standards.
Funding dynamics reflect cautious environment
Despite the significant decline, the report suggests a nuanced picture, particularly in the second quarter of 2025, where deployed capital more than doubled to US$1.28 billion compared with the first quarter’s US$0.58 billion. This indicates a shift towards larger, more strategic investments in companies demonstrating robust fundamentals, even as deal volumes remain subdued.
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Minette Navarrete, Founder and Managing Partner at Kickstart Ventures, commented on the changing landscape, stating: “Global macroeconomic uncertainty and heightened governance scrutiny are reshaping the way capital flows into Southeast Asia. The bar for younger companies has risen considerably.”
Regional shifts and standout markets
The regional funding balance saw notable realignments. Singapore maintained its position as the primary fundraising hub, attracting nearly two-thirds of the total capital at US$1.21 billion. However, the city-state recorded its weakest semester, with 129 deals representing a 13 per cent drop compared with the second half of 2024 and a nearly 44 per cent year-on-year decline.
Indonesia, traditionally seen as a key growth engine, experienced a dramatic 67 per cent fall in investments to just US$78.5 million–its lowest figure on record. For the first time, Indonesia was surpassed by the Philippines, where startups collectively raised US$86.4 million, making it a standout performer in the challenging period.
In contrast, Vietnam emerged as a bright spot, with deal count rising from 17 to 23 and total proceeds surging by nearly 169 per cent to US$275 million. Malaysia also posted stronger results, with proceeds doubling to US$196 million, underpinned by milestone fundraises.
Early-stage challenges, late-stage resilience
Investor caution was particularly pronounced in early-stage funding. Transactions up to Series B declined to 219, the lowest level in six years, with proceeds falling to US$1.1 billion–a mere fraction of the H1 2022 peak of US$4.54 billion. This trend reflects a heightened emphasis on capital efficiency and profitability over rapid expansion for younger companies.
Navarrete elaborated, “Early-stage funding now demands sharper proof of capital efficiency, viable growth models, and teams that can be trusted for both market performance and good governance.”
Conversely, later-stage activity displayed resilience. Although only ten transactions were completed in the first half of 2025, these generated US$756 million, representing a 70 per cent increase in value compared with the preceding half-year. The median deal size for later-stage rounds also rose to US$60 million, indicating a concentration of capital in businesses with established scale, strong fundamentals, and credible exit strategies.
Navarrete noted that “capital at the later stage is consolidating behind companies that have demonstrated resilience and scale. This creates a more disciplined environment for both founders and investors.”
New unicorns emerge amidst selectivity
Despite the more selective funding environment, the region welcomed three new unicorns. Malaysia’s Ashita Group secured US$155 million at a unicorn valuation, while Singapore’s Thunes raised US$150 million, valuing it at US$1.42 billion. Digital asset bank Sygnum also crossed the US$1 billion valuation mark.
The report tracks a total of 58 Southeast Asian startups that have now achieved unicorn status.
Sectoral shifts: Fintech weakens, sustainability gains traction
Sectoral trends revealed a selective deployment of capital. Fintech maintained its lead with 57 transactions worth US$631 million, although both its volume and value declined to their lowest levels in over six years.
In contrast, health-tech recorded a strong rebound, doubling its proceeds to US$108 million, bolstered by Nuevocor’s US$45 million Series B round. Greentech also registered 20 transactions, despite a decline in overall value, while climate-focused startups sustained momentum with 34 transactions, predominantly in renewable energy, waste management, and low-carbon mobility.
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Sustainability-linked sectors notably stood out, underscoring resilient investor interest in climate and health impact despite overall softened capital values.
Meanwhile, private debt activity weakened significantly, with proceeds falling to US$490 million (nearly half the level recorded in late 2024) as lenders narrowed their focus to revenue-generating companies with stronger repayment capacities.
Foundations for a healthier cycle
Navarrete underscored the long-term positive implications of these shifts: “The numbers tell us that Southeast Asia is not in decline, but in reset. Investors are no longer chasing growth at any cost, and founders are now challenged to build businesses that are disciplined, efficient, and resilient.”
She added: “The rebound in late-stage deal sizes and the emergence of new unicorns show that capital is still available, but it is increasingly directed toward companies that can prove their fundamentals and readiness for scale. This is a healthy recalibration for the region, laying stronger foundations for the next growth cycle.”
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