The persistent tech winter that gloomed over Southeast Asia the past couple of years has massively affected founders, investors, and other key players in the ecosystem through gaps in funding. As the industry moves into increasingly uncertain times, corporate venture capital Kickstart Ventures believes that founders and investors alike must find new ways to navigate the settling of the winter into a tech fog.
“During this tech fog, the startup playbook has changed and it becomes more valuable for founders to navigate with purpose,” Kickstart Ventures’ AVP for Legal and Compliance Jecky Pelaez said during the recently held Geeks on A Beach (GOAB), a community event in Mactan, Cebu under Philippine Startup Week 2024.
In this new landscape, Mr. Pelaez noted that the playbook startups are familiar with has drastically changed. Previously, businesses and investors employed aggressive growth strategies, but with heightened risks, startups shifted gears to achieve sustainable growth. From top-line profitability, this new reality forces founders to look at unit economics and ensure each product and sale positively impacts their business to achieve a path to profitability. Lastly, startups need to manage funding expectations in terms of amount and valuation, as well as be strategic in raising a round given the lengthier time it takes to fund-raise compared to the previously experienced funding rounds during the pandemic.
At the height of the tech winter, which was expected to be a temporary downturn but has now transformed into the new norm, Southeast Asia experienced a “funding crunch” where investments remained scarce compared to other markets. According to DealStreetAsia’s SE Asia Deal Review: Q3 2024, deal volume and value in the region remained below pre-pandemic levels, with only $1 billion overall funding during the third quarter of 2024, a significant decrease from the previous year’s $2.1 billion.
Additionally, CBInsight’s State of Venture Q2’23 Report: Southeast Asia (SEA) claims that funding cycles in the region are now taking longer with median months between funding rounds soaring, particularly for later-stage deals. In 2023, startups waited for a minimum of 35 months to finish a round of funding compared to 2019 where funding rounds took 25 to 30 months.
To successfully thrive in volatile conditions, Mr. Pelaez underscored the importance of going back to the core of the business through constant reflection and refocusing on crucial areas, managing one’s ego and being open to difficult decisions and conversations, as well as zeroing in on the fundamentals to ensure startups go beyond survivability.
He emphasized that founders should recognize the challenges and proactively stress-test their assumptions while being mindful of market conditions and the sentiments of investors, shareholders, and other key stakeholders. On an operational level, he stressed the need to build a team that is lean and agile enough to pivot when needed and double down on metrics that are crucial to business viability.
While echoing Mr. Pelaez’s insights, Kickstart Ventures President and Co-Founder Minette Navarrete remains positive that the community can power through the challenging landscape.
“While the tech fog is a difficult time for the ecosystem in the region, we at Kickstart Ventures believe that there are many opportunities for growth,” Ms. Navarrete quipped. “Startups need to take a step back, be open to feedback, stay grounded in the realities of the landscape, and be decisive especially when making tough decisions.”
