TLDR:
- 2023 was a challenging year for start-ups and venture capital (VC) firms due to rising interest rates and high capital costs.
- In 2024, VC firms are expected to focus on fundamental analysis while managing risks by combining early-stage and emerging market investments.
- Southeast Asia’s private funding hit a six-year low in 2023, and VC firms are looking to shift to profitability pathways.
VC firms in Southeast Asia are expected to maintain a focus on the fundamentals of start-ups but also explore early-stage deals in 2024, according to industry insiders. The previous year saw challenges for start-ups and VC firms, with rising interest rates and high capital costs contributing to a decline in private funding. However, rather than a complete shift towards a risk-on sentiment, investors are expected to manage risks by combining early-stage and emerging market investments with a focus on fundamental analysis.
The e-Conomy SEA 2023 report published by Google, Temasek, and Bain & Company in November highlighted that Southeast Asia’s private funding reached a six-year low in 2023. This was attributed to high capital costs and increased pressure to shift towards profitability. The report also indicated that start-ups in Southeast Asia would need to pursue a profitability pathway rather than relying solely on growth to attract investors.
This shift towards fundamental analysis and early-stage deals is influenced by the need for sustainable growth and profitability in the start-up ecosystem. VC firms are expected to be more cautious and thorough in their due diligence processes, ensuring that start-ups have a solid business model and long-term potential.
The focus on early-stage deals reflects the desire to support and nurture promising start-ups from their inception, allowing investors to have a greater influence on their growth trajectory. In addition, early-stage investments can potentially offer higher returns for VC firms in the long run.
Overall, the key elements of this article are:
- VC firms in Southeast Asia are expected to focus on fundamental analysis and early-stage deals in 2024.
- Private funding in the region hit a six-year low in 2023 due to high capital costs and the need for profitability.
- The shift towards fundamental analysis and early-stage deals aims to support sustainable growth and profitability in the start-up ecosystem.
