2024 was the year of the anti-squeeze

Startups sought to break out of the pressures of global converging risks on technology, geopolitics, monetization, competition, and cost of capital

2024 is the Year of the Anti-Squeeze Startup in Southeast Asia

Some succeeded, others didn’t

In 2025, we expect the momentum of the companies that have succeeded and built up “anti-squeeze” (ownership, diversification, corporate maturity) to create a “buying moment” for Southeast Asia

More companies from the region expanding globally and more investment and acquisition capital globally going to well-positioned Southeast Asia opportunities

Based on data from our private market statistics tool, M&A data from Tracxn, and a review of last year’s follow-on rounds in our portfolio, we highlight six intersections for the globalization of Southeast Asia opportunities and localization of global capital

(1) Debt financing

Debt financing continues to be a major component for companies to fuel growth

• Of course, this is more apt for companies with a core lending business or acquisitions business
• But one thing we observed is that many growth stage companies eventually touch on either of these activities in order to (a) expand platform revenues or (b) grow inorganically
• Debt financing rose by 62% from previous year while funding dropped 48% y/y (GITEX Asia, 2025)
• This type of financing also adds a level of signaling that potentially makes the company more attractive to the capital markets long term

(2) Global angle

Global storytelling and strategy as a way out of the fundraising crunch in Southeast Asia

• As we’ve written over the past year, the capital markets have been tending to favor opportunities with some global angle (not necessarily global expansion, but even a growth narrative that is globally recognized)
• This will continue to be a driver for funding rounds in 2025
• Key question is whether the company is at the right point to embark on global expansion or raising from investors in other markets as this may influence valuation or the ability to raise in further rounds

(3) Acquisitions in both directions

Acquisitions as another way out of fundraising crunch in Southeast Asia

• Inflationary environment has incentivized consolidation and inorganic growth through M&As
• M&A activity in Southeast Asia has been dominated by the US$1-50M band and the US$1-10B+ band (Tracxn), representing M&A opportunities for two types of companies (the buyer and the seller)
• When allocated efficiently, buyer companies can more quickly unlock new markets which strengthens their fundraising flywheel and opens the pool of potential investors / acquirers down the line
• With the right buyer, seller companies can not only continue to operate in a difficult environment but also enable shareholders to reduce loss or even make a notable gain on their investment

(4) Alternative, “Traditional” Investors and Buyers

It’s not just VCs in the game. More opportunities to raise from corporate strategics, SWFs, and other non-VC institutional funds that also come with expectations on corporate maturity and profitability

• Southeast Asia has always been an attractive region for M&A deals, primarily as a way for companies to have a hand in the region’s growth while de-risking the complications of direct expansion
• These motivations of acquisitions and global expansion for startups are more attractive to strategic investors that are interested in exposure to certain markets or capabilities aligned with their industry
• Last year, M&As in Southeast Asia were led by companies headquartered in Japan, the US, and the UK
• That said, a lot of strategics and more “traditional” funds will have expectations on corporate maturity and profitability that startups will have to adjust to quickly
• CFOs and early stage investors with inroads into these segments of the capital market are increasingly valuable

(5) AI vs funding

The 25-50M crunch continues to persist in Southeast Asia (insignia.vc) but AI presents an opportunity to overcome the gap

• The share of “less than 25M” deals have sustained growth from 2021 (all-time low), while “greater than 50M” deals have fluctuated in recent quarters (see our private market statistics tool)
• This also comes with a “25-50M” crunch (oftentimes Series B rounds in Southeast Asia), which has not been uncommon over the years since 2016, more a feature of the region’s funding landscape
• A potential opportunity that overcomes this crunch are AI startups that may not require as much capital to scale and quickly go from “raising for growth” to “raising because of growth”

(6) Political Capital

Stronger intersection between political and technology may mean more premium on ability of startups to raise “political capital”

• A second Trump term along with recent shifts in leadership of major economies signal greater thrust towards “techno-nationalism”, where countries leverage competitive advantages in foundational technologies like semiconductors to jockey for better positions on the global stage
• This may create more complexity not just for supply chain but also for capital movement cross border, with potentially greater regulatory oversight into significant transactions (e.g., the TikTok’s situation in the US)
• Putting government as a key stakeholder is important more than ever before, regardless of industry, and having investors or partners with inroads into the politics of specific markets can be valuable
• This also opens up for companies with a localization angle, especially in more globally competitive technologies like AI