Southeast Asia’s venture capital market is no longer in freefall. But calling it a recovery would miss the more important story.

The region’s startup funding landscape in 2025 has split into two very different markets, according to the “Southeast Asia Startup Funding Report for 2025” by DealStreetAsia and Kickstart Ventures. At the top end, mature companies with revenue, governance and clearer paths to liquidity are once again attracting large cheques. At the bottom, seed and pre-seed founders are still battling lower valuations, slower decisions and investors who want proof far earlier than they did during the boom years.

Also Read: The end of Southeast Asia’s unified startup funding story?

“What we’re seeing at this point is stabilisation rather than a rebound,” said Minette Navarrete, President and Managing Partner of Kickstart Ventures. That distinction matters. Capital is moving again, but with far less tolerance for speculative growth.

The result is a more disciplined Southeast Asian venture market, one that is rewarding companies seen as de-risked, while forcing younger startups to survive longer on leaner terms.

Late-stage capital finds its way back

The clearest sign of reopening came in late-stage funding. Deal volume more than doubled to 24 late-stage transactions in the second half of 2025, compared with 10 in the first half and nine in the second half of 2024. Late-stage equity proceeds rose to US$2.23 billion in the second half, up from US$760 million in the first half.

On paper, that looks like a strong comeback. In practice, the rebound was heavily shaped by a small number of very large deals. The most obvious example was Princeton Digital Group’s US$1.3 billion growth equity transaction in Singapore, which accounted for a large share of late-stage capital raised.

Strip out such mega-rounds, and the picture becomes more measured. Capital was spread across more transactions, but cheque sizes remained cautious. Investors were not returning to the 2021-era habit of backing ambitious narratives at almost any price. They were concentrating capital in companies with scale, market position and a credible route to public markets or strategic exits.

Even so, the reopening was significant enough to create four new unicorns in Southeast Asia in 2025, compared with one in 2024 and two in 2023.

Singapore-based healthtech platform Ultragreen.ai reached unicorn status after a US$188 million pre-IPO growth equity round that valued it at US$1.3 billion. Its subsequent listing suggested that public market investors remain willing to back healthtech companies if they can show clinical validation and revenue depth.

Malaysia’s Ashita Group joined the club after raising US$155 million in growth capital, signalling that scaled e-commerce and B2B2C models can still attract premium pricing when they demonstrate defensibility. Singapore payments company Thunes raised a US$150 million Series D, taking its post-money valuation to US$1.42 billion, while digital asset banking group Sygnum also crossed the threshold after an oversubscribed US$58 million strategic growth round.

These companies sit in very different sectors, but they share a common theme: they are not being funded purely on market potential. Investors are looking for proof that the business model can withstand scrutiny.

The lead investor problem

For late-stage founders, the market has improved, but it has not become easy. The biggest challenge is often finding the first investor willing to set the terms.

Also Read: Southeast Asia startup funding finds a floor, but not a rebound

Mathias Imbach, co-founder and Group CEO of Sygnum, said the central difficulty in closing its growth round was “finding the lead”. Once a credible lead investor is in place, the rest of the syndicate can follow. Without one, even strong companies can remain stuck in prolonged negotiations.

That reflects a broader shift in Southeast Asia. Growth investors are spending more time on due diligence, valuation benchmarks and downside protection. They are still willing to write large cheques, but only when they believe the company can justify the price through revenues, margins, governance and eventual exit potential.

For founders, this means late-stage fundraising has become less about creating competitive heat and more about building conviction among a smaller pool of selective investors.

Early-stage founders face a harder market

The other half of the story is far less comfortable. Early-stage activity, from pre-seed to Series B, continued to slow. Deal volume fell to 209 transactions in the second half of 2025, from 218 in the first half and 259 in the second half of 2024.

Proceeds did rise to US$1.28 billion in the second half from US$1.10 billion in the first half, but this was not a broad-based easing. The increase came from a narrower group of stronger companies rather than a general revival in risk appetite.

The valuation pressure is most visible at the entry points. Median seed valuations fell to US$2 million in 2025 from US$2.5 million in 2024. Pre-seed valuations rebounded to a median of US$500,000 from US$100,000, but the report described this category as volatile.

For first-time founders, the message is clear: investors are no longer paying up for ambition alone. They want early signs of product-market fit, customer willingness to pay and a credible path towards profitability. In Southeast Asia, where markets are fragmented by language, regulation, infrastructure and consumer behaviour, that bar can be especially difficult to clear.

There are still pockets of resilience. Series A valuations held steady at a median of US$10 million, remaining above pre-pandemic levels. That suggests companies which have found initial traction can still raise on stable terms. Series B was stronger still, with median valuations rising to US$17.8 million from US$10.0 million in 2024.

This underlines the bifurcation: investors are not abandoning early-stage startups altogether. They are drawing a sharper line between experiments and businesses that have already reduced execution risk.

Logan Tan, co-founder and CEO of e-procurement marketplace Eezee, said Southeast Asian founders can no longer copy Silicon Valley’s “grow fast at all costs” playbook. “The collapse of several highly funded unicorns here is proof that raising large sums to chase hypergrowth without solid fundamentals is unsustainable,” he said.

His prescription is pragmatic: customer-led growth, margin discipline and a cash runway of one to two years. That may sound conservative, but in today’s market it is increasingly what survival looks like.

The exit problem remains

The biggest unresolved issue is liquidity. Southeast Asia has produced large technology companies, but it still lacks a deep and reliable exit market. Public listings remain selective, while strategic acquisitions are often slowed by valuation gaps between founders, investors and potential buyers.

Edgar Hardless, CEO of Singtel Innov8, pointed to the pressure created by high entry valuations from the last cycle. “The appetite of companies in this region to meet the valuation expectations from entrepreneurs and investors is more limited compared to other regions like North America,” he said.

That leaves venture funds looking for other routes to return capital. Secondary transactions, where existing shareholders sell stakes to new investors, are becoming more important. They do not solve the exit bottleneck entirely, but they can provide partial liquidity in a market where IPOs and large M&A deals remain uneven.

Also Read: Growing SEA startups with Kickstart Ventures

The broader lesson from 2025 is that Southeast Asia’s startup ecosystem is maturing, but not uniformly. Late-stage companies with scale are regaining access to capital. Early-stage founders are being forced to build with less. Investors are still active, but they are more selective, more patient and more demanding.

For the region, that may not be a bad thing. The funding boom created speed, but also excess. The current cycle is quieter, tougher and less forgiving. It may also produce companies built to last.

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On 31 August, the European Commission did something no regulator had done before: it looked at a generative AI chatbot and decided it was, legally speaking, a search engine. ChatGPT was designated a “Very Large Online Search Engine” under the EU’s Digital Services Act (DSA), placing OpenAI’s flagship product in the same supervisory tier as Google Search, alongside Reddit and Roblox, both newly tagged as Very Large Online Platforms.

The trigger was scale: ChatGPT’s search-enabled function reported roughly 159 million average monthly users across the EU in the six months to March, more than three times the 45-million threshold that pulls a service into the DSA’s strictest bracket.

Also Read: OpenAI calls for ‘AI infrastructure revolution’ to reboot Japan’s growth

OpenAI now has until the end of November to run systemic risk assessments covering everything from minor safety to electoral integrity, submit to independent audits, and open its systems to vetted researchers. Until last week, these obligations only applied to platforms like Instagram or Google Search, not to a chatbot that writes original text rather than indexing web pages.

