Southeast Asia’s startup funding market entered 2026 with little sign of a broad-based recovery, as investors remained selective and risk appetite stayed subdued after three years of contraction, finds DealStreetAsia DATA VANTAGE‘s latest report.
While overall deal activity remained weak, a few pockets of resilience emerged. Malaysia moved up to second place by deal volume for the first time, while AI-focused startups, including those building agentic AI and enterprise automation solutions, continued to attract investor attention even as several other verticals pulled back, according to the Southeast Asia Deal Review: Q1 2026 report.
Startups in the region raised $2.81 billion across 98 equity deals in Q1 2026, marking the lowest quarterly deal count in at least eight years. While total funding value rose to its highest level since Q4 2022, the headline figure was heavily distorted by Singapore-based data centre operator DayOne’s $2 billion Series C round.
That single transaction accounted for more than 70% of all capital raised during the quarter, masking the lack of depth in the market. Excluding the outlier, fundraising remained weak by historical standards, with deal flow still far below the levels seen before the downturn began in late 2022.
Despite a pick-up in dealmaking in March, the improvement was not strong enough to shift the broader quarterly trajectory. The data points to a market stabilising at a lower base rather than staging a meaningful rebound, as investors continue to prioritise clearer paths to profitability, stronger governance and more disciplined capital deployment.
The quarter, therefore, underscored the uneven nature of Southeast Asia’s funding environment. Capital remains available for select themes and outlier transactions, but recovery signals have yet to translate into a sustained improvement in deal activity across the broader startup ecosystem.
Malaysia stands out
Singapore continued to dominate Southeast Asia’s startup funding market in Q1 2026, accounting for 91.5% of total capital raised during the quarter. Its share of regional deal volume has also remained above 50% since Q2 2022, underscoring how venture activity has become increasingly concentrated in the city-state.
The trend reflects investors’ continued preference for larger and more mature ecosystems at a time when risk appetite remains subdued. Singapore’s depth of later-stage companies, regional headquarters and institutional investor base has allowed it to capture a disproportionate share of capital, even as overall deal activity across Southeast Asia has weakened.
Source: DATA VANTAGE
Malaysia was the key outlier in Q1 2026, ranking as Southeast Asia’s second most active market with 18 deals, its highest quarterly tally since Q3 2024. The uptick was driven mainly by Seed and earlier-stage rounds, supported in part by activity from NEXEA Venture Capital’s accelerator programme.
The rise in Malaysia’s deal count suggests that early-stage formation remains active in selected markets, even as larger cheques have become harder to secure. It also points to a widening gap between markets where Seed activity is still being supported and those where funding momentum has thinned more sharply.
Most other markets weakened during the quarter. Indonesia recorded just five deals, the lowest quarterly figure in our dataset, highlighting how far activity has fallen in what was once the region’s largest startup market. The slowdown has also been compounded by governance concerns following a series of fraud scandals, most notably eFishery, whose founder Gibran Huzaifah was sentenced to nine years in prison last week over inflated financial reports.
Rama Suparta, co-founder of Saturdays Eyewear, which raised a $6.3 million round in January, said he remains confident in Indonesia’s market opportunity, citing its large population, sizeable addressable market and rising demand for vision correction amid increased urbanisation and lifestyle changes.
“Indonesia remains our primary focus, while we are also exploring regional expansion,” he told DealStreetAsia recently.
The rise of agentic AI
Data analytics and AI/ML emerged as one of the few growth pockets in Southeast Asia’s startup market in Q1 2026, climbing to second place by deal volume with 13 equity transactions, just one step behind fintech with 16 deals and followed by health tech with 12 deals.
The rise of agentic and generative AI marks a shift in the region’s AI funding narrative, which has historically been dominated by enterprise AI software, analytics tools and conversational AI. Investors are now backing startups that can automate workflows, execute tasks with limited human intervention and deliver clearer productivity gains for businesses.
Source: DATA VANTAGE
The largest round in the vertical was the $100 million Series D raised by Thailand-founded enterprise AI and conversational software company Amity. Other notable deals included Singapore-based generative AI platform Video Rebirth and AI model developer Sapiens AI, which raised $30 million and $20 million, respectively.
Amity executive chairman and founder Korawad Chearavanont said the company navigated a difficult fundraising environment by consistently demonstrating strong execution and clear competitive advantages, which helped it secure Southeast Asia’s largest GenAI-focused funding round.
Korawad said Amity will use the fresh capital to accelerate its agentic AI roadmap, strengthen its AI Research & Application Center, pursue strategic M&A in Europe and Southeast Asia, and hire global engineering and commercial talent.
“For our ‘buy’ strategy, we target sticky software businesses with loyal, recurring-revenue customer bases … By transforming these high-potential companies into AI-first businesses, we can expand our global footprint and build the sustainable, long-term growth needed for a potential capital markets entry,” Korawad said.
Separately, Video Rebirth founder and CEO Dr Wei Liu said the capital was raised to ensure the company remains at the forefront of the sector, not merely competing but leading.
“Our investors backed us because they understand that in this space, the teams that invest aggressively in R&D today are the ones that will define the industry standard tomorrow,” Liu said.
Download the Southeast Asia Deal Review: Q1 2026 report for:
- Quarterly fundraising trends in SE Asia since 2021
- Top deals of Q1 2026
- Most favoured industries by venture investors
- Fundraising trends by country
- Insights from industry insiders
