Private funding for Southeast Asia’s digital economy rose 15 percent year-on-year, reaching US$7.7 billion in the 12 months ending June 2025, according to an industry report released Tuesday. However, this growth lags behind the global private equity and venture capital increase of 25 percent.

The annual report, compiled by Google Alphabet, Singapore’s state investor Temasek Holdings, and global consulting firm Bain & Company, notes that total funding remains roughly 70 percent below the 2021 peak of US$27 billion.

“Current investment is concentrated on late-stage funding rounds, with early-stage to Series B funding declining from around 30 percent to approximately 20 percent over the past twelve months compared to the previous period,” the report stated.

AI Startups Attract Significant Private Capital

Despite limited overall funding, AI startups in the region continue to secure substantial investment. AI-related investment accounted for 32 percent of total private funding in Southeast Asia during the first half of 2025, up from 30 percent in the second half of 2024.

More than 680 AI startups raised over US$2.3 billion through June, with more than 495 of these companies based in Singapore.

Data Center Expansion Accelerates Across the Region

The report also highlighted robust data center expansion, with countries racing to build capacity to meet AI-driven demand. Once all planned projects are completed, Southeast Asia’s data center capacity is expected to increase 2.8-fold, surpassing the 2.2-fold growth projected for the broader Asia-Pacific region.

Regional Inclusion Expands the Investment Landscape

This year, the report’s coverage expanded to include Brunei, Cambodia, Laos, and Myanmar, in addition to Indonesia, Thailand, Vietnam, Singapore, Malaysia, and the Philippines. The region, home to nearly 700 million people, remains one of the fastest-growing internet markets globally, fueled by a young population, widespread smartphone adoption, high urbanization rates, and a growing middle class.

PHOTO: FREEPIK

This article was created with AI assistance.