With the conclusion of 2025, the Southeast Asian tech and venture capital landscape has proven to be a story of surprising shifts and emerging resilience. Contrary to initial optimism, PE-driven exits remained subdued, accelerating industry consolidation with a 'thinning of the herd.' We saw capital flows pivot sharply, with regulatory pressures muting growth in Indonesian lending while the Philippines experienced a surge in fintech funding. This complex environment was balanced by the mainstream rise of stablecoins, establishing a core infrastructure layer for real-world transactions. In 2026 we believe, 1) the focus will turn towards accountability and fundamental metrics, 2) continued capital scarcity will drive a new emphasis on measurable AI ROI, 3) regulatory evolution will shape prediction markets, and 4) the burgeoning private credit sector will provide crucial, non-dilutive financing for scale.

Revisiting 2025 predictions

A. PE-driven exits remained muted

In last year’s review, we anticipated a rebound in PE-driven exits as dry powder from earlier vintages came under deployment pressure.

Contrary to our prediction, both PE deal value and deal count declined y-o-y across the first 3 quarters of 2025. The investment periods of the 2021-vintage funds - an outlier cohort that raised $20b in total - will conclude in 2026. Next year matters disproportionately.

Meanwhile, following a prolonged liquidity drought, industry consolidation is emerging as a practical pathway forward, resulting in fewer better-capitalized players.

B. Lending growth rotated from Indonesia to the Philippines

Lenders in the Philippines attracted $163m in funding in the first half of 2025, more than double the total funding raised in 2024. Market leaders such as Salmon, Cashalo, and Asialink are benefiting from a virtuous cycle in which loan book expansion and falling funding costs reinforce one another. With economic growth outpacing the expansion of bank credit supply, the structural credit gap is expected to persist, underpinning attractive credit premiums.

Indonesian lenders had a tough year. Following the introduction of interest rate caps in 2024, the Financial Service Authority of Indonesia raised the equity floor for P2P lenders to US$0.8m, effective July 2025. The impact has been compounded by a series of high-profile blowups, resulting in serious capital flight from the sector. A meaningful recovery of market confidence may take years.

C. Voluntary carbon credits (“VCM”) are in a trough

Shifting policies prompted a secular curtailment of investment in VCM. While corporates continue to make or enhance their SBTi commitments, the actual issuances and retirements are both declining.

Negotiations around Article 6 appear stalled by politicized considerations. VCM is doubtlessly relevant in the long-run. But as John Maynard Keynes quipped, “The long run is a misleading guide to current affairs. In the long run we are all dead.”

D. Stablecoins approached mainstream adoption

Stablecoins are becoming the crypto “killer app” in 2025, buoyed by the Genius Act and Circle’s public listing. Encouragingly, the use cases are shifting from crypto trading to real-world transactions, supporting accelerated startup activity in SEA, particularly in the infrastructure layer.

Read our recent article on stablecoins here.

Looking into 2026

A. Capital scarcity continues to spur stronger fundamentals - Multiples expected to remain steady

VC activity in Southeast Asia remained muted in 2025. With dry power for the region limited in 2026, we expect early-stage companies to face continued pressures to demonstrate cleaner unit economics, with later-stage scale-ups beginning to demonstrate positive cash flow.

A key mechanism for realizing this aggregate earnings growth this year will be market consolidation. The prior cycle seeded an overlapping array of venture-backed firms, and as capital has tightened over the past three years, many could no longer sustain aggressive cash burn. This environment led to roll-ups, asset sales, and quiet shutdowns of subscale players, effectively "thinning the herd." We expect those who have survived the “winter” to begin reaping the fruits of consolidation in 2026, with improved pricing power, better operating leverage, and stronger bargaining power.

We anticipate a halt to the decline in valuation multiples across the region in 2026, a negative trend observed since 2022 and evidenced in deals encountered during the latter half of 2025. However, multiple expansion is also considered unlikely. Despite global expectations for interest rate cuts, any broad-based re-rating of Southeast Asia venture valuations is expected to lag in 2026 due to local structural factors. These local factors, such as liquidity constraints, regulatory uncertainty, and unclear exit pathways, are as significant a drag on valuations as global headline interest rates.

B. From AI Capex openness to ROI accountability

In 2026, the adoption of AI in Southeast Asia will move past the experimental stage, with a new emphasis on accountability. The central question for investors will be: "What is the measurable, concrete value that AI has generated?" Investors will now demand a clear demonstration of Return on Investment from previous AI initiatives, particularly those involving Agentic AI projects focused on cost-savings use cases. A key indicator of this impact will be Revenue Per Employee, serving as a high-level proxy for overall organizational productivity. This metric is already a focus for regional tech firms, from early-stage startups to publicly listed companies (see chart below), as they aim for broad-based productivity improvements.

This shift requires that all AI budget approvals are accompanied by explicit, quantified ROI cases, showing defined targets for cost reduction, headcount savings, or revenue uplift. Executive reporting will increasingly integrate AI impact metrics. Companies will face increased scrutiny to prove that AI has fundamentally altered their cost structures and elevated core margins. Vague narratives will be challenged, as investors demand quantifiable financial gains.

AI start-ups are also facing greater scrutiny, as clients will be less willing to offer experiment-based contracts. Consequently, winning mandates now increasingly requires these start-ups to first collaborate with clients to define tangible improvements in cost or revenue, rather than merely asserting process avoidance or time efficiencies.

