The first half of 2025 marked the weakest fundraising period for Southeast Asia’s venture capital managers in more than seven years, as caution outweighed conviction amid a challenging global and domestic backdrop, according to DealStreetAsia DATA VANTAGE’s bi-annual report.
Investor appetite has clearly waned as global capital has rotated into safer, more liquid assets. Only eight VC funds reported fundraising milestones in the first six months of this year, whether first, interim or final close, down from 17 in the prior semester and 14 in the same period last year, according to the report titled SE Asia VC Funds: H1 2025 Review.
Whether they are interim close or final close, these eight fundraising milestones collectively raised $384 million, a sharp decline from $1.14 billion in the preceding semester and $1.51 billion a year earlier.
Only eight VC funds reported fundraising milestones in H1, down from 17 in the prior semester.
Among the fundraising milestones in the first half of 2025, only three funds reached a final close, the lowest count since at least the first half of 2018. This limited activity reflects a sharply constrained fundraising environment, where fewer managers are able to bring a fund to completion.
Of the three final closes, only Clime Capital disclosed its raise, closing Southeast Asia Clean Energy Facility II (SEACEF II) at $175 million, exceeding its initial $135 million target. The other two managers withheld details about fund size, a move that typically indicates smaller-than-expected closes, providing limited visibility or signalling value to prospective LPs.
Even applying a generous assumption by tripling Clime Capital’s proceeds, the total would still fall short of any half-year period in the past seven years, including the second half of 2020 during the height of pandemic-related lockdowns. This underscores the severity of the current capital drought facing Southeast Asia’s venture capital ecosystem.
“There’s a lot of noise in the market across asset classes, across geographies. LPs are navigating portfolio-level pressures and keeping optionality open, not just within venture but across everything from credit to infra. So the bar is higher. They’re backing funds that are clear on where they win, not just where they’re active,” said Shaun Hon, founder and general partner at Motion Ventures.
Governance matters
While the macro environment has grown less favourable, fund performance has also come under greater scrutiny, the report said. Many vehicles in the region are underperforming in terms of distribution, with DPI figures falling short of expectations.
The absence of tangible returns has made LPs more hesitant to commit fresh capital, particularly for re-ups, as they increasingly allocate to yield-generating alternatives over long-horizon, illiquid VC bets. “Most of the LPs in our fund are HNWIs and family offices. Many of these LPs we have spoken to are concerned about global macro pressures such as inflation, tariffs and geopolitical risk. The poor performance of some larger VC funds in the region has also spooked some LPs,” said John Lim, partner at Meet Ventures.
Further compounding the downturn are a string of governance failures and fraud allegations involving early-stage startups in the region. These high-profile cases have cast a shadow over due diligence standards and capital discipline in Southeast Asia’s VC ecosystem, the report argues.
Many funds approaching the end of their lifecycle are generating disappointing distributions.
Melvin Hade, former managing partner of Northstar Ventures who now leads his own fund, Kayella Consumer Partners, said he’s not surprised by the overall trend in VC fundraising.
“LPs have been voicing concerns around fund performance and liquidity, particularly with VC funds, for the past couple of years. First, performance has been further dragged down by fraud allegations and governance issues at several early-stage startups, eroding investor confidence not just in individual founders but in the broader ecosystem,” said Hade.
Second, liquidity remains a key challenge, Hade said. Many funds approaching the end of their lifecycle are generating disappointing distributions, casting doubt on exit prospects. In his view, these factors are driving LPs to reallocate capital towards other asset classes or more liquid instruments.
Debut and ESG funds suffer
The pressure is especially acute for emerging managers, who now face longer fundraising cycles and higher barriers to securing anchor commitments for their debut funds.
Hade’s Kayella Consumer Partners stands out as the only debut fund to have reached a final close so far in 2025. The vehicle, reportedly in the “double-digit million dollars” range, was backed primarily by Hade and a small group of angel investors.
