“Funding gaps” have never been a real problem in Southeast Asia

Before Covid, almost every time you went to a conference about startups and startup funding in the region, the issue of funding gaps always came up. 

“We have great companies but they are not able to raise money because of the funding gap,” exclaimed many. You do see these claims in various reports too. 

While almost excessively talked about, we think that funding gaps have been heavily exacerbated in Southeast Asia, at least in the past decade.

Just look at the following: 

Yes, you would have noticed a clear evolution of the funding gaps: from series A, to series B, and now (I mean pre-covid) growth. 

Underlying is the rapid growth of funding availability across the life cycle of startups in the region.

When the infrastructure was ready and companies reached the particular stage, the gap emerged but was very quickly filled with capital that is being raised locally, but more often from global investors who increasingly put their attention to the region. 

You would see that more (and bigger) funds are raised for the region throughout the decade: 
And in addition to the Chinese capital we often talk about, there is also money coming from different parts of the world into the tech companies in Southeast Asia: 

As a result, the funding events (and amount) grew rapidly but steadily, especially after 2015. That trend remains even if you remove the mega rounds raised by Grab, Gojek and Tokopedia: 
All these were responsible for the boom of tech development in Southeast Asia in the 2010s: 

Of course, a key reason for any ‘gap’ is that investors at that stage are worried about, or rather, uncertain about the timing of, the availability of next stage funding. 

So rightfully, the issue of ‘lack of exit opportunities’ is often brought up in general. 

However, in SEA, exits are not hindered by regulatory obstacles, as is the case in some other large emerging markets. 

Instead, it is the absence of acquirers and an underutilized IPO route. As the ecosystem continues to mature once more though, the utilization of these paths is only a question of time. 

The US equity analysts we spoke to recently are bullish about tech in SEA; some major exchanges in the region are reforming to make it easier for tech companies to list. 

All these are the reasons why we are very optimistic regarding a closing of the growth stage funding gap in the not too distant future.