Fundraising by Southeast Asian startups remained subdued in 2025, with total capital raised reaching $5.4 billion, which is only a quarter of the peak funding seen in 2021 [1]. This significant decline in available capital has resulted in more businesses either shutting down operations or becoming 'zombie' companies—firms that continue to operate without fresh capital, meaningful growth, or prospects for further investment [1]. Investors have become more selective, emphasizing profitability amid concerns about overvaluation and unsustainable business models [1].
Startups attempting to modernize distribution systems for traditional small stores in Indonesia have faced difficulties in achieving profitability, further highlighting the challenging environment [1]. The tightening capital environment has increased the risk of a rise in zombie startups, which often survive by cutting costs and scaling back operations rather than pursuing growth [1].
The data underscores a broader concern about the long-term viability of many businesses launched during the recent investment boom, as the funding drought persists across the ASEAN region [1].
CONCLUSION
The ASEAN startup ecosystem is facing a significant funding drought, with capital raised in 2025 dropping to just a quarter of 2021 levels. This has led to increased risks of business closures and the proliferation of zombie startups, raising concerns about the sustainability and future growth of the region's startup landscape.