As Southeast Asia's tech hub status grows, it draws global investors thanks to its dynamic startup ecosystems. Investors in Southeast Asia are showing a growing willingness to make more significant investments due to the region's swift development and favourable government policies.
Startups such as Silicon Box, a Singapore-based semiconductor design and manufacturing company, received a substantial USD 200 million Series B investment earlier this year. In September 2023, Indonesian digital bank Superbank collaborated with Singapore's Genesis Alternative Ventures to secure almost USD 40 million in financing for Indonesian startups, particularly those in Series B and Series C stages.
Concurrently, the Merah Putih Fund, supported by the Indonesian government, amassed USD 300 million to invest in upcoming unicorns at Series C and Series D stages, showing that despite the economic global downturn, investment in startups is still occurring.
Government initiatives and support
Smart cities have become a significant development trend worldwide, with cities like Singapore, Helsinki and Zurich topping the 2023 Smart Cities Leaderboard. The technological advancements of the Fourth Industrial Revolution (Industry 4.0), including the Internet of Things (IoT), Cloud Computing, Open Data, and Big Data Analytics, are driving the Smart Cities movement.
Through innovative city initiatives and comprehensive digital economy frameworks, governments provide the necessary infrastructure and collaborative platforms for innovation and growth. For example, Malaysia is investing in innovative city projects to improve urban living, sustainability, and economic efficiency through The Smart City Framework Malaysia (MSCF). This national-level framework guides local authorities, state governments, and other stakeholders in planning and developing smart cities in alignment with current developments.
Growth of local startup ecosystems
Numerous incubators and accelerators are emerging across the region, providing startups mentorship, funding, and network access. These platforms are crucial in helping young companies navigate the challenges of early-stage development and scale their operations.
One notable example is the Vietnam Innovative Startups Accelerator (VIISA), a business acceleration program and seed-stage investment holding that invests in building global-ready startups in the country. With a fast-growing middle class, increasing digital penetration, and a deep technological talent pool, Vietnam presents significant opportunities for entrepreneurs to innovate and expand globally. Promising graduates can secure follow-on funding of up to USD 200k from VIISA, contingent upon securing a new round of funding.
Strategic corporate partnerships
Mutually beneficial, strategic corporate partnerships allow startups to leverage established companies' resources and market reach while providing corporations with innovative solutions and fresh perspectives.
Recently, GoTo launched GoRide Transit, a service developed in collaboration with the national commuter railways operator Kereta Commuter Indonesia. This service allows users to book trips involving both motorbike and commuter train rides. According to the company, the integration into GoRide Transit enables users to save up to 27% per trip and reduce travel time by 15%.
Investor interest in emerging tech
Investors increasingly recognise the potential of artificial intelligence (AI), blockchain, 5G, and Web 3.0 technologies. They are thus directing significant resources toward these areas. AI, in particular, is gaining traction with startups developing innovative solutions to address regional challenges.
A notable trend in SEA's technology sector is the increasing investment in deep tech startups, particularly in the healthcare and biotechnology sectors. According to a report by DealStreetAsia, the volume of deep tech deals has been on an upward trajectory since early 2020. In the first half of 2023, deep tech deals accounted for 14% of the total deal volume, the highest since the pandemic began, translating to about 57 deals out of 407 total deals in the region.
Increased VC funding in Southeast Asia
Venture capitalists are drawn by the region's strong growth potential, vibrant startup ecosystems, and supportive government policies. The diverse range of funding sources, including local venture capital firms, international investors, and corporate venture arms, is essential for providing startups with the capital they need to scale and succeed in the competitive tech market.
For instance, Singapore-headquartered VC firm Antler, known for incubating nascent startups from day zero, plans to increase funds in more evolved companies, extending up to Series C deals this year, with a focus on seed to Series A investments. Similarly, Vietnam-based early-stage VC firm Do Ventures is doubling down on follow-on investments from its debut fund, aiming to invest in 5-8 portfolio startups this year.
The promising outlook for Southeast Asia's tech hub underscores the region's potential to become a global tech powerhouse. With its rapid growth, dynamic startup ecosystems, and supportive government policies, the region continues to attract significant interest from international investors.
The increasing willingness of investors in Southeast Asia to make more significant funding is fueling innovation and driving the region's technological advancement. As the local startup ecosystems flourish and international collaborations intensify, ASEAN countries are well on their way to solidifying their positions as significant players in the global tech industry.
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