I got invited to a lunch a little while ago on “redefining Southeast Asia’s value proposition.” Fourteen people around a table, Chatham House rules — so I’m not going to tell you who was there or what was said.
But they sent four questions ahead of time to chew on. And the questions were good enough that I ended up writing out my own answers. So here they are.
The four prompts:
- What do you underwrite differently than you did two years ago?
- Does the old pitch for the region still hold?
- What does AI change?
- What’s the real bottleneck?
Here’s the through-line before I start: I don’t think Southeast Asia’s problem is builders. The founder pipeline is the best I’ve ever seen it. The problem is buyers — and almost everything else follows from that.
What I underwrite differently now
Two years ago you could still fund a company whose best realistic case was “regional leader, gets bought by a local strategic, or lists locally.” I don’t do that anymore.
The exit math stopped supporting it. Private equity exits across the region fell sharply last year, and the exits fell harder than the deals did. One large Southeast Asian market recorded zero PE exits for the year. Zero. If the only buyer for your company is a local strategic that doesn’t actually exist, that’s not a venture outcome — it’s a nice business that traps capital.
So exit path is now a day-one question for me, not a Series C problem. Global revenue from the start, or a credible path to a global acquirer, or I usually pass.
Two other things changed. I price regulatory risk as a base case now, not a tail risk — when a regulator can halve the take rate of an entire category with a few weeks’ notice, that’s a permanent haircut on anything that looks like infrastructure to a government. And I care more about how fast a founder gets to a paying customer with three people than about any 18-month plan. AI made the plan worthless anyway.
One number that reframes the whole “funding is recovering” story: strip out a single giant data-center deal from early this year, and the entire region did a rounding error in venture funding that month. A lot of “Southeast Asia is back” is really a data-center story that happens to show up in the venture numbers.
Does the old pitch still hold?
The old pitch had three legs. China+1. 680 million consumers. Cheap labor. I think all three have failed, and pretending otherwise is a big part of why foreign investors stopped listening.
China+1 became China-in-SEA. The factories did move — but the mover was China, not Western companies diversifying away from China. And that relocation is now getting taxed at the border rather than rewarded.
680 million consumers was never one market. It’s more like 50 to 80 million people with real discretionary income, spread across six regulatory regimes, six languages, and six payment stacks. The middle class in the region’s biggest market actually shrank over the last decade. And where people do spend, local brands already own more than half the value. The prize is going to local incumbents, not to some regional platform.
Cheap labor is a fading edge. Automation is beating the wage gap. If your ten-year thesis rests on a wage differential, you’re underwriting the wrong variable.
So what replaces the pitch? This is the thing I’ve actually been putting money behind. Call it independent by design.
In a world that’s fragmenting, the most durable wedge isn’t a feature — features get copied next quarter. It’s structural. A company built — incorporated, located, owned, and supplied — to be free of whoever dominates its input. In a normal world none of that matters. In this world, it’s the product.
And the best part is the demand isn’t something a founder has to drum up. Policy is creating it. Whole categories of buyers are being pushed out from under their dominant supplier — by tariffs, by sourcing rules, by plain geopolitical nerves — and they need someone they’re allowed to choose.
It comes in two forms. Some companies are genuinely neutral — built to sell to every side, including the dominant country’s own champions when they go global. Others are aligned — they don’t sell to that power and don’t need to; their whole value is being the credible alternative for everyone exiting it. Either way it’s the same idea: the buyer needs out, and you’re the option they can pick.
That’s what actually replaces the old pitch. Southeast Asia’s value proposition isn’t 680 million consumers. It’s a neutral place to build the companies the rest of the world is increasingly required to buy from — talent, energy, land, and a jurisdiction nobody has to be nervous about. That’s a supply story, not a demand story. And it’s a much better one, because the demand behind it is being written into policy in Washington and Brussels, not into a pitch deck.
The uncomfortable part, which I’ll say because it matters: this reframe is great for Singapore and a lot harder for everyone else in the region. “Southeast Asia’s value proposition” and “Singapore’s value proposition” are starting to become the same sentence. That’s a problem, and we should treat it like one.
