Nov 15, 2025

Once awash with venture capital, Asia's start-up ecosystem is now weathering a deep freeze as investors reassess their risk exposure amid global economic uncertainty and China's growth slowdown. For regional entrepreneurs, the flight of risk capital has turned into a crisis, with funds seeking refuge in safer markets. Malaysian venture capitalists told This Week in Asia that fierce competition for a dwindling pool of funds had become the new normal. “What winter? It's the constant weather here,” said Bikesh Lakhmichand, founding partner of 1337 Ventures, a firm specialising in Malaysian and Southeast Asian start-ups. “Fundraising is hard because funds are non-existent.” Venture capital funding in Asia totalled just US$51.2 billion in the first nine months of this year, according to accounting firm KPMG. Data from business analytics firm Crunchbase reveals a broader trend: funding hit a decade low of US$65.8 billion last year, a far cry from the record US$194 billion raised in 2021. Malaysia's government, aiming to revitalise the sector with its “KL20” start-up road map launched last year, has seen only limited success. Official figures show 6.7 billion ringgit (US$1.6 billion) flowed into start-ups in 2024. In the first half of this year, investments totalled just US$50.6 million across 32 deals, according to the Securities Commission Malaysia. Bikesh said Malaysia had long struggled to convince global investors of its potential as a launch pad for growing early-stage businesses into regional leaders. READ FULL ARTICLE App He said the challenge was compounded by investors' increasing demands for evidence of business viability and more rigorous due diligence. “Now it is so difficult. Regional funds already want [start-ups] to show proof of execution in markets where we are seeking funds,” Bikesh said. “Even though [a company] dominates here, when we go regional, they don't consider Malaysia as regional. Malaysia is seen as a [proof of concept] market, not a true market. It is such a painful dilemma.” Investor caution has been sharpened by a string of accounting scandals, such as the one at Indonesian agritech unicorn eFishery , which reportedly overstated revenue by nearly US$600 million over nine months last year. Analysts say such scandals have amplified global investors' wariness towards regional start-ups. In the wake of the eFishery debacle, Indonesian start-up funding plunged by almost 55 per cent to US$161.3 million in the first half of this year, compared to the same period in 2024, official data showed. Across Southeast Asia, start-up funding fell 20.7 per cent to US$1.9 billion in the first half of the year, a report by DealStreetAsia and Kickstart Ventures found. “In the good days in Indonesia, valuations [of start-ups] went too high. Now a lot of them are under water,” said Sivapalan Vivekarajah, co-founder and senior partner at ScaleUp Malaysia Accelerator. “Because the performance of venture capital funds has not been very good, it is quite hard to raise funds with [limited partners] … funds are now using their money to try to save better companies in Indonesia and Vietnam.” ‘Buy Malaysia First'? Industry insiders say that making Malaysia a magnet for start-up capital will require more than ambitious government targets. At the launch of the KL20 road map last year, Prime Minister Anwar Ibrahim set a target for Kuala Lumpur to become one of the world's top 20 start-up hubs by 2030. While the initiative helped raise Malaysia's profile, access to growth capital remained limited, with preference given to government-backed or AI-related projects, said start-up founder Joyce Kau. Kau, who raised funding in Singapore for her AI-driven communications platform Caht.io, urged the government to incentivise local investment in Malaysian start-ups, lower barriers to regional fundraising and encourage the registration of patents for home-grown technology. “The potential is there where Malaysia has strong talent and cost advantage, but policy and capital must align faster,” said Kau, who has a development team in Malaysia. The potential is there … but policy and capital must align faster ScaleUp's Sivapalan argued that the government should also persuade conglomerates, which typically favour foreign technology, to partner with local start-ups. “We need to do what Japan or [South] Korea have done. In Malaysia, we don't have a ‘Buy Malaysia First' policy. We always buy foreign,” Sivapalan said. “When you buy local tech, local start-ups get more revenue, which means they can grow faster and hire better people. We have to trust our own products.” Jeep Kline, founder and partner at Silicon Valley-based Raisewell Ventures, called for greater collaboration among Southeast Asian tech firms. After scouting the region for deep tech investments in areas from AI to quantum computing, Kline stressed that Southeast Asia's full potential would only be realised through cross-border cooperation. “When you do data centres, you can also serve the entirety of Southeast Asia and not just one country. Otherwise, it is too small,” she said, citing Singapore's success as a regional tech hub. “We have to tell the story a little bit differently. It is not about fragmentation, but about how we have economic cooperation in a way that nobody should miss.”