ASEAN
Southeast Asia's Startups Shift to Debt Funding Amid Tough Equity Market
As equity funding declines, Southeast Asian startups increasingly rely on debt financing, reflecting a maturing market landscape.
Startups across Southeast Asia are increasingly relying on debt financing as macroeconomic conditions make it tougher to secure equity funding. Data from Tracxn indicates that debt funding in the region surged from $487.8 million in 2023 to $3.1 billion in 2024, and further doubled to $6.1 billion in 2025. In contrast, equity funding fell from $8.4 billion in 2023 to $7.9 billion in 2024, and continued to decline to $6.2 billion in 2025, slightly below debt funding levels.
This shift in funding strategy reflects a maturing market as founders and investors reassess risks, according to the CEO of Tracxn. The growing reliance on debt financing suggests that startups are adapting to a more selective fundraising environment, where traditional equity routes are becoming less accessible.
“This reflects a maturing market as founders and investors gauge risks.”CEO of Tracxn
In Singapore, the government has initiated support for startups through the Enterprise Financing Scheme – Venture Debt (EFS-VD). This program aims to facilitate access to venture debt for high-growth startups that may not possess significant assets for collateral. The EFS-VD has been enhanced to include backing by redeemable convertible preference shares (RCPS), allowing startups with irregular cash flows to secure more flexible repayment plans.
As reported by Enterprise Singapore, the EFS-VD is designed to finance innovative enterprises, enabling them to leverage venture debt and warrants for growth. This initiative is particularly relevant in the current climate, where startups are navigating a challenging funding landscape.
“The EFS-VD aims to finance the growth of innovative enterprises using Venture Debt and Warrants.”Enterprise Singapore
Additionally, the trend towards debt funding aligns with a broader global context. In the United States, technology growth and venture debt transactions reached approximately $35 billion, indicating a worldwide shift towards this funding model. Southeast Asian startups are evidently following suit, suggesting a strategic pivot in response to evolving market conditions.
As the startup ecosystem in Southeast Asia continues to evolve, the increasing adoption of debt financing may provide a crucial lifeline for companies seeking to sustain growth amidst tightening equity markets.