Singapore continues to stand out as the top fundraising hub in Southeast Asia, in terms of both deal count and value, amid a global funding downturn in 2023, a report from DealStreetAsia and Enterprise Singapore showed.
The report—Singapore Venture Funding Landscape 2023: A Full Year Study—showed that Singapore startups garnered 63.7% of all equity deals in ASEAN 6 (Singapore, Indonesia, Malaysia, the Philippines, Thailand, and Vietnam) last year, up from 56.7% in 2022.
Additionally, startups in the city-state also captured the lion’s share of deal value in the bloc at 73.3%, from the preceding year’s 62.5%.
Indonesia, the largest consumer market in the region, accounted for 15.4% of the deal value in Southeast Asia last year. However, startups in the archipelago witnessed a 65.4% year-on-year drop in private funding, mainly due to a decline in e-commerce investments.
Vietnam and Thailand accounted for 6.1% and 1.6%, respectively, of total deal value, while the Philippines accounted for 2.2% and Malaysia 1.3% of the total, the report shows.
In terms of deal volume, Indonesia’s share was at 15.9%, Vietnam at 6.6%, Malaysia at 6.3%, the Philippines at 4.1%, and Thailand at 3.4%.
However, Singapore was not spared from the effects of the global funding slowdown as deal volume in the country dropped 19.8% year-on-year, reaching just 522 in 2023. The amount raised also plunged 44.7% from a year earlier to $6.1 billion.
Collectively, the ASEAN 6 experienced a 28.6% drop in deal volume compared to the previous year. The region also saw deal values plummet by more than 52.9%.
In 2022, too, venture capital funding in Singapore slightly weakened following a bumper 2021 as investors took a cautious stance amidst a challenging macro environment.
Chua Kee Lock, CEO of Vertex Venture Holdings, the venture capital arm of Singapore’s state investor Temasek Holdings, attributed the decline in venture funding across Southeast Asia to two factors: inexperienced venture capital firms investing in marginal ideas at excessively high valuations, and difficulty in raising from limited partners (LPs).
“Amidst this challenging backdrop, startups should focus on sustainable growth and profitability. Companies with strong founding teams, differentiated offerings, or business models will emerge and thrive as the next global champions,” Chua said.
The report by DealStreetAsia and Enterprise Singapore cited data based on company announcements, regulatory filings, media reports, industry reports, and DealStreetAsia’s research.
Deep tech rises
Notably, the report noted a rise in deep tech deals in Singapore. Last year, the city-state recorded a 31.4% year-on-year increase in deep tech deals to 159 in 2023, marking a recovery from a 38.9% drop in the preceding year.
Deep tech’s share of total private funding in 2023, soared to 25% last year, versus 17% in 2022.
However, deal values continued their downward trajectory, decreasing by 18.4% to $1.53 billion in 2023. Silicon Box achieved the maximum funding among deep tech startups, amassing $139 million as part of a $200 million Series B round in December.
Overall, Singapore saw 10 deep tech startups graduate to Series B rounds, while 24 moved to Series A.
Fund managers acknowledge that Singapore offers a conducive environment for deep tech innovation, suggesting a promising investment trajectory in 2024 if navigated prudently.
Tan Kaixin, general manager at SEEDS Capital the investment arm of Enterprise Singapore, said they will continue to nurture deep tech startups within its current areas of focus and invest in promising emerging areas that can anchor Singapore as the deep tech hub of the region.
“We have approached 2024 with renewed optimism as we note that interest and investments in deep tech continue to gain steam globally, especially in areas such as clean tech, AI, and quantum tech,” Kaixin said.
Additionally, Singapore remains an attractive hub for startups in the healthtech space even during the post-pandemic era. Last year, healthtech deal volume in the city-state more than doubled.
Green tech transactions, on the other hand, grew 160%, according to the report. Among the top ten deals in this space were green tech enterprises with hardware capabilities in renewable energy, waste management, and battery services attracting investments.
“The pandemic has created higher awareness and acceptance of the use of technology to facilitate healthcare delivery. For example, telemedicine and related activities are now more widely used,” said Eric Loh, Singapore CEO of Trendlines Medical, a Singapore-based company that invests in and incubates innovation-based medical technologies.
Early-stage deals take up the lion’s share
The report also highlighted that early-stage deals in Singapore continued to drive the transactions last year, accounting for 94.1% of the total deal volume and 49.8% of the deal value, up from 89.9% and 43.7%, respectively, in 2022.
Despite a 37% decline in total deal value, the median value—seen as a proxy for valuations—for early-stage deals witnessed minimal impact from the downturn.
Late-stage deals in Singapore, on the other hand, saw a decline in both value and volume, as the global funding slowdown and lack of liquidity forced venture investors to become more selective and prioritise companies with robust business fundamentals.
Singapore clocked 29 late-stage deals in 2023, down by more than half from 64 deals in 2022 and 63 in 2021. In terms of the total value, late-stage deals collected $3.06 billion, down by 50.8% year on year.
As a consequence, late-stage funding’s share of the overall deal value in Singapore fell to 50.2% in 2023 from 56.3% in the previous year.
“The shift in early-stage deal dynamics throughout 2023 underlines a cautious yet opportunistic investment approach,” said Magnus Grimeland, founder and CEO of global VC firm Antler.
The report also noted that 13 of the 20 top-funded startups last year hailed from Singapore, led by Lazada Group, which received a capital injection of about $1.2 billion from its parent Alibaba Group.
Thailand’s Flash Express also secured $447 million in Series F funding to become the second most-funded startup in the region in 2023.
Promising investment trajectory in 2024
Local and regional fund managers interviewed for the report said the current investment scene is marked by a delicate balance of careful optimism and mindful strategy, which leads to a more guarded investment approach.
This cautious approach, however, will position Singapore, with its robust ecosystem supported by strategic government initiatives, as a prime beneficiary in this selective investment climate.
For the entire Southeast Asia, despite the funding winter, when investors look at the broader landscape of the region, they will see strong macro fundamentals—fast-growing economies with an emerging middle class.
“Investors would be wise to take a long-term view of Southeast Asia. This is a region which has emerged from every difficult period stronger than before, including COVID-19 in which Southeast Asia, especially Singapore, bounced back from the pandemic faster than most of the rest of the world,” said Quest Ventures managing partner James Tan.
Bright spots
Healthtech, green tech, agri tech, food tech, and AI have emerged as bright spots in Singapore’s funding landscape, the report noted. Healthtech has become a focal point of investment while green and agri tech sectors are also seeing substantial traction.
The city-state’s ready infrastructure for test-bedding AI tech and enabled solutions and a growing pool of AI professionals also provide fertile conditions for new startups to emerge in this disruptive sector, the report said.
Kabir Narang, founding general partner of Singapore- and US-based venture capital firm B Capital Group, said there is plenty of room for startup growth, particularly as Southeast Asia has showcased its resiliency through the last few months.
“Our key advice to the portfolio is around sustainable growth, managing burn, being prudent, diversifying revenue streams, and reducing vulnerability to market disruptions,” Narang said.
Read the Singapore Venture Funding Landscape 2023: A Full Year Study report here: