Fundraising by Southeast Asian startups remained subdued in 2025, with only $5.4 billion raised, which is just a quarter of the peak funding seen in 2021 [1]. This significant decline in capital availability has resulted in more businesses either shutting down operations or becoming 'zombie' companies—firms that continue to operate but are unable to raise additional capital and struggle to achieve profitability [1]. The funding drought is particularly affecting startups that have attempted to modernize distribution systems for traditional small stores in Indonesia, as some have found it difficult to reach profitability [1].
Market analysts note that the slowdown in funding has forced startups to prioritize profitability and cost management, as investors are now more cautious and selective in their investments [1]. This marks a sharp contrast to previous years when capital flowed more freely, enabling less sustainable business models to persist [1]. The risk of more zombie firms emerging is especially acute in sectors that require ongoing investment to scale operations; without access to fresh funds, these businesses may struggle to compete or innovate, further dampening growth prospects in the ASEAN startup ecosystem [1].
The scenario raises concerns about the sustainability and health of the startup ecosystem in Southeast Asia, as the lack of funding could hinder innovation and growth in the region [1].
CONCLUSION
The sharp decline in startup funding across Southeast Asia in 2025 has led to an increase in business closures and the emergence of more 'zombie' firms, raising concerns about the region's startup ecosystem. Analysts highlight that startups are now forced to focus on profitability and cost management amid cautious investor sentiment, which may dampen growth and innovation prospects.