Southeast Asia (SEA) is home to approximately 58 unicorns, demonstrating a successful track record of startups and a thriving ecosystem that supports entrepreneurial ventures. Over the last decade, the region has attracted top-tier global investors to invest in ventures with billion dollar valuations that are capitalizing on SEA’s robust economic growth and a burgeoning consumer market.
As of July this year, a total of US$2.31 billion had been raised across 328 equity funding rounds in SEA. The region is projected to raise a total capital of US$18.3 billion in the venture capital market in 2024. Early-stage investments are expected to dominate the market, with an anticipated volume of US$9.5 billion.
SEA has a rapidly evolving digital economy supported by a tech-savvy consumer base and increasing internet penetration and smartphone usage. The region has over 400 million internet users with a penetration rate of over 70% in most countries. In 2023, SEA’s internet economy size was valued at approximately US$218 billion with a projected growth to US$295 billion by 2025.
Investors are eager to support startups in the region that are developing innovative products and solutions which tackle local challenges and meet the needs of the community. It is important for startup founders to understand investors’ mindsets. Understanding what resonates with investors can significantly impact a founder’s chance of raising funds, even in a tough funding market.
Evaluating a Startup
In today’s rapidly evolving business landscape, consumer preferences and tech advancements, investors have become more discerning about the kind of businesses they choose to fund. They tend to focus on key factors such as return on investment (ROI), scalability or market expansion, competitive advantage and risk when backing a startup.
According to Thanit Apipatana, a Bangkok-based entrepreneur, investor, and startup advisor, a business model has to be financially viable with strong ROI. “Startups that prioritize financials and profitability demonstrate growth potential and build confidence among investors in delivering long term returns.”
For instance, a SaaS company that consistently grows its subscriber base each month can demonstrate its potential ROI by using metrics such as customer acquisition costs and lifetime value. By illustrating how quickly the startup can recoup its investments, it can attract investors looking for high returns.
Experts emphasize that successful startups prioritize customer satisfaction, retention and product-market fit, fostering customer loyalty, and enabling scalable growth through word-of-mouth referrals.
A Winning Business Plan
To woo investors and secure funding, it is essential to build a solid business strategy. A well-structured plan must outline market potential, growth strategy, business goals and a roadmap for achieving those goals. Investors always seek a comprehensive plan to understand the business model, financials and how well a startup is positioned to provide a potential ROI.
Apipatana acknowledges that creating a comprehensive business plan is crucial for startups to raise funds. The plan should include detailed industry analysis, operating costs and the potential earning of the business. Such planning is foundational for the future health and financial feasibility of the business.
“A well-articulated plan offers clarity and direction. It demonstrates informed decision-making and a clear roadmap to achieving goals, while giving investors the confidence that their funds will be utilized judiciously to drive success,” notes Apipatana. He has advised and invested in companies across the region, including Singapore-based proptech startup Mogul.sg and Thailand-based Life Below Labs.
Having a competitive advantage is a vital aspect that investors look for in a startup, especially in today’s crowded market, where businesses clone one another’s offerings and products in no time. This advantage is the main differentiator that founders need to highlight when seeking funding.
According to a report by Statista, startup founders in SEA are increasingly choosing venture capital firms as a primary source of funding. This is because venture capital investors not only provide capital, but also offer expertise, mentorship, and access to extensive networks. For entrepreneurs, venture capital funding provides a platform for rapid growth and scalability.
The traditional funding sources such as bank loans, financial institutions, and government grants are often insufficient for startups to scale their business. This is where angel investors and venture capitalists come in, bridging the funding gap for early-stage startups in the region. According to Tracxn, as of August this year, SEA has 33 Angel Networks with a combined portfolio of 934 companies.
As the region’s high-quality startups attract funding from both local and foreign investors, sectors such as technology, healthcare, e-commerce and fintech have become particularly attractive to investors due to their potential for scalability and fast-paced growth.
The Potential for Business Growth
A scalable business model is essential for a startup to achieve significant growth, and investors consider this a key factor when considering funding. Understanding the market and the target audience is crucial for tailoring the product to meet specific market needs.
Additionally, having the right team and leadership plays a crucial role in providing the strategic direction necessary to address the challenges of scaling the business to the next level.
The lack of investors or financing is one of the primary reasons why startups fail. A survey conducted among startup founders worldwide revealed that their businesses did not work out due to a lack of financing, with nearly half of the entrepreneurs surveyed citing this as the top reason for their failure.
Apipatana emphasizes that although having a great product, a smart go-to-market strategy, product-market fit and effective branding and marketing are crucial for building a successful startup, having the right team and leadership in place is paramount. “It is the people and the team who drive success, solve problems, and help the business scale.”
In the evolving SEA markets, entrepreneurs and investors will play a key role. The region is considered an attractive investment destination for investors due to its large and diverse markets, rising disposable incomes, and supportive regulatory environment.
In recent years, the startup scene in the region has experienced significant changes due to the availability of increased funding options. According to Statista, countries like Singapore, Indonesia, and Malaysia have seen a rise in tech startups, particularly in e-commerce, fintech and logistics sectors. Indonesia in particular is becoming a hub for investments, supported by a growing tech-savvy population and a rise in entrepreneurial activities.
With heightened investor interest in the region, it is game on for startups.
Thanit Apipatana is a Bangkok-based entrepreneur, investor, and startup advisor with a keen interest in venture building, real estate, F&B, sports and philanthropy. Mr. Apipatana has advised and invested in companies in the region, including Singapore-based proptech startup Mogul.sg and Thai-based Life Below Labs. As a thought leader, Mr. Apipatana shares his insights on entrepreneurship, F&B, education, sports and the social sector.