Most of the commentary on this has understandably focused on what it means for OpenAI, and for Ireland’s Coimisiún na Meán, which now supervises an outsized share of Big Tech‘s EU compliance. But the more interesting question for readers is what happens next: because the EU rarely regulates in isolation, and Southeast Asia has a well-worn habit of importing Brussels’ homework a cycle or two later.

The Brussels effect isn’t hypothetical here; it already happened once

Southeast Asia has run this playbook before, almost to the letter. When the EU’s GDPR came into force in 2018, it didn’t just reshape how European companies handled data but it became the reference architecture for an entire generation of Asian privacy law.

Indonesia’s Personal Data Protection Law and Vietnam’s earlier data-protection decrees both borrowed GDPR’s core scaffolding: consent requirements, data-subject rights, extraterritorial reach, the works. Regional regulators didn’t hide the influence; they built on it, because writing a data law from scratch is slower and riskier than adapting one that’s already survived its first constitutional challenges.

AI regulation is following the same script, faster. Vietnam passed the region’s first standalone AI law in December 2025, effective this March, built explicitly around the EU AI Act’s four-tier risk classification — unacceptable, high, medium, low — with Vietnamese characteristics layered on top, including a requirement that foreign providers of high-risk AI systems appoint a local contact point.

Indonesia’s draft Presidential Regulation on AI, delayed from late 2025 into early 2026, follows the same EU-style risk-based logic. Thailand’s ETDA is still consolidating its draft AI principles after public consultation, with no firm timeline, but the direction of travel is identical.

A recent ISEAS analysis put it plainly: the EU’s risk-based approach has become the most widely adapted template for AI governance across the bloc, more influential than either the OECD’s principles or the innovation-first models coming out of South Korea and Japan.

Also Read: ‘AI is a race for innovation; regulation will only develop effectively once winners are announced’

So when the European Commission draws a bright line (45 million monthly users, and you’re now a “very large” service subject to search-engine-grade scrutiny), Southeast Asian lawmakers aren’t watching from a distance. They’re watching for the template.

The threshold is coming for the region, not just for OpenAI

Here’s the part that should worry SEA-based AI builders more than the Brussels decision itself: the user numbers that triggered this are no longer a Silicon Valley or European phenomenon. Indonesia is now ChatGPT’s fastest-growing Southeast Asian market, with adoption reportedly climbing by roughly 85 per cent over the past year. Thailand’s AI usage grew by more than a third over the same stretch.

None of the region’s markets have crossed a 45-million-user threshold yet, but ASEAN’s combined online population is large enough, and growing fast enough, that a Jakarta- or Hanoi-specific version of the DSA’s “very large” tier is not a fantasy. It’s a drafting decision waiting for a policy window.

And when that window opens, the compliance bill will not land evenly. A frontier lab like OpenAI or Anthropic can absorb a systemic risk assessment, an independent audit and a data-sharing regime as a cost of doing business in a market it already dominates. A Southeast Asian AI startup that are building on top of a foundation model, serving a regional language, running on a fraction of the balance sheet cannot. Vietnam’s own AI Law already requires foreign high-risk AI providers to register a local point of contact; layer three or four separate national risk-assessment regimes on top of that, each modelled on Brussels but tuned to local political sensitivities, and the compliance burden starts to look less like consumer protection and more like a moat that only the biggest players can clear.

Fragmentation, not regulation, is the real risk

This is the trap SEA regulators need to see coming. Copying the EU’s risk-based logic is not, on its own, a bad instinct; the alternative, no rules at all until something goes wrong, is worse, and the region’s own AI ethics and human-rights advocates have long argued that guardrails are overdue.

The danger is in how the copying happens: five or six ASEAN member states independently translating the same Brussels template into slightly different national decrees, different thresholds, different definitions of “high-risk,” each with its own local-contact-point requirement and its own audit cadence.

Vietnam’s Ministry of Science and Technology has already had to walk back parts of its draft implementing decree after industry groups warned that a rushed, EU-AI-Act-style rollout creates exactly the kind of compliance bottlenecks Brussels and Seoul are still untangling for their own laws.

Also Read: Without governance, AI agents risk becoming enterprise chaos engines

A genuinely EU-inspired approach would borrow the other half of Brussels’s playbook: a single supervisory framework, applied consistently across a bloc, rather than a patchwork of national reinterpretations. ASEAN has the institutional muscle to attempt that, a regional AI governance framework that sets one risk taxonomy and one set of thresholds, rather than leaving Jakarta, Hanoi, Bangkok and Manila to each draft their own. Without it, the region risks importing the DSA’s compliance weight without importing the one thing that makes it manageable at scale: a single market’s worth of harmonised rules.

OpenAI has four months to prove it can meet Brussels’ new bar. Southeast Asia’s regulators have rather longer than that to decide whether they’re building one rulebook, or six.

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For many small merchants in Southeast Asia, payments and loyalty are still treated as separate problems. One system records the sale, another handles digital payments, and a third, if it exists at all, tries to bring the customer back.

StoreHub and ShardLab now want to see whether those layers can be stitched together more tightly.

Also Read: 3 easy tips for SMEs to build overseas customer loyalty

Kuala Lumpur-based StoreHub has received an undisclosed strategic investment from ShardLab, a Singapore-based venture studio that describes itself as the innovation arm of South Korean-headquartered blockchain investment firm Hashed.

The two companies will also form a joint venture to explore new consumer payment and rewards products for merchants and consumers across the region.

No financial details were disclosed. The more important number, at least for the partnership, may be StoreHub’s newly revealed footprint: more than 20,000 merchant locations across Malaysia, the Philippines, Thailand and Japan, processing over 200 million transactions a year with around US$3.5 billion in annual transaction value.

That gives ShardLab something many frontier-technology companies struggle to access: real-world distribution.

From experiments to shop counters

ShardLab was set up through a strategic partnership between Hashed and SCBX, one of Thailand’s largest financial groups, to build and commercialise products at the intersection of financial services and emerging technologies. Its work includes programmable loyalty and rewards infrastructure, a phrase that broadly refers to rewards systems that can be automated, personalised, transferred or embedded into payment flows more flexibly than traditional points cards.

In Southeast Asia, that matters because consumer behaviour is fragmented. Customers may pay with cash, cards, bank transfers, QR codes or e-wallets, often depending on the country, merchant type and transaction size. Loyalty is equally scattered, ranging from paper stamp cards to app-based points and marketplace-led promotions.

For a restaurant chain or large retailer, building around this complexity is possible. For a neighbourhood café, salon or small F&B outlet, it is usually a distraction from day-to-day survival. StoreHub’s pitch has long been that it helps these merchants run sales, payments and operations from a single system.

ShardLab’s investment suggests the next layer could be rewards and payments that are more closely tied to actual purchasing behaviour.

Wai Hong Fong, CEO of StoreHub, framed the partnership around merchant outcomes rather than technology for its own sake.

“StoreHub has spent over a decade building the commerce and payments infrastructure that merchants across Asia use to run their businesses every day. ShardLab and Hashed have spent years at the forefront of payments and rewards technology, and this partnership is about bringing that work to real merchants at scale,” he said.

“Anything we build together must pass the same test that everything at StoreHub passes: does it help merchants sell more? The larger shift within StoreHub continues alongside this: we are rebuilding our product around AI, so that a three-person restaurant can operate with the capability of a thirty-person one.”

That last line points to a wider shift within commerce software. Merchants are no longer looking only for digital cash registers or payment acceptance. Increasingly, the question is whether software can help them forecast demand, manage staff, design promotions, reduce manual work and make better decisions without hiring more people.

Why StoreHub’s network matters

The joint venture gives StoreHub and ShardLab a controlled way to test new payment and rewards models with live merchants and consumers. The companies said specific products will be announced when they launch, rather than outlined upfront.

Also Read: Digital payments: Adapting to a changing world

That is sensible. Southeast Asia has seen plenty of loyalty experiments that were easy to announce and hard to sustain. Consumers may sign up for points, but many forget to redeem them. Merchants may offer discounts, but not always profitably. Web3-linked rewards, in particular, have often struggled when the consumer experience feels more complicated than the benefit.

The more interesting opportunity is less about asking users to understand blockchain, and more about whether the underlying technology can make rewards cheaper, more interoperable or more useful.

For example, programmable rewards could theoretically allow merchants to issue incentives based on customer behaviour, time of day, basket size or repeat visits. They could also support partnerships between nearby merchants, or enable more transparent campaign tracking.

But none of that matters unless it works at the counter, during a lunch rush, with staff who may not be technically trained and customers who simply want to pay quickly.

Hojin Kim, CEO of ShardLab, said StoreHub’s merchant base changes the nature of what his company can build.

“We have spent the past few years testing how new payment and rewards technologies can improve everyday consumer experiences. StoreHub gives us something fundamentally different: a distribution network of more than 20,000 real-world merchant locations,” he said. “This partnership is about moving from pilots to scale and building products that create measurable value for both consumers and merchants.”

A crowded commerce stack

StoreHub operates in a competitive category that cuts across point-of-sale systems, payments, loyalty, inventory and restaurant operations. In Southeast Asia, it overlaps with players such as Singapore’s Qashier, which provides smart POS and payment solutions; Oddle, which focuses on restaurant ordering and management; and Indonesia’s iSeller, which serves omnichannel retail and F&B merchants. Globally, companies such as Shopify, Lightspeed and Square-owner Block have shaped expectations around integrated commerce tools for small businesses.

The challenge for StoreHub is that merchants rarely buy software because it is elegant. They buy it because it solves immediate pain: fewer missed orders, faster payments, better cash flow, clearer stock records or more repeat customers. Any new rewards product born from the ShardLab tie-up will be judged against those practical metrics.

The regional context also cuts both ways. Southeast Asia’s young, mobile-first consumers are comfortable with digital payments and app-based rewards. At the same time, the region remains highly localised. What works for a café in Kuala Lumpur may not work for a food stall in Bangkok or a boutique in Manila. Regulations, payment rails and consumer habits vary widely by market.

That makes StoreHub’s multi-country presence useful, but also raises the bar for execution. A rewards system that depends on heavy consumer education or merchant training is unlikely to scale. A system that disappears into existing payment and checkout behaviour has a better chance.

Also Read: Malaysian startup StoreHub raises US$5.1M in Series A round led by Vertex Ventures

For ShardLab and Hashed, the deal is also a test of whether blockchain-adjacent infrastructure can find a more grounded role in everyday commerce. The sector has spent years looking for mainstream use cases beyond trading and speculation. Merchant rewards and payments are a plausible candidate, but only if the technology is invisible to users and clearly valuable to merchants.

StoreHub’s disclosure of its transaction scale suggests it is no longer positioning itself merely as a software provider for small businesses. It is becoming a commerce network with enough volume to test financial and consumer products on top of its operating system.

The investment may be undisclosed, and the first products are still to come. But the strategic direction is clear: StoreHub wants to sit closer to the transaction, the customer relationship and the merchant’s decision-making layer. If the joint venture can turn loyalty from a cost centre into a measurable sales tool, it could offer a glimpse of where Southeast Asian commerce software is heading next.

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For years, bback was known in Singapore for a narrow, if relatable, promise: helping people feel less wrecked after a night of drinking. Now, under new ownership, the company wants to stretch that proposition into something broader: recovery not just from alcohol, but from exercise, travel, fatigue and the general overload of modern urban life.

DSG Consumer Partners and Saket Gore, former Asia Pacific CEO of Himalaya Wellness, have acquired Singapore-born recovery brand bback, formerly known as bounceback, from Evo Commerce. Gore will take over as CEO.

Also Read: Evo Commerce, parent of D2C anti-hangover solution BounceBack, nets US$2M

The deal value was not disclosed.

The acquisition gives bback a new owner-operator structure at a time when consumer wellness brands across Southeast Asia are trying to move beyond single-use products and build daily habits. In bback’s case, the challenge is clear: it has recognition in Singapore’s alcohol-recovery segment, but will now have to prove that consumers see “recovery” as a category bigger than hangovers.

From party relief to everyday recovery

bback’s flagship product is Party Relief, an alcohol-recovery supplement sold across more than 400 points of sale in Singapore, including Guardian, Watsons and major e-commerce platforms. The brand has also expanded into hydration and liver wellness products.

That gives it a base in retail, but the next phase is more ambitious. Gore and DSGCP want to position bback around multiple occasions: post-drinking, strenuous workouts, long-haul travel, dehydration and everyday tiredness.

“Consumers want to do more, not less, without compromising how they feel afterwards. That’s why we believe recovery is a much bigger category than it is today,” said Gore.

It is a neatly timed thesis. Across Southeast Asia, consumers are spending more on supplements, functional drinks and preventive wellness products, even as price sensitivity remains high. The pandemic made health more personal; the return of travel, nightlife and office routines has made fatigue and recovery more visible.

Singapore, with its dense retail networks, high e-commerce adoption and health-conscious urban consumers, is a useful testbed for brands hoping to travel across the region.

Still, “recovery” is not yet as clearly defined as categories such as skincare, vitamins or sports nutrition. That gives bback room to shape the language, but also places a burden on the company to educate consumers without sounding vague.

A brand built in Singapore

bback was created by Evo Commerce, led by CEO and co-founder Roy Ang, which developed the early product portfolio and built distribution across Singapore’s pharmacy chains and online marketplaces.

“bback laid the very groundwork for Evo Commerce’s journey and proved what we could build from scratch,” Ang said. “Seeing it grow into a favourite in Singapore has been incredibly rewarding.”

For DSGCP, the appeal appears to be less about buying a nascent idea and more about backing an already visible consumer brand with room to widen its use cases.

“Evo has done the initial heavy lift of building an effective, trusted product with strong consumer recognition and meaningful distribution in Singapore,” said Sameer Mehta, Managing Director and Head of Southeast Asia at DSG Consumer Partners. “We believe there is a much larger opportunity ahead for the brand in recovery.”

Also Read: Evo Commerce bags U$2.1M to expand retail touchpoints

DSGCP has spent more than a decade investing in consumer brands across India and Southeast Asia, with more than 100 companies in sectors such as health and wellness, food and beverage, beauty and lifestyle. Its Singapore portfolio includes Moom, Blood, and Protocol — all brands operating in categories where product trust, content and community tend to matter as much as shelf space.

That experience will be relevant for bback. Supplements and functional wellness products are not impulse buys alone; consumers need to understand when to use them, why they work and how they fit into daily routines. That puts pressure on branding, product education and repeat purchase rates.

Why Saket Gore matters

The appointment of Gore is central to the deal. He spent more than a decade leading Himalaya Wellness across Asia Pacific, giving him experience in health and wellness distribution across markets that can differ sharply in regulation, consumer behaviour and retail structure.

His background is particularly relevant because Himalaya has long operated in adjacent categories through products such as PartySmart, an alcohol-recovery supplement, and Liv.52, a liver health product. That gives Gore direct familiarity with both the promise and limitations of the category.

