Lessons from 2024, when the penny finally dropped for South-east Asia’s startups
A venture capitalist reflects on key trends and offers a glimpse of what lies ahead in the new year
AS I gaze at the glimmering sea and majestic mountains of Banyuwangi, I find myself reflecting on what has been a transformative 2024, for venture capital and for startups.
But let’s start with the bigger picture – politics.
This was a year defined by elections. Indonesia’s Valentine’s Day surprise saw a resounding win for the Prabowo-Gibran ticket, signalling continuity and a focus on human capital development, downstreaming of the mineral industry, and foreign direct investment.
Then in November, we saw a nail-biting election in the United States.
What would a potential Trump 2.0 mean for South-east Asia? Would increased tariffs on China redirect opportunities here, or would protectionist policies disrupt regional trade routes? The potential bans on TikTok and Temu, already banned in Vietnam, raise further questions about market flows and inflation risks.
Speaking of the supply chain, one of the major surprises of this year was the deluge of goods from China flooding the ports of Indonesia. This triggered protectionist fears, resulting in delays in customs clearance and a shortage of quotas for imports. A major scarcity of supplies ensued for everyone, ranging from restaurant owners to online merchants. This led to significant missed sales opportunities, which we hope will improve in 2025.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
E-commerce was another battleground.
Platforms such as Shopee and TikTok dramatically raised their commission fees, making South-east Asia the world’s most expensive market for merchants.
While Sea Ltd’s stock recovery signalled optimism, it also highlighted mounting pressures on sellers. Live-streaming e-commerce in China grew by only 50 per cent year over year, hinting at a maturing market, and South-east Asia seems poised to follow.
As digital brands pivot towards offline retail, the demand for skills in distribution, site selection, and store management grows – a daunting shift for many. Only the strongest brands who can adapt with an omnichannel strategy will survive, and we hope to see more born-in-South-east-Asia brands succeed.
The Indonesia Stock Exchange provided an optimistic counterpoint. My visit with distinguished guests from China showcased promising initial public offering (IPO) pipelines for 2025, boosted by a post-election recovery.
Consumer strength
Meanwhile, South-east Asia’s consumer strength shone through, as exemplified by Malaysia’s successful Mr DIY and 99 Speed Mart IPOs. The long lines at select stores in malls show that there is always opportunity if you can find the right product-market fit.
I was quite impressed by Labubu, the crazy smiling collectible that is sold out worldwide. Pop Mart’s meteoric rise, from under HK$20 to about HK$93 per share, underscores the power of having a blockbuster product.
Closer to home, the burgeoning queues outside On Cloud’s Jakarta store reaffirm Indonesia’s retail potential.
On the climate front, we were thrilled to see Xurya, which was seeded by our Fund II, close an oversubscribed US$55 million funding round, marking a significant milestone in clean-energy innovation.
On the electric-vehicle (EV) front, things have been moving slower than expected in Indonesia, with subsidies for only 60,000 two-wheeler EVs, so we await to see how the new government in Indonesia will dictate policies in the new year.
If China can offer us a look into the future of EVs in South-east Asia, then we are glad to see that 2024 marks the first time that EVs outsold traditional cars in new car sales.
If we wind back the clock a few years ago, EVs in China made up only 6 per cent of all new car sales in 2020 – in a few years, this number has become 50 per cent. This makes me hopeful for EVs in South-east Asia.
Of course, any article about 2024 would be amiss without a mention of generative artificial intelligence (AI) – still a hot topic and driving large fundraising rounds in the US and China.
I had the opportunity to attend the launch of OpenAI’s Singapore office, where I witnessed fascinating demos, such as of self-programmed drones.
At home, I was surprised to see my daughter use ChatGPT to ask Santa what presents she should wish for this Christmas, which led her to discover Shein (a potential risk of AI-enabled consumerism).
On the investment front, most AI applications we have seen are for enterprise use, not dissimilar to the software-as-a-service (SaaS) business model. Few consumer-facing applications, such as Speak in the US, have reached a unicorn valuation for language learning, so we await more traction on consumer applications in 2025.
New reality
The key phrase that comes to my mind for 2024 is it being the year when the “penny finally dropped” for the startup ecosystem in this region.
If you recall the euphoria of 2022, and the gradual awakening to a new reality in 2023, the acceptance of the new norm took place in 2024 for many founders.
We also saw some seven follow-on financing rounds for our portfolio companies as investors loosened up their purse strings and founders came to terms with down-to-earth valuations. Notable examples include Supermom’s US$14 million funding round connecting brands with more than 10 million parents across South-east Asia, and the Indonesian automotive startup Broom securing US$25 million in Series A+ funding.
With the fundraising records we saw in 2021 now a distant memory, and the painful cost efficiencies mostly done, I hope we can look to 2025 with renewed optimism, reigniting the engine of growth and seeing how companies perform compared with how they did in the pre-Covid era.
The writer is a managing partner at AC Ventures
Copyright SPH Media. All rights reserved.
