SINGAPORE –  Singapore was the top start-up investment destination in South-east Asia in 2023 despite a downturn in funding, noted a new report.

It found that start-ups based here accounted for 63.7 per cent of all equity deals in the Asean-6 group of nations – Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam – in 2023, compared with 56.7 per cent in 2022.

The report from Enterprise Singapore and DealStreetAsia also noted that Singapore’s deep-tech start-up ecosystem flourished in 2023, with a 31.4 per cent year-on-year increase in deals.

This marked a recovery from a 38.9 per cent drop in 2022, although deal value fell 18.4 per cent to US$1.53 billion (S$2.07 billion) in 2023.

EnterpriseSG start-up ecosystem director Cindy Ngiam said on April 3 that Singapore’s results indicate continued investor confidence in the country as the region’s go-to destination for funding and start-up development.

“As investors prioritise strong fundamentals during this funding winter, the resilience and solid foundation Singapore has built into its tech and innovation ecosystem are what will allow us to further our growth in deep tech,” said Ms Ngiam.

The report also noted that deep-tech start-ups here are integrating artificial intelligence (AI) and machine learning, which marks a shift in how these firms approach research and development and cost management. 

The recent surge in private funding for AI companies in the US is likely to inspire other investors, including those based in Singapore, it added. 

“While the AI landscape in Singapore is relatively nascent, fund managers see the potential for disruptive companies to emerge on the back of the resources and funding it has committed to strengthening its position as a test bed for new technologies,” the report said.

Mr Aditya Mathur, managing director of venture capital firm Elev8.vc, highlighted at a panel discussion on April 3 that Singapore’s deep-tech ecosystem has expanded rapidly since 2019.

“The number of quality deep tech start-ups and world-class founders has grown immensely,” he said. “In the past, we used to look around the world (for start-ups) but now I think Singapore is generating enough deal flow for us.”

Venture-backed private companies here secured US$6.1 billion in funding in 2023, down 44.7 per cent from 2022, while deals in the Asean-6 declined by around 53 per cent.

The report saw a shift in investor focus to early-stage funding.

Early-stage deals here garnered 94.1 per cent of deal volume in 2023, up from 89.9 per cent in 2022, while capturing 49.8 per cent of deal value, compared with 43.7 per cent in 2022.

But early-stage start-ups based in Singapore were not spared the funding crunch, experiencing an 18.2 per cent decrease in deal volume and a 37 per cent decline in deal value.

Despite the funding squeeze, global and regional investors continue to show strong interest in Singaporean start-ups that have demonstrated strong business fundamentals, innovative solutions and growth.

The report noted that the country boasts a number of tech companies valued at over US$500 million after closing large funding rounds. These include e-commerce loyalty solutions platform ShopBack, cross-border payments company Thunes and e-commerce solutions provider SCI Ecommerce.