The Great VC Divide: How AI Is Shaping Southeast Asia’s Next Wave

A market cooling, but not collapsing

Venture capital in Southeast Asia has slowed dramatically from the highs of 2021. By April 2025, total startup funding in the region had dropped to around $1 billion, an 87% decline from last year’s $7.6 billion peak. On the surface, it looks like winter has settled in.

But beneath the frost, certain sectors are burning brightly. In particular, AI and SaaS are defying the trend, drawing outsized attention from investors who are becoming far more selective about where they place their capital.

AI and SaaS break away from the pack

While most sectors contracted, SaaS funding in the region jumped by more than 260% year-on-year, and AI investments rose by over 200%. This divergence is stark: foodtech, logistics, and e-commerce have seen funding declines of 70% or more, while AI startups are raising at step-ups and finding stronger exit opportunities.

Singapore’s Antler recently committed $7.4 million to Southeast Asian startups, with AI dominating the cohort. Elsewhere, Temasek-backed Vertex Holdings has highlighted that investors are prioritizing companies with clear profitability paths, disciplined execution, and strong product-market fit. The days of fast money chasing every new idea are fading; conviction is back in style.

Going global to grow faster

One of the defining characteristics of SEA’s new AI wave is its global ambition. Startups like JigsawStack, building developer tools in Singapore, are already securing early traction among U.S. customers. Realfast, an AI automation platform backed by Peak XV, is also focusing on American enterprise clients, citing faster deal cycles and higher margins abroad.

This outward-looking approach is becoming a pattern. For SEA founders, serving global customers not only boosts revenues but also makes fundraising easier in a capital-constrained environment.

What the divide really means

The so-called “VC divide” isn’t a death knell for Southeast Asia’s startup scene, it’s a sign of its maturing. Investors are no longer rewarding growth at any cost, but backing business models that are resilient, revenue-generating, and globally relevant.

For founders, the opportunity is clear: align with the themes that matter, AI, SaaS, fintech, sustainability, and build with an eye toward fundamentals. For investors, this is a chance to back the companies that will define SEA’s global presence over the next decade.

WOWS Insights

At WOWS, we see the slowdown less as a freeze and more as a filter. Yes, capital is scarcer, but for founders with strong economics and a clear product story, opportunities are still there, especially in AI and SaaS. The divide is real, but it also sets the stage for the next generation of standout companies from Southeast Asia.