In Southeast Asia, where pharmacies, modern trade, convenience retail, traditional retail and marketplaces all play different roles depending on the country, expansion is rarely as simple as exporting a product. What works in Singapore may need new pricing, formats, education and channel strategy in Indonesia, Thailand, Vietnam or the Philippines.

For now, bback says Singapore will remain the focus. The company plans to invest further in brand building, product innovation, e-commerce and retail, while hiring locally across brand, marketing, e-commerce, content and operations.

“We want to build bback from Singapore, with the ambition to create a brand that can travel across Asia,” Gore said. “We have the foundations of an established business, but the freedom and entrepreneurial energy to shape what comes next.”

The competitive field

bback will not be building in an empty lane. In alcohol recovery, Himalaya’s PartySmart is an obvious reference point, particularly given Gore’s previous role. In hydration and everyday recovery, the company will compete for attention with functional beverage and electrolyte brands such as Liquid I.V., Pocari Sweat and a growing field of sports nutrition and supplement players available through pharmacies, gyms and online marketplaces. It will also face a broader behavioural challenge: convincing consumers that recovery is a proactive wellness habit, not just a fix after indulgence.

That distinction matters. If bback remains associated mainly with nights out, its growth ceiling may be limited by occasion. If it can credibly expand into hydration, travel and active lifestyle needs, it could sit closer to the broader functional wellness market, where repeat consumption and multiple use cases can support larger brands.

The risk is dilution. A sharp proposition can become blurry when a brand tries to cover too many occasions too quickly. The next phase will depend on whether bback can broaden its meaning while keeping the simple consumer promise that made it recognisable in the first place.

Also Read: Evo Commerce banks US$2.8M more for product development, Asia expansion

For Singapore’s startup and consumer ecosystem, the deal is also a reminder that not every venture-backed outcome needs to be a software exit. Consumer brands built in small markets can travel if they solve a specific problem, earn trust and find the right regional playbook.

bback now has new capital, an experienced operator and a backer familiar with consumer-brand building. What it does not yet have is proof that “recovery” can become a category with regional scale. That is the bet DSGCP and Gore are making, from Singapore outward.

The post DSGCP, Saket Gore buy bback to build a broader Asian recovery brand appeared first on e27.

A few years ago, in a Shanghai conference room, a Korean executive stood up and made a phone call. His joint-venture partner of more than a decade had gone quiet as their factory dispute escalated. Years of holiday gifts. A seat at the man’s daughter’s wedding. Countless dinners across two economic cycles. Surely that bought a returned call.

It rang. Nothing. It rang again that afternoon, and the next day. What collapsed in his face wasn’t the deal. It was his certainty that fifteen years had built something.

It hadn’t — not in the way he thought. He had built proximity. He had never tested whether it created obligation. We measure relationships by time. Markets measure them by what they make people do.

Did what he believed was a relationship ever obligate the other side to act on his behalf — not attend a dinner, not answer a text, but spend their own capital, risk their own standing, because of him?

Guanxi (關係) is not friendship alone. At its commercial core, it is reciprocity with memory — a running account of favours extended and owed, kept current through repeated, deliberate exchange. Feelings are the wrapping. The ledger is the thing.

China asks what you owe each other

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For much of the past decade, Southeast Asia’s venture capital story was sold as a regional one. Singapore provided the capital base, legal infrastructure and headquarters location; Indonesia, Vietnam, the Philippines, Malaysia and Thailand supplied the young consumers, rising digital adoption and growth markets.

That framing now looks increasingly out of date.

Also Read: “Not a bank, not a gamble”: Chocolate Finance wants your business’s spare cash

The “Southeast Asia Startup Funding Report” for 2025 by DealStreetAsia and Kickstart Ventures points to a sharper split in the region’s venture market. Capital has not simply become more cautious after the exuberance of 2021 and 2022. It has become more concentrated. Investors are no longer spreading money evenly across Southeast Asia’s major startup ecosystems.

Instead, they are clustering around Singapore, the market they consider safest when exits are scarce, valuations are under pressure and governance risks sit higher on the investment checklist.

The result is a Singapore-centric funding map: one highly capitalised hub surrounded by neighbouring markets facing weaker early-stage activity, fewer late-stage rounds and a slower path to recovery.

Singapore pulls away

The numbers show how pronounced the divide has become.

In 2025, Singapore accounted for 61.4 per cent of Southeast Asia’s equity deal volume, with 283 transactions. More strikingly, it captured 78.1 per cent of total equity funding value, or US$4.20 billion. Vietnam followed with US$360 million, Indonesia with US$340 million and Malaysia with US$260 million. The rest of the region together accounted for only US$350 million.

The concentration intensified in the second half of the year. Singapore’s equity funding value rose to US$2.99 billion in H2 2025, up more than 147 per cent from US$1.21 billion in the first half. Deal count also increased from 129 to 154.

That was not a broad-based rebound across startup stages. Much of the late-stage money went into Singapore-based or Singapore-headquartered companies with stronger institutional backing and clearer regional or global ambitions. Late-stage deal value in Singapore hit US$2.01 billion across 16 deals in H2, compared with US$400 million across seven deals in H1.

Two transactions illustrate the pattern. Payments company Thunes raised a US$150 million Series D round, while Princeton Digital Group secured US$1.30 billion. Of Southeast Asia’s four new tech unicorns in 2025, two — healthtech firm Ultragreen.ai and fintech platform Thunes — were headquartered in Singapore.

Singapore’s advantage is not only about being richer. It has deeper capital markets, a more predictable regulatory environment, stronger legal structures and a greater concentration of regional headquarters. In a bull market, investors may be willing to absorb more uncertainty in exchange for growth. In a correction, those institutional comforts matter more.

Neighbours struggle for momentum

The contrast with other Southeast Asian markets is stark.

Indonesia, the region’s largest consumer market, remained active but subdued. It accounted for 14.3 per cent of deal volume, with 66 transactions, but only 6.3 per cent of total regional funding value, or US$340 million. In H2 2025, investors deployed US$260 million across 32 deals. Late-stage capital returned selectively, with six deals worth US$160 million after none in the first half, but the market appears to have stabilised at a lower level rather than regained real momentum.

Vietnam saw an even harder reset. Its startup ecosystem recorded only US$90 million across 13 equity deals in H2, down from US$280 million across 23 deals in H1. Early-stage dealmaking fell to just 12 transactions in the second half, compared with 21 in the previous semester. For a market once viewed as one of Southeast Asia’s most promising next-generation tech hubs, the slowdown is significant.

Also Read: Southeast Asia startup funding finds a floor, but not a rebound

Malaysia also continued to lose pace. Equity funding slipped to US$61 million across 16 deals in H2. Early-stage volumes declined to 16 deals, down from 23 in H1 2025 and 34 in H2 2024. The US$155 million growth equity round by Ashita Group stood out, but it did not change the broader picture of thinning startup activity.

The Philippines remained constrained by the absence of later-stage capital. Funding fell for two consecutive semesters, reaching US$33 million across nine deals in H2. Late-stage funding was absent for the past two semesters. The country’s digital economy has produced large platforms, but many are closely linked to corporate groups rather than independent venture-backed companies. That limits the pipeline of startups that can raise large growth rounds, pursue IPOs or deliver venture-scale exits.

Thailand was the exception, though from a low base. Funding rose to US$66 million across seven deals in H2, compared with US$10 million in H1. Fintech accounted for nearly 90 per cent of the country’s startup funding, suggesting that the improvement was narrow rather than ecosystem-wide.

