The Southeast Asian Startup Ecosystem: Powered by Dreams, Hype, and Other People’s Money
Venture capital is the noble pursuit of finding the next trillion-dollar company, backing daring entrepreneurs, and, if you’re in Southeast Asia, torching institutional money faster than a startup’s monthly burn rate. Unlike Silicon Valley, where at least some investors put their own cash on the line, Southeast Asia’s VC scene operates on a far more elegant principle: spend Other People’s Money (OPM) like it’s infinite, because technically, it is (until the fund cycle ends).
This is more than investing; it’s a finely tuned financial magic trick where startups look valuable as long as they keep raising, and investors look brilliant as long as they can convince another LP to bankroll the illusion. The best part? Nobody has to care about profitability! Why bother building a sustainable business when you can just raise a bigger round, throw some growth metrics on a pitch deck, and pretend everything is fine?
But, of course, this beautiful system has its flaws. When the hype runs out, the market corrects, and suddenly everyone remembers that cash burn is not, in fact, a business model, things start to unravel. So let’s break down
How Southeast Asia turned OPM into an art form,
Why it’s a ticking time bomb,
Why, despite it all, there will always be another fund willing to play along.
OPM: The Magic Drug That Lets Investors Play With Monopoly Money
Imagine you're a high-flying, well-manicured VC partner in Jakarta or Singapore. You wear expensive suits, attend panels where you nod thoughtfully about “market dynamics,” and, most importantly, you’ve just convinced a handful of pension funds, sovereign wealth funds, and clueless family offices to hand you $300 million. These LPs have no idea how startups work, but they love the idea of being early investors in "the next big thing."
Now, what do you do with all this money?
Option A: Back bold, groundbreaking companies in AI, biotech, or deep tech. Startups that could take a decade or more to mature but might change the world.
Option B: Pour cash into yet another fintech, e-commerce, or logistics startup because these models have worked elsewhere, and LPs like "proven" ideas.
Option C: Back the 151st digital payments app, because why not? It’s not your money, and besides, the founder has a slick pitch deck.
If you picked B or C, congratulations! You have mastered the Southeast Asian art of OPM-driven investing.
The Beautiful, Risk-Free World of OPM-VCs
In Silicon Valley, investors reinvest their own money. They are often ex-founders, engineers, or product leaders who actually understand the businesses they fund. But in Southeast Asia? The game is different.
Here, most VCs are glorified asset managers. They don’t need to take personal financial risks, they just shuffle Other People’s Money around and collect fees. If the startup they backed burns millions, implodes, or gets acquired for pennies on the dollar? No problem! They’ll raise a new fund from another round of LPs who weren’t paying attention the first time.
What Happens When VCs Play With OPM?
Nobody cares about profitability. Growth is the only KPI that matters. Startups are told to spend aggressively, acquire users at any cost, and worry about monetization later (except, later never comes).
No actual risk-taking. Deep tech? AI? Too complicated. Hard science? No immediate returns. Let’s just copy-paste an existing business model, slap some “for SEA” branding on it, and call it a day.
Startup founders are forced to scale at absurd speeds. The goal isn’t to build something sustainable; it’s to burn through enough VC money to get noticed by bigger VCs, raise another round, and keep the illusion going.
And thus, the cycle continues, until one day, someone realizes that a billion-dollar valuation doesn’t mean much if the business still has no path to profitability. But by then, the smart investors have already cashed out and moved on to the next fund.
The Startup IPO Game: Pump It, Dump It, Then Hope Nobody Notices
After years of setting institutional money ablaze in the name of "growth," the final trick is to dump these unprofitable, cash-incinerating machines onto public markets before anyone notices they are giant financial sinkholes wrapped in slick PowerPoint presentations.
Take GoTo (Gojek-Tokopedia), Bukalapak, and the other poster children of SEA’s overhyped IPO era. These startups were lovingly incubated by VCs who whispered sweet nothings into their ears:
“Don’t worry about profits, just scale! Investors love scale! IPO and cash out. It’s foolproof!”
And what happened next?
Stock prices collapsed.
Retail investors (a.k.a. "greater fools") lost money, wondering why their “Amazon of Indonesia” was bleeding cash.
VCs? Oh, they had already exited and were too busy sipping cocktails in Bali to care.
This is the textbook OPM trick. You inflate a startup’s valuation, hype it up, and then sell shares to unsuspecting public investors before reality kicks in. It’s basically a glorified game of financial musical chairs, except the last one standing isn’t just any unlucky fool; it’s thousands of hardworking retail investors who genuinely believed in Southeast Asia’s “tech revolution.”
Why Bother With Profits When Hype Works Just Fine?
In Silicon Valley, investors at least attempt to ensure that companies generate actual revenue before they go public. Airbnb, Google, Meta? They had years of solid revenue before IPO. But in Southeast Asia? Pfft. Profitability is just a Western imperialist concept that doesn’t apply here.