What AI changes
Two things, and they both cut in Southeast Asia’s favor — which is not where most AI commentary lands.
First, fragmentation has always been the tax on building here. Localization, compliance, six languages, per-country go-to-market — it’s why regional expansion has historically destroyed margin. AI drives the cost of that toward zero. A technology is doing what thirty years of regional integration policy couldn’t. If that holds, the regional roll-up becomes fundable again for the first time since 2021.
Second, AI lowers how much capital it takes to get to real revenue. And that’s the actual fix for the exit problem. Southeast Asia’s chronic issue is that the exit ceiling is too low to justify the money going in. So lower the money going in. A $50 million outcome on $3 million raised is a genuinely good return. The mistake I see founders make is raising like they’re in the US and then trying to exit in a market that can’t support that capital structure. Don’t do that.
Where’s the alpha? The unglamorous layers — agriculture, logistics, blue-collar workflows, credit and identity infrastructure for the majority of the region that’s underbanked. Not because it’s noble. Because those workflows are messy, multilingual, and undigitized, which is exactly where the technology has the biggest edge and the fewest incumbents.
The honest tension I can’t resolve: you can be the best applied-AI market in the world and still have no frontier lab of your own. For venture returns, best-applied is more than fine — the application layer captures plenty. For national strategy it’s shakier, because applied value can be repriced by whoever owns the model. Both of those are true and they point in opposite directions. And underneath all of it sits energy, which almost nobody is pricing. Compute is landing faster than power.
The real bottleneck
Here’s my ranking, which is a little different from the usual list.
One: buyers, not builders. In the US, most venture wins are acquisitions. The region has maybe a handful of serial acquirers of any scale. That’s the root cause. No buyers means weak returns to investors, which means investors pull back, which starves the next group of founders. It’s a capital-formation spiral, not a company-quality problem.
Two: it’s not a money shortage, it’s a nerve shortage. There’s a huge pile of undeployed Asian venture capital sitting around. The money is here. The conviction isn’t. “The region needs more funds” is the wrong diagnosis.
Three: talent, but not the way people say it. It’s not that Southeast Asia loses people to San Francisco. It’s two steps — the region consolidates into Singapore, and then Singapore leaks to San Francisco. And founders are making a rational economic choice when they go. You can’t moralize people out of arithmetic. You fix it by making the outcomes here bigger, which loops right back to buyers.
Four: fragmentation — the one bottleneck that might actually be getting better, thanks to the AI point above.
So how do you actually fix it?
I don’t think there’s one lever. But I don’t think it’s a mystery either. Three things, and the region controls all of them.
Right-size the capital so smaller exits count. This is the fastest fix and it’s already available. If AI lets a company reach real revenue on a few million dollars, then a $30–50 million acquisition is a great outcome — but only if the company didn’t raise $40 million first. The exit market isn’t as broken as it looks once you stop feeding companies more capital than the market can ever return. This is a financing choice, and founders and investors here can make it tomorrow.
Build companies with a buyer already built in. This is where independent by design pays off twice. A company that exists to be the credible non-dominant supplier doesn’t need a local M&A market — its acquirer is a global strategic being pushed toward it by policy. You route around the missing regional buyer entirely. The exit was designed in from the start, not hoped for at the end.
Grow your own acquirers, on purpose. A handful of regional platforms just turned profitable. Those are the first real buyers the ecosystem has produced, and the instinct shouldn’t be to pressure them straight into an IPO. It should be to let them consolidate — to become the strategic buyer that the next fifty startups exit into. We’ve spent fifteen years funding startups and almost no time building the companies that buy them.
None of this needs a treaty or a new fund. It needs founders to raise less, investors to build for global buyers, and profitable platforms to be allowed to grow teeth.
So what?
If I had to compress it: stop selling Southeast Asia as 680 million consumers, and start building the thing the region actually lacks — a market for exits.
For founders: raise less, stay global from day one, and don’t confuse a big round with a good outcome in a market that can’t buy you.
And for everyone still waiting for the 680-million-consumer story to finally convert — I think you’re waiting for the wrong thing. The value proposition was never the demand. It’s the supply, so build for that.