Southeast Asia’s startup ecosystem is moving into 2026 on a stronger, more disciplined footing after three years of reset.
The funding winter, which began in 2022, as outlined in DealStreetAsia and Kickstart Ventures’ Southeast Asia Startup Funding Report: H1 2025, has now transformed into a market driven by fundamentals.
The first half of 2025 hinted at this recalibration—only $1.85 billion in private capital investments was deployed across 229 equity deals, reflecting deep investor caution and a much higher bar for startup funding. A silver lining, though, was that greentech and health tech climbed into the top three most active verticals, a sign of where investor conviction is building.
I believe 2025 was a reset year for Southeast Asia: clearing out unsustainable growth, leaving founders who build with discipline and real paths to profit. Now, 2026 will be about those founders leaning into sectoral tailwinds, especially climate, health and all things AI, hopefully reflecting this resilience into resilient market leaders.
Against this backdrop, Kickstart Ventures sees four themes shaping Southeast Asia’s venture market in 2026.
1. Greentech and health tech will step into the spotlight
Across Southeast Asia, greentech and health tech are set to pull further ahead in 2026, and may overtake traditional mainstays like e-commerce and enterprise IT by deal activity.
Even though sustainability sits at different stages of maturity and priority across the region’s emerging economies, it remains a major global issue. Accordingly, renewable energy remains the engine of startup dealmaking, waste management and recycling are gaining fresh momentum, and climate-mitigation solutions continue to anchor deal flow.
In parallel, diagnostics and drug discovery are driving health tech deal volume, while curative technologies are securing larger cheques. All of this is driven by enabling AI technologies being brought to bear in these industries, enhancing efficiencies (e.g., 10x faster drug discovery) and unlocking results previously unattainable—making greentech and healtech even more ripe for VC investment.
2. The Philippines, Vietnam and Malaysia as potential growth engines
Beyond the region’s usual hotspots of Singapore and Indonesia, 2026 will shape up to be a potential breakout year for the Philippines, Vietnam and Malaysia.
The Philippines has already edged ahead on startup fundraising compared to Indonesia, as it continues with its positive macroeconomic story (over 5% GDP growth) while maintaining attractive demographics such as a young, wealthy and growing population.
Vietnam was the only market to post a clear year-on-year growth in deal volume in H1 2025 with proceeds surging to around $275 million, while Malaysia doubled its capital raised to roughly $196 million even with fewer deals. Together, these three emerging markets are poised to drive the next leg of Southeast Asia’s venture growth story.
3. Volatility persists as capital deployment becomes more selective
Southeast Asia’s funding environment is expected to remain uneven in 2026, with volatility now a structural feature of the region’s venture landscape.
Investor sentiment is highly sensitive to geopolitical shocks, policy shifts and local market conditions, putting a premium on discipline and strong sectoral tailwinds.
Capital is consolidating around resilient companies in structurally growing areas such as new retail, sustainability and vertical AI, while weaker players face a tougher shakeout and fewer chances to recapitalise. And, of course, the fundamental investment question of when exits can be realised—i.e., “show me the money”—continues to be asked by LPs and GPs in Southeast Asia.
4. Bigger cheques will flow to fewer, but stronger, companies
After a period of pullback, Southeast Asia’s venture market is showing early signs of stabilisation, paving the way for a more disciplined “risk-on” in 2026.
In Q2 2025, capital deployed more than doubled quarter-on-quarter even as deal volume held steady, signalling that VCs are concentrating larger cheques into fewer, higher-quality companies, including more late-stage rounds. This recalibration is set to define 2026, with capital efficiency and business fundamentals driving allocation decisions.
Crystal-ball gazing into 2026, Southeast Asia’s venture market will still have ups and downs. Investor sentiment will continue to react quickly to variables like geopolitics, interest rates and local policy changes, and the fast-evolving AI landscape. Not every good quarter will imply a full, market-wide rebound or even a positive return on investment. And as such, LPs and GPs need to prepare themselves accordingly.
For founders, that means 2026 is the year to double down on capital efficiency, governance and sectoral tailwinds, not growth at any cost. For LPs and GPs, it’s the moment to refine theses around climate, health and vertical AI, and back the teams that have emerged stronger from the reset.
But the direction of recovery is encouraging. Rather than a sudden “snap back,” we expect a steady, sector-led recovery, led by founders and investors who use this period to build stronger, more resilient companies for the long term.
The author, Mike Maté, is General Partner at Kickstart Ventures.
