Fundraising by Southeast Asian startups remained subdued last year, with more businesses forced to shut down operations or reduced to “zombie” companies surviving without fresh capital.
According to research by DealStreetAsia, the region’s startups raised USD 1.16 billion in October-December 2025, slightly down from the same quarter a year earlier. For the full year, funding increased 18% to USD 5.4 billion, but that was still about a fourth of the level seen in the peak year of 2021.
Crunchbase data shows that global startup funding rose about 30% in 2025, highlighting that Southeast Asia has lagged in the recovery from what has been called a “funding winter.”
“We are seeing more companies consider pivoting their business or selling assets,” one venture capitalist investing in the region said to Nikkei.
According to media reports, a number of the region’s startups have closed since 2023, including two Singapore-based entities, biotech firm Tessa Therapeutics and fintech company Pace Enterprise, which offered “buy now, pay later” services.
One noteworthy example is Indonesia’s Ula, a B2B wholesale platform for mom-and-pop shops. After years of struggle, the company formally announced the closure of its business in a social media post last August.
Once touted as a rising star in Indonesia, and having former Amazon employee Nipun Mehra as one of its founders, Ula attracted prominent investors, such as the family office of Amazon founder Jeff Bezos, Sequoia Capital, and Tiger Global, who bet on the startup’s technology-driven model that would reform inefficient distribution systems in the emerging market.
But soon after Ula was founded in 2019, the Covid-19 pandemic disrupted its launches of sales operations and logistics hubs.
Mom-and-pop shops are scattered across wide areas, making last-mile deliveries from distribution centers costly and labor-intensive. Ula sought to improve efficiency by having shop owners pick up goods from “group pickup points” located a kilometer or two away, but achieving early profitability proved difficult.
As the fundraising environment deteriorated after 2022, Ula concluded that further expansion would be difficult and announced a temporary suspension of its business in 2023. Conditions did not improve and the company gradually shut down operations.
“By late 2022, market realities had shifted,” the company said in the social media post. “We explored pivots, ran experiments, and pushed creativity, but the road to long-term profitability stayed steep.”
The tougher funding environment came as global monetary tightening began in 2022. Yields on the benchmark ten-year US Treasury climbed from the 1% range in 2022 to around 5% at one point in 2023. As bond yields rise, usually in tandem with interest rates, their prices fall, and investors tend to favor lower-risk assets such as these government bonds rather than high-risk investments like startups.
“The exuberance of the earlier years seems to have been tempered by the challenging market and exit conditions,” Maisy Ng, managing partner at Singapore-based Delight Capital, which did not invest in the startups mentioned above but does back others, told Nikkei. “Startups need to show that they can make money and that the business model can scale.”
Takahiro Suzuki, general partner at venture capital firm Genesia Ventures, which also did not invest in the above startups, pointed out that one reason for the slow funding recovery in Southeast Asia compared to India or the West is the lack of “down rounds” in which a company raises new funds at a lower valuation than its previous round.
“Down rounds are less likely to occur in Southeast Asia,” he said, explaining that in the US, Europe, and India, venture capital firms have a longer history, so their shareholders are more willing to accept down rounds because gains realized from other investments can offset the losses.
In contrast, many local funds in Southeast Asia are relatively new and lack a strong track record, making them more inclined to oppose down rounds that would reduce the value of their holdings, he said. As a result, some companies are unable to raise fresh capital, are forced to cut operating expenses and end up becoming zombies.
Worse, a few high-profile scandals involving well-funded startups, including accounting fraud at aquaculture tech company eFishery, has fueled investor concerns over corporate governance in the region’s startups.
Looking at recent large fundraising deals, a shift in sectors is evident. In the past, the startups raising large amounts of funds were digital consumer businesses, such as ride-hailing group Grab and e-commerce group Sea.
According to DealStreetAsia research, however, the biggest deal last year was USD 1.3 billion in fundraising by Singapore-based data center operator Princeton Digital Group, underscoring rising demand for the essential infrastructure for digital services driven by the growing use of artificial intelligence.
In a distant second with USD 188 million was UltraGreen.ai, which provides fluorescent technology used in surgery. The company listed on the Singapore Exchange in December.
“Regardless of market situation, we always like to invest in ‘painkillers’ rather than ‘vitamins,'” said Delight Capital’s Ng. “If a company provides a solution that solves their customers’ pain instead of a ‘nice-to-have’ solution that can be expended with when the budget shrinks, they will always find a way through, even in difficult market conditions.”
This article first appeared on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing partnership with Nikkei.