Rakuten Capital’s Saemin Ahn Skeptical on Southeast Asian Venture Capital Outlook
Saemin Ahn warns that Southeast Asian startups face significant funding challenges and capital inefficiency.
1Declining Regional Investment Prospects
Saemin Ahn, leader of international investments at Rakuten Capital, expresses pessimism regarding venture capital in Southeast Asia. He argues that the region’s velocity curve for scaling companies is fundamentally incompatible with traditional venture models. Consequently, he expects the region will struggle to attract material global spotlight for the next two to four years.
2Funding Slump and Market Reality
In the first nine months of the year, Southeast Asia received only $10.7 billion in funding, representing roughly 1% of the $679 billion global total. While this marks a recovery from the previous year, Ahn highlights that a significant portion of this capital is concentrated in singular, large-scale infrastructure projects like data centers.
3Capital Inefficiency and Performance Gaps
Ahn notes that many Southeast Asian companies nearing public listings fail to deliver the stellar results required to justify continued venture backing. Data suggests that outcomes in the region are significantly less capital-efficient, generating only half the value per dollar invested compared to markets like China, leading to reduced oxygen for startups.
4Strategic Pivot to Global Markets
Rakuten Capital has shifted its primary investment focus toward North Asia, the United States, and parts of Europe. Ahn observes that many entrepreneurs in Southeast Asia are either assimilating into corporate ecosystems or relocating to more developed markets. Rising interest rates and inflation have further increased the cost of funding for local firms.
5Diversifying Financing Beyond Equity
To succeed in the current climate, Ahn suggests that venture capitalists must evolve beyond pure equity investments. He advocates for incorporating mezzanine financing, debt, and credit instruments to help companies grow more productively. This approach aims to provide the critical mass necessary for startups to survive in a high-cost capital environment.
6Infrastructure and Micro-Compute Clusters
While massive data center investments flow into Malaysia and other parts of Asia, Ahn warns of the gigawatt race's sustainability. He proposes a shift toward smaller micro-clusters and modular infrastructure, such as Nvidia’s DSX pods. This strategy allows for localized AI deployment without the multi-year construction timelines required for giant hyperscale data centers.
7Heterogeneous Computing as a Priority
Ahn emphasizes the importance of heterogeneous computing, which integrates diverse processors from manufacturers like AMD, Nvidia, and Baidu into single units. This technical approach, once ignored, has gained traction as evidenced by the $3 billion valuation of Gimlet. Such plumbing-level innovations are becoming essential for training large language models efficiently.
8Future Outlook for Rakuten Capital
Looking ahead, Rakuten Capital aims to function as the de facto strategy arm for the Rakuten Group while exploring startup incubation. By leveraging internal knowledge to build new businesses, the firm hopes to create value for its headquarters. Ahn remains focused on identifying market supply-demand deficits to guide future investment and incubation efforts.