Why investors are crowding into safety

The deeper issue is not only that funding has slowed. It is that the risk calculation has changed.

Edgar Hardless, CEO of Singtel Innov8, pointed to a problem that has shadowed Southeast Asian venture capital for years: exits. “One of the biggest challenges is the lack of exits, creating higher uncertainty of returns for investors in this region,” he said.

That matters because venture capital relies on liquidity. Startups can raise multiple rounds, but investors ultimately need companies to list, be acquired or provide secondary-sale opportunities.

In Southeast Asia, those exit routes remain limited. Valuations set during the 2021 and 2022 boom have also made acquisitions harder, as potential buyers are often unwilling to match old expectations.

This dynamic hits younger ecosystems hardest. Minette Navarrete, President and Managing Partner of Kickstart Ventures, noted that the Philippines still has room to mature. “The ecosystem is still relatively young and has room to grow; the Philippines has yet to produce an independent unicorn, and firms often struggle to raise funding beyond Series B,” she said.

The governance question has also become more central. After a series of corporate governance failures and fraud cases in the region, investors are applying tougher filters to both startups and funds. Navarrete described governance as “a new competitive advantage for startups and venture capital firms”.

That shift favours companies with cleaner reporting, stronger controls and more transparent operations. It also favours Singapore, where regulatory trust and institutional infrastructure are part of the market’s selling point.

A fractured regional future

The danger is that Southeast Asia’s venture ecosystem becomes less regional in practice, even as founders continue to talk about regional expansion.

If more than three-quarters of equity funding value is concentrated in one market, promising companies in Indonesia, Vietnam, the Philippines and Malaysia may struggle to raise the capital needed to move beyond seed and Series A. That could create an innovation drought outside Singapore, where startups exist but fewer have the runway to become regional challengers.

The answer is not for neighbouring markets to imitate Singapore wholesale. Their strengths are different: Indonesia has scale, Vietnam has technical talent, the Philippines has digitally engaged consumers, Malaysia has cross-border operating depth, and Thailand has sector-specific opportunities. But these markets need stronger exit pathways, better governance standards, more local institutional capital and clearer rules for scaling businesses.

Also Read: Growing SEA startups with Kickstart Ventures

Founders, too, face a changed environment. The old “grow fast at all costs” model is no longer enough. Investors now want disciplined unit economics, credible paths to profitability and evidence that companies can survive without endless external funding.

Southeast Asia is still a compelling startup region. But in 2025, its funding landscape stopped looking like a single rising tide. It became a map of divergence, with Singapore as the safe harbour, and the rest of the region fighting to bring capital back to shore.

The post The end of Southeast Asia’s unified startup funding story? appeared first on e27.

The Jakarta High Court has increased the prison sentence of Ibrahim Arief, a former technology consultant linked to ex-education minister Nadiem Makarim and former VP (Engineering) at OVO, in a corruption case tied to the procurement of Chromebooks for Indonesian schools, according to Kompas.com.

A panel of judges sentenced Arief to five years in prison, one year longer than the four-year sentence handed down earlier by the Jakarta Corruption Court. The appeal ruling, read by Judge Catur Irianto on Monday, also ordered Arief to pay a fine of around US$30,800 and compensation of about US$308,000.

Also Read: Nadiem Makarim sentenced to 10 years in Chromebook corruption case

The case has drawn attention in Indonesia not only because it involves public-sector technology procurement, but also because of its proximity to one of Southeast Asia’s most recognisable technology figures. Makarim, who co-founded ride-hailing and super-app giant Gojek before assuming the role of the Education Minister, became a symbol of Indonesia’s digital economy ambitions. The Chromebook case, however, has put a different spotlight on the intersection of technology, education policy and state spending.

A heavier ruling on appeal

According to Kompas.com, the Jakarta High Court panel accepted appeals filed by both the public prosecutor and Arief’s defence team. The judges then amended the earlier decision of the Jakarta Corruption Court, particularly on the main prison sentence and the additional punishment related to replacement money.

“Declaring that the defendant Ibrahim Arief alias Ibam has been legally and convincingly proven guilty of committing a criminal act of corruption committed jointly as in the indictment of the public prosecutor’s subsidiary,” the verdict stated, as quoted by Kompas.com.

The judges imposed a five-year prison sentence and a fine of around US$30,800. The fine must be paid within one month, with a possible extension of up to one more month, after the decision obtains permanent legal force.

More significantly, the court ordered Arief to pay compensation of around US$308,000. If he fails to pay within one month after the ruling becomes final and binding, prosecutors may seize and auction his assets to recover the amount. If his assets are insufficient, he faces an additional four years in prison.

The court also said that if Arief pays only part of the compensation, the amount paid will be taken into account when calculating the additional prison term. His time under city detention will be deducted from the sentence, and the court ordered that he remain under city custody.

The lower court split

The appeal ruling builds on an earlier verdict from the Jakarta Corruption Court, which had sentenced Arief to four years in prison and imposed the same fine of around US$30,800. At that stage, he was found guilty of violating provisions under Indonesia’s Corruption Law, in conjunction with Article 55 paragraph 1 of the old Criminal Code, which concerns participation in criminal acts.

Also Read: Nadiem Makarim indicted in US$125M Chromebook graft case

But the lower court decision was not unanimous. Two judges, Eryusman and Andi Saputra, issued dissenting opinions. They argued there was no evidence of malicious intent, no direct role in lobbying, and no proof that Arief had received illicit gains.

According to the dissenting judges, Arief acted only as an information technology consultant and did not have decision-making authority within the Ministry of Education and Culture. They also found no strong causal link between his actions and the criminal acts charged.

Kompas.com reported that, in the court’s deliberations, Arief was said to have pointed out weaknesses in Chromebooks and recommended the use of Windows-based devices for schools. That detail is important because it complicates the usual picture of a procurement case: rather than being portrayed as a simple advocate for the purchased product, Arief was described by the dissenting judges as someone who had raised concerns about it.

The High Court, however, took a different view and concluded that the evidence supported a conviction and a heavier sentence.

Why the case matters beyond Indonesia

For Southeast Asia’s technology ecosystem, the case is a reminder that digitisation is not just about startups, software and adoption curves. It is also about public trust, procurement design and accountability.

Across the region, governments have poured money into digital education, cloud systems, national identity platforms, healthtech infrastructure and AI readiness programmes. These projects often require collaboration between ministries, consultants, vendors and technology providers. When governance is weak or roles are blurred, the risks multiply.

Indonesia, Southeast Asia’s largest digital economy, has been especially ambitious in using technology to modernise public services. The education sector is a major part of that agenda, given the country’s vast geography and uneven access to quality learning tools. Devices such as Chromebooks are attractive to governments because they can be relatively affordable, cloud-based and easier to manage at scale. But hardware procurement for schools is also vulnerable to controversy: specifications, operating systems, vendor choices, distribution and after-sales support can all become points of dispute.

That makes the Arief case relevant beyond the courtroom. It raises questions about how governments evaluate technology recommendations, how consultants’ roles are defined, and how responsibility is assigned when procurement decisions later face corruption allegations.

For founders and investors in Southeast Asia, particularly those selling to governments, the message is clear. Govtech and edutech contracts can offer scale, but they also require stricter compliance, cleaner documentation and a sharper understanding of public-sector accountability. A consultant’s advice, a vendor’s pitch or a ministry’s technical decision may later be scrutinised not as part of a commercial negotiation, but as evidence in a criminal case.