C. Prediction markets: From global signals to regional experiments

2025 is widely considered the breakout year for prediction markets, where they transitioned from a niche crypto-native obsession to a recognized "Event-Driven Finance" asset class, attracting massive institutional capital and mainstream adoption.

Entity	Key Developments in 2025
Polymarket	Raised $2b from ICE (parent company of NYSE) Announced plans for a US CFTC-regulated venue Valued at $9b
Kalshi	Raised over $1.3b from investors including Sequoia and Paradigm Valued at $11b
Robinhood	Launched a dedicated “Prediction Hub” section for retail users
Google Finance	Started displaying real-time prediction market odds next to stock tickers (e.g., Fed rate hike odds)
CME Group & FanDuel	Launched a partnership to offer “institutional-grade” sports prediction contracts

Prediction markets, following global trends, are likely to see cautious growth in Southeast Asia. Currently, most SEA nations have either explicitly or implicitly banned them due to their perceived similarity to gambling. However, as the sector develops, regulatory frameworks are expected to evolve, potentially allowing accredited investors and corporate entities to participate, recognizing the potential for practical applications.

Regional adoption is anticipated to focus less on speculation, gaming, and pure economic analysis, and more on tangible, real-world commercial use cases. This direction is not unprecedented, as businesses worldwide have already adopted similar models.

A notable illustration is "Mattress Mack" (Gallery Furniture), a Texas retailer offering a full refund on furniture purchases if a specific local sports team secures a major championship. Another regional example involves Maybank Singapore, which provides a Maybank Manchester United Platinum Visa Card. This card provides 5 times the usual reward points and boosts the cashback rate to 3% (up from the standard 1%) when Manchester United wins a Premier League match.

While companies traditionally use betting markets to hedge such promotions, the growing availability of prediction markets could empower more businesses to adopt these mechanisms to drive analogous business models.

D. Easing of banking rules - Freeing up capital for banks to invest and acquire fintechs

Donald Trump's economic agenda strongly advocates for banking on deregulation, which includes reducing capital and liquidity rules for large banks, a direction already signaled by emerging Fed proposals to ease certain capital buffer requirements. The anticipated relaxation of these bank reserve requirements could stimulate new investments and acquisitions. While these changes directly benefit US-based banks, Global Systemically Important Banks (G-SIBs) with a significant US footprint may also gain the flexibility to reallocate liquidity towards global investments.

Whether this deregulation will result in more investments or exits in Southeast Asia is still uncertain. Capital allocation discussions might take several years to finalize, especially since major US banks have shown relatively little investment activity in the region over the past five years.

Potential reduction in reserve requirements for US Banks

Regulatory Area	Current Status	Proposed Softening under Trump Agencies	Potential Implications
Liquidity Coverage Ratio (LCR)	100% High-Quality Liquid Assets coverage of 30-day stress outflows (estimated cash outflow during a 30-day panic) for most large banks	Potential recalibration of outflow rates (e.g., less conservative for operational deposits); shift to “outcomes-based” rather than rigid ratios	i.e. Banks can potentially treat the cash that companies keep at banks (e.g., for payroll) as “stickier” (less likely to flee), which would lower the amount of liquid assets banks need to hoard, freeing up capital used for equity investments
Enhanced Supplementary Leverage Ratio (eSLR) for parent companies of large US G-SIBs	Fixed 2% buffer above 3% minimum SLR (total ~5%)	Recalibrated to 50% of G-SIB’s Method 1 surcharge (likely to reduce to ~3–4%)	Aggregate Tier 1 capital reduction of approximately $13B for G-SIBs (~2% relief). Potentially freeing up capital for equity investments into or acquisitions of fintechs.

CVC Investments by US-based G-SIBs in Southeast Asia over the past 5 years

Source: Crunchbase, CapIQ

E. Rise of private credit providing additional support for regional fintechs and embedded finance

The private credit sector has experienced significant growth in the region since late 2023, particularly for firms focused on early and growth-stage companies, coinciding with a period of limited equity capital. This upward trend intensified in 2025. Several venture capital funds launched dedicated venture debt and private credit strategies. At the same time, international debt providers increased their regional activity, and advisory firms like Fuse Capital expanded their operations into this market.

The rise in venture debt availability in the region (as detailed in the table below) is a positive development for fintech companies, providing risk-aligned capital at a time when regional banks are cautious. Debt financing is typically essential for regional fintech firms seeking to achieve scale, serving various purposes across different sub-sectors:

• Lending firms require debt to fund the loans they provide.
• Regulated entities often use debt to satisfy regulatory capital requirements.
• Insurers and Managing General Agents (MGAs) rely on it to finance their loss reserves.
• Payments and remittance firms utilize it for funding payment float.
• Wealthtechs leverage it to launch new products.

Venture debt / private credit lenders lending to SEA early stage/ growth firms (non-exhaustive list)

In summary, it is our view that 2026 is poised to be a year defined less by fundraising euphoria and more by structural maturity. Survivors of the capital 'winter' will gain from market consolidation, demonstrate stronger unit economics and require stricter ROI from new initiatives like AI. While global factors such as potential US banking deregulation, introduce new variables, the regional narrative will be driven by local structural factors—liquidity constraints, regulatory evolution, and the increasing prominence of private credit as a vital alternative to equity. This dynamic suggests a more disciplined, resilient, and ultimately healthier ecosystem is taking root in Southeast Asia.