Instead, SEA VCs have perfected a far superior strategy:
Hype the hell out of your startup.
Raise absurd amounts of OPM.
Scale recklessly.
IPO before anyone realizes there’s no business model.
Retire early.
By the time stock prices tank, the VCs and insiders are long gone, and the only people left holding the bag are retail investors and fund managers who believed in the dream.
It’s a brilliantly executed cycle of wealth extraction, except the wealth only flows in one direction.
Copy-Paste, but Make It VC-Friendly! (Or, Why Innovation Is Boring)
You know what’s really difficult? Investing in cutting-edge AI, robotics, biotech, or deep-tech startups that require actual R&D, patience, and technical expertise.
You know what’s much, much easier? Copying whatever worked in Silicon Valley or China, slapping a “for SEA” label on it, and calling it a billion-dollar opportunity.
And so, instead of world-changing innovation, Southeast Asia’s startup ecosystem has become the region’s most successful knockoff factory.
The Hall of Fame for Cloned Startups
📱 Lazada – “Hey, Alibaba made billions! Let’s just do that.”
🛵 Gojek – “Uber + Meituan, but with motorbikes. Genius!”
🛒 Tokopedia – “People like Taobao? Cool, let’s copy that.”
💳 Every Fintech Startup Ever – “Stripe, but for SEA. Raise $200M now.”
And let’s not forget the army of buy-now-pay-later (BNPL) startups that exist solely because someone realized that poor people also want debt.
Why do VCs love these copy-paste startups?
Simple: OPM investors hate risk. They need “proven business models” that can be lazily pitched to LPs:
“Look! This worked in China! Surely it will work here too!”
The Problems With This Strategy (Not That Anyone Cares)
No real competitive moat. If a bigger company with more money enters the market, the startup is dead. (Looking at you, Lazada vs. Shopee.)
Southeast Asia ≠ China. The region doesn’t have a unified economy, strong logistics, or a massive middle class willing to spend.
Zero incentive for real innovation. Why risk failure on new ideas when copy-pasting gets you a fat Series A check?
In short: Why bother building the next Tesla, SpaceX, or OpenAI when you can launch another BNPL app, slap together a pitch deck, and raise a $100M valuation overnight?
The Exit Strategy: Pray, Hope, and Find a Greater Fool
Alright, you’ve spent years running a VC fund in Southeast Asia. You’ve burned through millions of Other People’s Money (OPM), pumping it into a dozen unprofitable, overhyped startups. Your LPs are starting to ask questions.
What do you do? Panic? Admit failure? Work to fix the business?
Of course not. You just need to find a bigger fool to take it off your hands.
Your Menu of Exit Options:
IPO Dump: The classic. Just shove the company onto a public exchange, pretend it’s a “regional tech giant,” and quietly exit while retail investors buy the hype. (Bonus points if you get a local government to cheer it on as a "milestone for the ecosystem.")
Softbank to the Rescue: If the stars align, Softbank or Temasek might still be writing checks, hoping this time, just maybe, they aren’t funding the next WeWork-level disaster.
SPAC Your Way Out: Find a random Special Purpose Acquisition Company (SPAC) that’s desperate for a deal. Merge. Take your payout. Pray no one reads the financials too closely.
Strategic Acquisition: Sell the company to a bigger, equally unprofitable competitor who needs to “show growth” on their balance sheet. Suddenly, your loss-making ride-hailing app is “unlocking synergies” with a loss-making e-commerce startup. Genius.
And just like that, you’ve successfully escaped the burning building with cash in hand, leaving retail investors, employees, and late-stage investors to inhale the smoke.
Silicon Valley vs. Southeast Asia: The Investor’s Retirement Plan
In Silicon Valley, investors often reinvest their money into new startups, helping build the ecosystem.
In Southeast Asia, investors cash out and buy real estate in Bali.
Different philosophies, same outcome: the only people who really win are the ones who exited first.
The Southeast Asian startup ecosystem is a stunning sandcastle of billion-dollar valuations, delicately balanced atop a bonfire of venture capital. It glistens under the sun of media hype, attracts foreign investors desperate for “emerging market exposure,” and, for a moment, looks like the future of tech.
Then reality hits. And just like that, the waves of economic downturn, poor unit economics, and retail investor regret come crashing in.
VCs never cared about actual innovation. Why fund deep tech when you can just clone an app from China and call it a “regional opportunity”?
Startups are forced to scale like a Ponzi scheme burning millions monthly in pursuit of “hypergrowth” instead of sustainable revenue.
Most IPOs are beautifully disastrous. The stock price plummets, but don’t worry, the early investors already got out.
Deep tech? AI? R&D? Cute. But have you considered launching yet another BNPL startup instead?
So, the next time you see a new “SEA unicorn” raising $200M, ask yourself:
Is this a real business or just another venture-backed sandcastle waiting to collapse?
Either way, the fund managers have already cashed out and are enjoying their Bali villas, bought with your pension fund money.