The shadow of Makarim’s legacy

The mention of Makarim gives the case wider resonance. Before entering politics, he helped build Gojek into one of Southeast Asia’s defining startups, proving that a local platform could compete at massive scale and reshape daily life in Indonesia. His appointment as education minister was seen by many as a sign that startup thinking could be brought into government.

But public administration operates under different rules from startup execution. Speed, experimentation and vendor partnerships may be praised in the private sector, but government projects must also satisfy procurement law, audit trails and public scrutiny.

Also Read: The VCs writing off Indonesia are making a US$300B mistake

The case involving Arief does not erase the broader digital reforms attempted in Indonesian education, but it does show how politically and legally sensitive such reforms can become. Technology choices in schools are not neutral. They affect budgets, vendors, teachers, students and the credibility of government institutions.

For now, the legal focus is on Arief’s conviction and the High Court’s decision to increase his sentence. Whether further legal steps follow will determine how final this chapter is. But the broader lesson is already visible: in Southeast Asia’s push to digitise the state, governance may prove just as important as the technology itself.

The post Jakarta court raises sentence for ex-consultant of Nadiem Makarim in Chromebook graft case appeared first on e27.

Southeast Asia’s venture capital map fractured further in 2025. Singapore alone accounted for 78.1% of the region’s equity funding value (US$4.2 billion) and 61.4% of deal volume, according to a new DealStreetAsia-Kickstart Ventures report.

The city-state’s share intensified in the second half of the year, with funding value jumping 147% and late-stage rounds such as Thunes’ US$150 million Series D and Princeton Digital Group’s US$1.30 billion raise reinforcing its pull. Vietnam, Indonesia and Malaysia trailed far behind with US$360 million, US$340 million and US$260 million respectively, while the rest of the region shared just US$350 million.

Vietnam suffered the sharpest reset, its H2 funding nearly halving to US$90 million. The Philippines remained starved of late-stage capital, and Malaysia’s early-stage activity kept shrinking. Only Thailand improved, though almost entirely on the back of fintech.

Singtel Innov8‘s Edgar Hardless points to the region’s chronic lack of exits as the core problem, while Kickstart Ventures’ Minette Navarrete argues governance has become “a new competitive advantage.” The result: a Singapore-centric funding map, and a harder climb for founders everywhere else in the region.

Read the full report here.

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REGIONAL

SEA venture funding stabilises but shows no real rebound: Southeast Asia closed 2025 with only 461 equity deals, the lowest annual count since 2018, a sign the region’s venture market has stopped falling but not yet rebounded.

Jakarta court lengthens sentence in Chromebook graft case: A Jakarta appeals court increased Ibrahim Arief’s prison term to five years over a corruption case tied to Chromebook procurement for Indonesian schools, linked to ex-minister Nadiem Makarim’s tenure.

Lumio Solar bags US$900K for plug-and-play solar in PH: The Philippine startup wants to make rooftop solar accessible to renters and households without property ownership, betting plug-and-play appliances can widen adoption beyond wealthier homeowners.

MAS commits US$173M to next phase of fintech innovation: Singapore’s central bank will channel US$173 million into fintech development, sustaining the city-state’s push to cement its position as the region’s leading financial and innovation hub.

Vietnam to embed AI lessons across all school grades next year: From the next academic year, AI education will be integrated into Vietnam’s national curriculum, reflecting a state-led effort to build foundational digital literacy at scale.

AI boom to keep Singapore manufacturing resilient, say economists: Surging data centre and semiconductor demand tied to the AI buildout is expected to buffer Singapore’s manufacturing sector against broader global trade headwinds, economists say.

Gojek Singapore expands Zig tie-up with GoTaxi launch: The ride-hailing partnership between Gojek and Zig deepens in Singapore, with the GoTaxi service marking a broader push to consolidate mobility options for commuters on the island.

GoTo VP Catherine Hindra resigns citing personal reasons: Catherine Hindra’s departure adds to a string of senior exits at the Indonesian tech giant as it continues restructuring amid pressure to reach sustained profitability.

FEATURES AND INTERVIEWS

Chocolate Finance eyes SMEs’ idle cash after consumer scale: Having built US$1.3 billion in assets from over 150,000 Singapore consumers, the fintech now targets small businesses’ spare cash, betting the same simple-yield pitch translates to SMEs.

INTERNATIONAL

South Korea’s President Lee says interest rate rise is unavoidable: President Lee’s remarks signal tightening monetary conditions in a key regional tech economy, with potential knock-oneffects for startup valuations and venture activity across North East Asia.

ChatGPT, Reddit, and Roblox face EU Digital Services Act rules: The EU’s DSA brings strictercontent moderation and transparency obligations to major platforms, a regulatory template SEApolicy makers are increasingly watching and replicating.

Meta executive leaves for OpenAI amid India scrutiny: A senior Meta executive’s move to OpenAI coincides with growing regulatory pressure on the social media giant in India, one of its largest and most contested markets globally.

Chinese automakers follow Tesla’s bet on humanoid robots: Chinese EV makers are integratinghumanoid robotics into their manufacturing and product road maps, intensifying competition in asector that SEA industrial players are beginning to monitor closely.

US erects barriers around drones and robots as China holds scale: Washington’s exportcontrols and procurement restrictions on drone and robotics technology are reshaping supply chains, forcing SEA buyers to pick sides in an increasingly bifurcated market.

Apple App Store chief Phil Schiller exits as Tim Cook steps down: Phil Schiller’s departure is part of a broader leadership exodus at Apple, raising questions about the company’s developer and app ecosystem strategy at a pivotal moment for mobile platforms globally.

Tim Cook’s farewell: Apple’s future lies with a product builder: In his parting message, Cook signals confidence in his successor’s product-first philosophy, a transition that will reverberate across the global app and device ecosystem that SEA developers depend on.

Crypto shrugs off Fed rate fears as stocks wobble: Digital asset market cap climbed 1.09% to US$2.64 trillion even as equities stumbled under bond-yield pressure, exposing a widening divergence between risk appetites in crypto and traditional markets.

Bitcoin sellers dig in at US$81,000 ahead of Asia open: Total crypto market value fell 0.89% to US$2.61 trillion in 24 hours, with traders citing shifting rate-hike expectations as the driver behind the pullback.

CYBERSECURITY

Ransomware hits schools via stolen logins, not malware: A new Sophos report finds identity-based attacks drove 85% of ransomware incidents against education institutions, above the 79% cross-sector average, as stolen credentials and phishing replace exotic malware.

CrowdStrike and Telkom Indonesia sign MOU on AI-driven cybersecurity: The partnership positions Indonesia’s state-owned telco to deploy AI-powered threat detection across itsinfrastructure, signalling growing enterprise-level cyber security investment in South East Asia’slargest economy.

SEMICONDUCTOR

SEA’s chip-hub ambitions collide with smuggling scrutiny: Singapore police recently froze a US$42 million bungalow tied to a fraud probe linked to Nvidia chip reseller Aperia Group, underscoring the region’s growing role as a transhipment point for restricted chips.

Nvidia’s US$3.5B MediaTek bet maps its AI chip strategy: Nvidia’s investment in MediaTek signals a push to broaden its AI silicon foot print beyond data centres into edge devices, with implications for chip supply chains across Asia.

Nvidia’s AI advantage is moving beyond the GPU: Nvidia is extending its moat into networking, software, and systems, a strategic shift that could reshape how AI infrastructure is procured and deployed across the region’s hyper scalers and cloud providers.

