Pace of funding is slowing . . .
Between 2015 and 2018, tech startups in Southeast Asia embarked on a funding spree led by unicorns such as Grab (Singapore), Gojek (Indonesia), Bukalapak (Indonesia), Tokopedia (Indonesia), and VNG (Vietnam). This growth-at-all-cost model was preferred as tech startups in the region raced to become market leaders. But after WeWork’s initial public offering debacle in August 2019, this cash-burning era came to an end. The pace of funding to tech startups in the region slowed and the amount of investment in 2019 was 30 per cent less than in the previous year. Although investors still find the region’s tech scene attractive, they have become more conservative, pushing startups to prioritize profitability in their businesses.
Ripple effects . . .
This shift has not come without costs. As the funding flows have decreased, layoffs across Southeast Asia’s tech markets have increased. Faced with pressure from investors, unicorns and startups have had to consolidate their profitable lines of business while shutting down under-performing services as a part of their drive towards quality and efficiency. Since 2019, the hiring trend has also shifted from startups offering full-time employment to more contractual employment and/or outsourcing services to vendors. This is coming as a wake-up call to new graduates who aspire to work for tech unicorns and startups.
A blessing in disguise . . .
Despite the cooler market sentiment, Southeast Asia’s tech landscape still has tremendous potential for growth. Certainly, tech startups in the region are facing a more cautious investment environment in 2020 compared to the last few years. With the coronavirus spreading across Asia and the world, startups continue to have a hard time raising cash. However, this reality check for the startup market in Southeast Asia comes at a good time; as startups need to prove the quality of their growth and present a roadmap to profitability for investors, they can avoid WeWork-like fiascoes and a bursting of the startup bubble in Southeast Asia.
- DealStreetAsia: Tech giants cut jobs, slow hiring in Indonesia as reality checks ambitions
- Nikkei Asian Review: Southeast Asian startup funding down 30% amid tougher scrutiny
- Nikkei Asian Review: ‘Winter’ is coming for Asia’s unicorns in 2020