The contrast with last year is stark. In the first half of 2024, three debut funds collectively raised $250 million, underscoring the slowdown in capital formation for emerging managers. With muted first-half momentum and few interim closes on record, 2025 is unlikely to surpass last year’s total of six debut fund closes and seven in 2023.
Retroactive disclosures remain possible. In March, Singapore-based Meet Capital revealed that it had closed its debut fund in late 2024, highlighting how some managers only report milestones months after completion. However, the broader trend since 2023 has been clear: emerging managers are finding it increasingly difficult to secure commitments in a market where LPs are prioritising established GPs.
The slowdown has also extended to climate and ESG fundraising. Clime Capital’s above-target close stands out in an otherwise subdued landscape. In the past 18 months, only three ESG-aligned funds have reported interim closes in Southeast Asia, signalling a thinner pipeline and more selective LP engagement, a sharp contrast to the segment’s momentum just two years ago.
In the past 18 months, only three ESG-aligned funds have reported interim closes in SE Asia.
The trend mirrors a broader global retreat from ESG-labelled strategies. In the United States, such vehicles have faced headwinds from political pushback, increased regulatory scrutiny and shifting investor priorities. These pressures have reshaped both fundraising capacity and investor messaging.
In response, several managers have rebranded or scaled back their ESG offerings, pivoting towards narrowly defined strategies such as climate infrastructure and energy transition. These themes, with clearer risk-return profiles, are attracting a larger share of capital as LPs seek more targeted exposure within the sustainability spectrum.
Drop in foreign appetite
Foreign VC funds with mandates that include Southeast Asia, either as a core focus or as part of broader pan-Asian or global strategies, have also seen a slowdown in fundraising momentum. This segment is an important bellwether for cross-border capital flows into the region, often reflecting global LP sentiment towards emerging market exposure within diversified portfolios.
In the first half of 2025, only two such funds reached a final close, compared to three in the previous semester and six in the same period last year. The two closings were Japan-based Headline Asia, which closed its fifth fund at $145 million, and Cathay Innovation, which raised $1 billion for its third global vehicle. Both firms have a track record of deploying capital into Southeast Asia alongside other Asian and global markets, signalling continued albeit selective appetite for the region.
In H1, only two foreign VC funds with a mandate to invest in SE Asia reached a final close.
The United States remains the leading source of foreign VC capital targeting Southeast Asia. So far this year, only one US-headquartered fund—Cathay Innovation—has announced a final close. This brings the five-year total, from July 2020 to June 2025, to at least 25 US funds with some allocation for Southeast Asia, raising a combined $12.1 billion. Greater China ranks a distant second, with nine funds over the same period, mostly led by Hong Kong-based managers.
However, visibility into trends remains limited due to less-than-consistent disclosure of fund closes and the small number of vehicles in this category. This low frequency of reported closes means that quarter-to-quarter or semester-to-semester comparisons can be volatile, and single large raises can skew the picture. That said, the overall trajectory over the past few years points towards a retreat from the momentum peak recorded in the second half of 2021.
It is also important to contextualise this downtrend against the extraordinary capital inflows of the pandemic era. The peak fundraising years coincided with a period of unprecedented liquidity in developed economies, as central banks injected capital to cushion the economic impact of COVID-19. These conditions created a temporary surge in risk appetite for higher-growth, higher-volatility markets, including Southeast Asia within pan-Asian mandates.
As that era of easy money fades, global allocators are taking a more measured approach. While Southeast Asia remains a strategic component of many pan-Asian portfolios, the bar for new commitments has risen. Managers with a differentiated edge — whether through sector expertise, on-the-ground networks, or demonstrable DPI — are better positioned to secure capital, while others may struggle to maintain prior cycle momentum.
The SE Asia VC Funds: H1 2025 Review has extensive data on:
- Final closings by VC funds in H1 2025
- Debut funds that closed in H1
- VC funds focused on ESG
- Fundraising milestones by foreign VC funds that invest in SE Asia
- Insights from industry insiders
