In the first nine months of this year, startups in Southeast Asia raised more than $13 billion. A record. Depending on whose tracker you believe, that is somewhere between a 120% and a 170% jump on last year. Hold on to that range for a second. Two serious data providers, looking at the same region over the same nine months, cannot agree on the number. That is not an accident, and we will come back to it. Here is the second number, and it is the one I want you to actually feel. Of that $13 billion, seed and angel rounds, the first real cheque a brand new company gets, came to about $270 million. Spread across roughly 90 companies. Sit with the gap. $13 billion at the top of the page. Ninety founders at the bottom, splitting $270 million between them. The money in this region has never been bigger, and it has almost nothing to do with the founder in Manila, KL or Bangkok trying to make payroll this month. I have watched the money here change shape about four times in a decade. Every time, it arrived looking like the boom had finally come. Every time, the headlines said we had arrived. And every time, when you followed the money to the end, it was not here to build a Southeast Asian company at all. It was here for something else. So this week I want to follow the money through all four of its disguises. Then, at the end, I will tell you why, after taking a blowtorch to all of it, I am more bullish on this region than I have been in years. I mean that. This is not a sad story. One. The headline is the trick Thirteen and a half billion dollars, nine months, a record. If that is the only line you read, the drought is over and it is time to go out and raise again. Here is what the line does not tell you. Three deals were 54% of that number. Three. Widen the lens to every round of a billion dollars or more, and four deals were about 63% of all the money raised in the entire region this year. Before we have even started, nearly two thirds of Southeast Asia’s record year is a handful of enormous cheques going to a handful of enormous companies. So here is the one habit that will protect you from almost every misleading funding headline about this region. When a number says funding hit a record, your first question is never how much. It is how many. How many companies? Here, more than almost anywhere, one or two giant transactions can carry the whole number and make a starving market look like it just ate a feast. Look at where the money actually sat. Late stage, the Series C and beyond, the pre-IPO money, more than tripled to over $10 billion. Early stage, the seed and Series A, the part of the market where companies are actually born and where the next decade here gets decided, barely moved. Data centres alone were about 35% of all the money. I would love to know when we started counting data centres as startup funding. Video generation tools took another big slice on top. Think about what a data centre is. Power, concrete, cooling, and rack after rack of servers. It is a real estate and energy play with a technology label on the front. Perfectly good business, and we need them. It is just not a Southeast Asian founder with an idea and a laptop. The single biggest category in our record year is, quite literally, buildings. So the record is not founders getting funded. The record is a small number of very large, very late cheques going into physical infrastructure and a couple of foreign technology giants, sitting on top of an early stage market running on fumes. That is not a recovery. That is a costume. A big, shiny, $13 billion costume. To understand the costume, you have to understand the waves that came before it, because each one taught us a bad habit. We are still paying for all of them at once. Two. The hype money Most of you lived through this one. Rates were on the floor, capital was effectively free, and it flooded into Southeast Asia from big global funds that had made a fortune in China and were hunting for the next one. The instruction attached to that money was simple. Grow at all costs. Buy the users, buy the market share, buy the headline. Worry about a business model later, or frankly never. For a while it worked the way a sugar high works. Valuations went vertical. Everyone was a soonicorn. The pitch stopped being “here is a company that makes money” and became “here is a rocket, get on before it leaves the ground.” Burn was no longer a warning sign. Burn was the strategy. You were supposed to lose money faster than the next guy, because that proved you were winning the land grab. I sat in rooms where a founder losing $10 million a year was treated as more investable than one quietly making $1 million, because the one making money was clearly not thinking big enough. Then the free money ended. Rates went up, the global funds pulled back, and reality walked in through the front door and turned the lights on. You know the wreckage, because some of it made headlines around the world. eFishery in Indonesia, the poster child for aquaculture meets technology, hundreds of millions raised, a genuine darling until it was not. According to reports, a very large share of its revenue turned out not to be real, inflated to feed a valuation that had become the whole point. Zilingo raised enormous money, scaled hard across the region, and came apart on governance and burn before it could grow into the price tag it had been given. Underneath those two famous names sits a long, quiet graveyard. Companies that raised a monster round at a monster number, then went silent. Shut two or three country offices. Laid off most of the team. Then did a down round so brutal, or a bridge on such ugly terms, that they simply stopped sending press releases. You only find out when you check the cap table a year later. But here is what I think wave one really did, and it is worse than the billions it burned. It rewired a generation of founders. It taught them that the core skill of building a company was fundraising, not building. That the most important customer was the investor, not the human being using the product. It trained people to run their companies like they were preparing to sell them to a greater fool, because for about five years the greater fool kept showing up on schedule with a bigger cheque. When the greater fool stopped showing up, a lot of those founders did not know what to do next, because nobody had ever asked them to. I have watched genuinely talented people spend three years becoming world class at exactly one thing, raising money. When the market turned, that skill was worth nothing, and there was nothing underneath it. That is the quiet tragedy of wave one. Not the companies that died loudly. The founders who were patiently taught the wrong trade, and the LPs, angels and fund managers who walked away with a damaged view of the whole region. Disguise number one: money that came to inflate a story into a bigger story and flip it before the music stopped. Three. The grant money Wave two is gentler, and in some ways it did more lasting damage, precisely because it showed up wearing the nicest costume of all. This money came to help. When the hype money left a crater, two kinds of capital stepped into the gap. Both arrived with genuinely good intentions and genuinely terrible incentives. Hold both ideas at once. The first is grant money. To be clear, this is everywhere, not one country: the US, Europe, Seoul, Japan, right across Asia. Governments decided they could build a startup scene by writing cheques directly to startups. Grants, matching funds, innovation programmes, disbursements tied to milestones. On paper it sounds wonderful. Free, non-dilutive capital for founders. What could go wrong? Here is what goes wrong. That money does not select for the best company. It selects for the best grant application. Think about who approves these grants. Usually a panel. Often very few of the people on it have ever built or sold a piece of technology. They sit in a room with a scoring… This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit seaofstartups.substack.com
