Can Southeast Asia's fintech startups survive the funding squeeze?

Just four funding rounds accounted for 86% of the region's $2.3b investment.

Southeast Asia's fintech startups face a tougher fundraising market as investors favour established companies, despite a threefold increase in the region's total investment in the first nine months.

“Investors continued to concentrate capital in larger transactions involving mature fintechs with proven business models, driving higher overall investment value even as deal volume declined,” Andrew Huang, head of fintech at KPMG China, said in an August report.

Fintech funding in Southeast Asia more than tripled year on year to $2.3b in the nine months to September, but four major transactions accounted for 86% of the total, according to an October report by Tracxn Technologies Ltd.

Ant International's $1.2b Series A funding round alone represented 52% of the region's investment.

Seed funding, meanwhile, fell 46% to $53.3m across just 18 rounds, underscoring the difficulties facing startups seeking their first investments.

The trend was also evident across the Asia-Pacific region, where fintech investment fell to $4.6b across 350 deals in the first half, according to KPMG's H1 Pulse of Fintech report.

Huang said investors increasingly preferred bigger, profitable fintech companies with established business models and financial infrastructure over speculative early-stage ventures.

Payments remained amongst the sectors attracting investment in both reports, whilst Tracxn also identified cryptocurrency financial services as a funding destination.

Questions to ponder:

• How can early-stage fintech companies attract investors as funding shifts towards established companies?
• Will the concentration of investment in a handful of companies make it harder for smaller fintechs to compete?
• Which fintech business models are most likely to secure funding as investors become more selective?