Chinese hyperscalers ramp AI spending but trail US rivals: Moody’s finds that Chinese cloud giants are accelerating AI infrastructure investment but remain significantly behind US counterparts in scale gap with direct consequences for SEA’s AI supply chain choices.

AI

100-plus companies call for unified action against rogue AI: OpenAI, Anthropic, Google, and over 100 other firms have jointly urged governments to act against unaligned AI systems, in one of the broadest industry-led AI safety coalitions to date.

India’s hiring slowdown shows AI’s early jobs impact: A survey of 651 Indian tech firms found 65% say AI has already reduced hiring, a pattern also emerging in Britain’s job market data, a warning sign for other economies.

OpenAI backs Thailand’s new eight-week AI accelerator: OpenAI and Thailand’s science ministry are running an eight-week Bangkok accelerator for ten local startups, pushing the country’s AI ambitions beyond demos into hospitals and classrooms.

Japan’s US$27.9B AI market hides tough entry barriers: Japan’s AI sector is projected to triple to US$27.9 billion by 2029, driven by an ageing population and government investment, but foreign entrants face steep structural and cultural hurdles.

THOUGHT LEADERSHIP

Southeast Asia’s AI edge isn’t one advantage, it’s eleven: Rather than chasing frontier labs, the author argues the region’s opportunity lies in combining imported models with local strengths across eleven distinct advantages, not one grand strategy.

Stop treating Southeast Asia as a single market, argues op-ed: Running teams across Singapore, Tokyo and New York, the author warns that treating SEA’s 680 million people as one addressable market is where expansion budgets quietly go to die.

Why the global AI marketing backlash skips Southeast Asia: While Western trend decks warn that 78% say AI ads feel less authentic, the author argues that framing doesn’t map cleanly onto Southeast Asian consumer attitudes toward AI-generated marketing.

A founder’s guide to pitching Southeast Asia’s investors: Raising capital in the region takes more than a good deck, the guide argues, offering founders a practical playbook for navigating one of the world’s most closely watched startup ecosystems.

AI speeds up global expansion but can’t fake local nuance: AI can translate, summarise competitors and prepare market analysis overnight, but the author warns that tasks once needing local specialists still require human judgement to get markets right.

Factory announcements aren’t SEA’s real manufacturing story: Beyond the plant openings, the author argues Southeast Asia’s real competitiveness will be decided by the supply-chain ecosystem — suppliers, logistics, skills — that surrounds new factories.

Southeast Asia builds specialised manufacturing hub network: Vietnam, Malaysia and Thailand are attracting investment across electronics, semiconductors and automotive supply chains, each carving a distinct role while Singapore anchors higher-value technology work.

Southeast Asia quietly gains from shifting FDI redistribution: Beyond incentives, the author recalls how a Miami-based company’s expansion decision hinged on culture, not spreadsheets, as manufacturers quietly redirect investment across the region.

Indonesia’s insurers enter a second digital transformation wave: A former enterprise-software executive turned insurance insider shares what surprised him most after moving into Indonesia’s insurance sector amid its ongoing digital shift.

AI’s environmental impact needs product-level decisions: By the time sustainability teams weigh in, the author argues the important environmental decisions have already been made, pushing companies to treat AI’s footprint as a product design choice.

How to build teams that resist burnout, not just endure it: With Microsoft data showing 48% of workers feel overwhelmed by their workload, the author draws on 15 years leading APAC and EMEA teams to outline what actually prevents burnout.

When your cloud provider’s data centre gets hit by a drone: After a military drone strike knocked out an AWS data centre serving millions of users, the author recounts a week spent manually migrating a platform because automated tools failed too.

SWOT isn’t boring; it’s just used too late, argues writer: Frameworks like SWOT, 5W1H and PESTLE aren’t office wallpaper, the author argues — used at the right time, they help avoid costly strategic mistakes many teams only diagnose in hindsight.

China’s overseas asset tax reform is a signal for SEA: Beijing’s push to tax citizens’ offshore assets is a fiscal move with wider consequences, the author argues, as it reshapes how private wealth moves through the region, not just government revenue.

The post Singapore now captures 78 per cent of SEA’s startup funding appeared first on e27.

The global economic landscape faces numerous structural challenges. Apart from specialized sectors like education, finance, and government, most mainstream industries are experiencing significant headwinds. In corporate boardrooms across the region, “cost cutting” has transitioned from a seasonal strategy to a daily operating baseline.

As a result, once deep-pocketed businesses are striving to find cheaper alternatives across various nodes of their operations. Enterprise Resource Planning (ERP) software often comes under the radar during these efficiency drives. Because ERP systems represent one of the largest IT capital expenditures for an enterprise, the temptation to slash this line item is understandable. However, reducing a strategic digital transformation to a mere budget-slashing exercise carries profound operational risks.

The Singapore ERP Market Landscape

The Singapore ERP ecosystem has traditionally followed a distinct structure. The market for mega-cap corporations is primarily led by established international giants such as SAP and Oracle, known for robust architecture and compliance frameworks. Meanwhile, tier-2 brands—including Microsoft Dynamics 365, NetSuite, and specialized regional players like Multiable—serve as the frontrunners in the mid-tier enterprise market. For entry-level market, brands like Odoo and Chillaccount excels.

Interestingly, while Chinese enterprise software vendors have worked aggressively for nearly two decades to establish a foothold in Singapore, they have largely remained in a status of also-run. Despite their massive scale domestically, replicating that dominance in Southeast Asia’s leading business hub has proven highly elusive.

Famous for extreme domestic competition (“involution”) and aggressive low-cost structures, Chinese ERP vendors initially enjoyed a brief honeymoon period during this recent round of regional cost-cutting waves. Desperate to lower capital expenditure, several Singaporean enterprises turned their attention toward these highly economical software options. Unfortunately, this honeymoon phase has not lasted long.

Decoding the High Failure Rates of Discount ERP

A stark reality in enterprise technology is that a staggering percentage of ERP projects fail to meet their objectives, with a massive portion of the remaining implementations left struggling in perpetuity. For many executives, this high failure rate is surprising. After all, Chinese manufacturers—whether one likes it or not—are successfully capturing global market share in sectors like electrical appliance, Electric Vehicles (EV) or renewable energy. Why, then, can their ERP software counterparts not replicate this global success?

The answer lies in the structural design of the reseller and implementation partner program. This framework is often the primary driver of these miserable project failures.

For careful prospects who insist on a detailed Proof of Concept (POC) process before purchase, Chinese ERP vendors actually hold no sustainable cost advantage over international competitors. While the initial software license might appear cheaper, the total cost of ownership over a five-year lifecycle quickly evens out. To bypass this barrier and make the cut, some vendors deploy a sales tactic common in their home market: decoupling the software sale from the delivery by shifting total responsibility to third-party resellers. To secure the contract, the primary vendor avoids signing the direct implementation contract with the customer. Instead, independent resellers do.

The Illusion of Low-Cost Consulting

Consequently, competition among these resellers is fierce, leading to highly unsustainable bidding behaviors. Fixed-price deployment contracts or stunningly low-priced consulting rates—sometimes quoted as low as RMB 1,500 (approximately SGD 280) per man-day—are frequently observed. For a system as operationally complex and cross-functional as an ERP, businesses must ask themselves: what level of business transformation or process optimization can an enterprise truly expect from a consultant charging RMB 1,500 a day?

A simple back-of-the-napkin calculation exposes the structural flaw in this model. Based on the public financial statements of leading Chinese ERP vendors, sales, marketing, and channel acquisition expenses frequently account for around 50% of total revenue. When you subtract these heavy customer-acquisition costs, factor in a razor-thin profit margin for the reseller, and account for mandatory corporate contributions like social insurance and housing funds, the math collapses.

