Rakuten Capital’s Saemin Ahn is ‘pessimistic’ on Southeast Asian VC: Good startups are getting ‘a lot less oxygen’

Saemin Ahn made his name betting on Southeast Asia. Now, as the region starts to pull itself out of a years-long venture funding slump, he’s not sure the old model works for the region anymore.

“I’m pretty pessimistic about the prospects of venture capital investment in Southeast Asia,” Ahn, who leads international investments for Rakuten Capital, the corporate venture arm of Japan’s Rakuten Group, tells Fortune. “The way firms scale and succeed in Southeast Asia has a very different velocity curve [than the U.S.], which isn’t very compatible with venture capital.”

Just five years ago, Southeast Asian digital companies such as Grab and Sea won large funding rounds from investors like Baillie Gifford and Hanwha Asset Management. While the share of total venture funding remained small, observers were hopeful that Southeast Asia’s young, digitally-savvy population would fuel the next generation of internet unicorns. 

Things are much cooler now. In the first nine months of the year, only $10.7 billion flowed into the region, just over 1% of a total $679 billion, according to data from the Founders Forum Group and Dealroom. About $4.5 billion of that went to just one company, DayOne, a Singapore-based data center company. And yet this low share still represents a recovery: Last year, funding to Southeast Asian startups was three times lower.

Today, Ahn argues, the lion’s share of global venture capital is concentrated in the U.S. and North Asia. Venture capital is a derivative of other money flows: only “a fraction of the fraction of the fraction” of the money that enters a market ever reaches startups, he explains. Companies need to post stellar results to win more VC money—and Ahn fears that the region’s startups aren’t delivering. 

“A lot of the Southeast Asian companies that have gone public or are about to go public, they’re not showing those results at all,” he says. “If you build something that’s of quality in Southeast Asia, you just get a lot less oxygen if you build the same thing in the U.S.”

Take Grab, perhaps the golden child of Southeast Asia’s tech sector. Since the company went public on the Nasdaq via a SPAC listing in late 2021, shares have fallen by around 75%. 

“In the past few years, many entrepreneurs........

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