Startups can expect brighter 2025 after prolonged funding winter

Startups are expected to find it easier to secure funding in the year ahead after a tough 2024 which saw rising costs, muted investor interest and geopolitical developments hampering their growth.

Industry players told The Straits Times that the local funding landscape is poised to be buoyant in 2025, driven by expected rate cuts and more investments targeting Southeast Asia.

Startups that can show sustainable growth will have a competitive edge, given that investors have generally grown more prudent in recent years, they added.

“Investors are prioritising companies with strong fundamentals, clear unit economics and proven market traction – this means that start-ups have to demonstrate a clear path to profitability and sustainable growth to secure funding,” said Mr Chua Kee Lock, chief executive of Temasek-backed venture capital firm Vertex Holdings.

This comes after a prolonged funding winter that has gripped the global start-up ecosystem since 2021, as persistent high interest rates and geopolitical uncertainty, due to events such as the Russia-Ukraine war, drove investors towards safer assets.

Mr Chua said that South-east Asia and specifically Singapore will continue to attract significant venture capital funding in 2025 despite these global challenges.

“Singapore’s strong fundamentals and proactive government support position it as a leading start-up hub in the region.”

Mr Willson Cuaca, co-founder and managing partner at East Ventures, said that funding will persist in 2025, but the money is “getting smarter”.

“Success in securing funding is not about chasing and blindly throwing around the latest buzzwords like artificial intelligence (AI) in your start-up… What truly matters is addressing real and impactful problem statements as well as large addressable markets,” he said.

Cloud communications start-up Toku is one firm that has experienced the shift in funding landscape. Toku has managed to secure funding in recent years – of about US$5 million (S$6.8 million) per funding round – but its CEO Thomas Laboulle said that the expectations of investors have changed. “The challenge wasn’t getting in front of investors; it was the shifting their mindset and expectations – most were focused on supporting their existing portfolios and placed tighter constraints on new capital deployment,” he said

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East Ventures’ Mr Cuaca said the “secret sauce” for founders in 2025 lies in building a strong business foundation, as investors will pay more attention to companies with long-term potential instead of those that just focus on short-term trends. “Founders who stay grounded and deliver value will always stand out, even in volatile times,” he said.

The original article was published in The Straits Times, Tuesday, 31 December 2024, page 18.