Southeast Asia Got $10.7 Billion in VC This Year. Rakuten's Saemin Ahn Isn't Buying the Recovery

Southeast Asian startups attracted just $10.7 billion in venture funding in the first nine months of this year — barely 1% of the $679 billion deployed globally, according to data from the Founders Forum Group and Dealroom. One of the region's earliest champions now says that gap will not close soon.

"I'm pretty pessimistic about the prospects of venture capital investment in Southeast Asia," Saemin Ahn, who leads international investments at Rakuten Capital, the corporate venture arm of Japan's Rakuten Group, told 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."

The number needs context. Roughly $4.5 billion of that $10.7 billion went to a single company: DayOne, a Singapore-based data center operator. Strip it out, and the rest of the region shared about $6 billion — roughly the cost of one mid-sized AI funding round in San Francisco. Yet even this low share counts as a recovery. Last year, funding to Southeast Asian startups was three times lower.

What changed since the boom?

Five years ago, the picture looked different. Regional champions such as Grab and Sea drew large rounds from investors including Baillie Gifford and Hanwha Asset Management, and observers bet that Southeast Asia's young, digitally savvy population would produce the next generation of internet unicorns.

Ahn argues the exits have not backed that thesis. "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 said. "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."

The region's flagship tells the story. Grab, which listed on the Nasdaq via a SPAC merger in late 2021, has seen its shares fall by around 75% since. Venture capital, Ahn explains, is a derivative of other money flows: only "a fraction of the fraction of the fraction" of the money entering a market ever reaches startups, and today the lion's share of global VC sits in the U.S. and North Asia.

Entrepreneurs are following the money. "In the past few years, many entrepreneurs who set up shop [in Southeast Asia] have either assimilated into the corporate ecosystem, or moved to more developed markets like North Asia and the U.S.," Ahn said. Rising inflation and higher interest rates have raised funding costs on top of that. His verdict: "Even with venture capital, you still need critical mass… I think it'll be very hard for Southeast Asia to get any material spotlight for the next two to four years."

A report by Lightspeed Venture Partners adds hard evidence, finding that outcomes in Southeast Asia generate only half the value per dollar invested compared with markets like China. Rakuten Capital itself now concentrates on North Asia excluding China, the U.S., and parts of Europe. In plain terms: the firm that once bet almost exclusively on the region has redirected its capital.

Why the pessimism is a sharp reversal

Ahn's record makes the turn notable. He started Rakuten Ventures in 2013 as one of its founding managing partners, with a team focused exclusively on Southeast Asia. "We were lucky enough to catch onto the macro trend of people becoming interested in Southeast Asia's growth and potential," he recalled. "Investors like Sequoia Capital were all moving into the region, and we were able to invest in some really great companies."

The portfolio included Indonesian tech firm GoTo, Singapore-founded cashback platform ShopBack, and hotel platform RedDoorz. "A lot of the investments we made on the first and second generation, they've done very well for themselves and exited themselves out," Ahn said.

Three years in, Rakuten widened the mandate. "We just realized that the team that was running the Southeast Asia investment team could also apply their know-how to everything global," Ahn recounted. The conglomerate asked: "Hey, you want to try that in the U.S. and also in Japan?" His seven-person team now invests in more than 90 companies, largely in e-commerce and fintech — aligned with Rakuten Group's core businesses, which span more than 70 companies including Rakuten Ichiba, Rakuten Travel, Rakuten Mobile, and Rakuten Wallet.

Where does Ahn see the AI opportunity instead?

One measure puts AI at 80% of global venture funding, concentrated in a handful of U.S. firms: OpenAI, Anthropic, xAI, and Waymo. In Asia, most AI infrastructure money flows into hyperscale data centers. Malaysia alone has attracted over $34 billion from cloud providers including Google, AWS, Microsoft, Alibaba, and Tencent — with a possible additional $50 billion from SoftBank — making it one of the world's fastest-growing data center markets. China, India, and Japan are building fast too.

The trade has wobbled recently, with some data center operators pulling IPOs or watching shares plunge, and Southeast Asia's energy grid raising questions about whether it can power the giant campuses at all. Ahn's contrarian take: go small. "Everyone is trying to build a data center that's as big as possible, but not a lot of the focus is going to smaller or micro-clusters where inference and edge nodes can live," he said.

He points to Nvidia's newly released DSX pods, which ship computing power in modular, scalable racks. "You can actually start to install these pods — even inside Singapore — next to charging stations," Ahn said. "You can enrich countries with AI even without giant data centers that need two or three years of construction and also labor."

His second early AI bet targets heterogeneous computing systems that combine AMD, Nvidia, and Baidu chips into one compute unit for training LLMs or inference. When he first raised the idea roughly two years ago, "people really didn't care about it," he recalled. In September, San Francisco-based Gimlet, which splits AI workloads across chip types, raised $300 million at a $3 billion valuation.

For funds staying in Southeast Asia, Ahn prescribes a structural overhaul: venture capitalists must "transform" into entities offering mezzanine or tranche financing, debt, and credit alongside equity. As for Rakuten Capital, he hopes it remains the group's de facto strategy arm and moves into start-up incubation. "What happens if we could incubate things inside Rakuten Capital and make them something that's worthwhile for Rakuten HQ? I think that's one of the small hopes that we have for the future," Ahn said. Ahn speaks next at the Southeast Asia 500 Summit on Nov. 3 in Ho Chi Minh City.