The front-line consultants actually assigned to serve these clients are likely earning a net salary of just RMB 9,000 per month. In the enterprise technology space, compensation directly correlates with expertise. A salary at that level typically commands junior resources who lack the macro business acumen, industry-specific knowledge, and technical sophistication required to architect a robust corporate system.

Balancing Budget and Business Risk

The logical breakdown is clear, yet many companies remain willing to try their luck. A fundamental lack of deep internal technology expertise, paired with an overly budget-minded corporate culture, represents the top two common traits among these unlucky buyers. A challenging, unfavorable business environment only strengthens their determination to gamble on a low-cost solution. Regrettably, very few of them achieve a successful return on investment in the end. Instead, they find themselves stuck with half-baked systems that disrupt supply chains, distort financial reporting, and require expensive rescue projects to fix.

This trajectory sounds remarkably familiar to seasoned IT observers. The current approach of certain low-cost enterprise software models closely mirrors the challenges previously seen with low-tier offshore (mainly India, Indonesia and Vietnam) software development frameworks that prioritized headcount volume over delivery quality.

Singapore is a global city of excellence, and Singaporean enterprises traditionally seek long-term quality, scalable architecture, and strict data governance. In the realm of digital transformation, cheap but inferior software paired with underqualified implementation partners is never the answer. True cost optimization does not mean buying the cheapest tool; it means investing in a reliable solution and an experienced partner that ensures the project succeeds the first time.

Why We Write this Article?

This piece is authored by Sam Cheong, the Principal Consultant at Synchro RKK Sdn Bhd and one of Malaysia’s most respected business software authorities. Driven by a passion for complex problem-solving, Sam fell in love with Enterprise Resource Planning (ERP) architecture early in his career. Following a proven track record of high-impact deployments, he successfully acquired the ERP business unit from SRKK to found Synchro ERP. Today, he leverages his deep technical expertise and strategic vision to help organizations streamline operations, scale infrastructure, and navigate digital transformation. Witnessing the rising wave of compromised implementations in the region, Sam shares these insights to guide enterprises away from costly deployment pitfalls.

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In February 2024, Klarna’s CEO Sebastian Siemiatkowski told the world that the company’s AI assistant had taken on the work of 700 customer service agents. Headcount fell from 5,500 to 3,800. The story became the most cited example of AI replacing humans at scale. Boards across Asia, Europe, and the US used it to justify their own restructuring conversations.

Eighteen months later, Klarna was quietly rehiring. By February 2026, Siemiatkowski publicly admitted that the company had gone too far. Customer satisfaction had cratered. Software engineers and marketers were being pulled onto support lines to plug the gaps. The CEO who had once claimed AI could do every job, including his own, was now telling Bloomberg that the quality of human support was the new priority.

Klarna is not the cautionary tale of a single company that bet wrong on AI. It is the cautionary tale of a thinking error that most AI-driven reorgs are making right now.

The data on the thinking error

A Harvard Business Review article published in January 2026, authored by Thomas Davenport and Laks Srinivasan, surveyed 1,006 global executives in late 2025. The numbers landed hard. Sixty percent of organisations had already reduced headcount in anticipation of AI. Only two percent of those organisations had reached the point where AI was actually doing the work the cut humans used to do. Fourteen percent had AI solutions ready to deploy. Eleven percent were using AI in production.

The math is uncomfortable. Six out of ten companies had cut. Two out of a hundred had a working AI replacement for what they cut. The other 58 were either betting the gap would close before customers noticed, or quietly absorbing the work back into the humans who remained.

Davenport and Srinivasan called this AI washing. Companies using AI as the narrative cover for financial restructuring that they would have done anyway. Recent research from agentic AI vendors confirms the pattern: 55 percent of companies that executed AI-driven layoffs now regret the decision. Gartner projects that 40 percent of agentic AI projects will be cancelled outright by 2027.

This is not a problem about AI capability. It is a problem about how leaders are framing the question they are trying to answer.

Also Read: Why Japan’s booming AI market is harder to crack than it looks

What work-first design looks like

The companies getting AI team design right are not the ones starting with the question “how do we restructure for AI?” They are starting with a different question. What does the work itself actually want to look like now?

I call this Work-First Design, and the difference shows up in the outcomes.

At Tripadvisor, AI agents now handle 90 percent of incoming customer queries autonomously. The headline number sounds like Klarna’s. The strategy underneath is the opposite. Tripadvisor did not set out to eliminate human roles. The company set out to free the human support team for strategic work that required judgment, creativity, and relationship-building. The 90 percent automation rate enabled a 100 percent reassignment of human attention to work AI could not do. Thumbtack and ClickUp built similar models.

McKinsey research from 2025 found that companies which fundamentally redesign their workflows around AI are three times more likely to capture real value from the technology, and they generate twice the AI usage per employee. The redesign companies are also the ones building pod structures that work. Meta’s Reality Labs reorganised a large group into AI-native pods with roles like AI Builder, AI Pod Lead, and AI Org Lead. Engineers were expected to operate with broader range. Pods were required to own outcomes rather than isolated tasks.

The pods are not the point. The work redesign underneath is the point. Putting “Pod Lead” titles on top of a workflow that has not been redesigned just renames the old problem in new vocabulary.

This is where most reorgs fail. The leaders running them have been sold a structure. Pods, agents, AI-native teams. The structures are real and many of them work. But they only work if the work has been redesigned to fit. Drop a pod structure on top of a customer service workflow that still requires emotional judgment on 30 percent of cases, and you get Klarna. Drop the same pod structure on top of a workflow where AI genuinely handles 90 percent and humans handle the judgment-heavy 10 percent, and you get Tripadvisor.

The structure looks identical from the outside. The outcomes are not.

The Klarna pattern is going to repeat

The reason Klarna is going to keep happening is that work redesign is harder, slower, and less narrative-friendly than structural reorg. A reorg announcement makes the board happy. A six-month work redesign with no headlines does not.

Leaders are also being pushed by the wrong signals. Compensation benchmarks now reward AI fluency at every level. The PwC Global AI Jobs Barometer reports a 56 percent wage premium for AI-skilled workers. The labour market is telling leaders to hire AI talent fast and restructure around them. The temptation is to do exactly that, then figure out the work design later.

Later is when the customer satisfaction scores collapse. Later is when the engineers get pulled onto the support phones. Later is when the CEO has to tell Bloomberg that the strategy was wrong.

Also Read: AI is changing global expansion, but it cannot standardise local markets

I built and exited a SaaS company without taking venture capital. That meant I never had the budget to throw structure at problems. Every team I built had to match the shape of the work, because there was no spare capital to absorb a wrong design. That discipline turned out to be the most valuable constraint of my operating years. The companies that are now learning this lesson under AI pressure are learning it the expensive way.

The good news is that the lesson is learnable. The bad news is that the leaders most likely to ignore it are the ones with the most capital to throw at the problem first.

Three questions for leaders rethinking team design in 2026

What is the actual shape of the work after AI is genuinely doing what it can do, and what is left for humans?

If you removed every “AI” job title from your reorg plan, would the structure still solve a real problem, or does it only make sense as an AI narrative?

If your customer satisfaction scores or your output quality drop 15 percent in the six months after the reorg, what is your specific plan to recover them?

If the answer to the third question is “we will rehire,” you are not redesigning. You are doing a Klarna in slow motion. The cost of that mistake has now been documented in detail. There is no excuse left to make it.

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