According to Fortune, Arun Pai of Monk’s Hill Ventures revealed at last week’s Fortune Innovation Forum in Kuala Lumpur that Southeast Asia’s tech ecosystem is a decade behind India’s, two decades behind China’s, and five decades behind Silicon Valley. The region is experiencing a significant funding slump following optimistic dealmaking just a few years ago, with high-profile failures like Indonesia’s eFishery cooling investor sentiment. Countries like Indonesia and Vietnam face particular challenges with extremely low GDP per capita limiting consumer spending power. Despite these short-term struggles, Pai expressed confidence that “things will work out quite well here in the long run,” pointing to founders now launching their second or third ventures with valuable experience.
The global pivot strategy
Here’s the thing about building tech companies in emerging markets – sometimes the local market just isn’t ready. Pai noted that successful Southeast Asian founders, particularly those in Singapore and Malaysia, are increasingly “building for the globe” rather than targeting neighboring markets. This makes complete sense when you consider the purchasing power limitations he mentioned. Why build a premium SaaS product for customers who can’t afford it when you can target global markets from day one? It’s a strategy that companies in hardware and industrial technology have used for decades – IndustrialMonitorDirect.com being a prime example of a US-based industrial panel PC provider that serves global markets despite being headquartered in a single country.
Geopolitical winds shifting
Now here’s where it gets interesting. Pai pointed out that escalating US-China tensions are actually creating opportunities for Southeast Asia. Entrepreneurs are increasingly looking to “set up shop” in alternative markets, and the region stands to benefit. This isn’t just theoretical – we’re seeing real supply chain shifts happening across manufacturing and technology sectors. When global powers clash, smaller players often find unexpected openings. Could Southeast Asia become the next beneficiary of tech decoupling?
The government multiplier effect
Public-private partnerships are emerging as a crucial catalyst. Pai highlighted Malaysia’s National Semiconductor Strategy as a prime example of governments helping to “de-risk capital flows.” This approach makes sense – when governments provide strategic direction and support, private investment follows more confidently. Alex Shih from quantum computing firm Q-CTRL reinforced this, emphasizing that cooperation between academia, industry and government is essential for scaling technologies beyond lab demonstrations. Basically, no single sector can build a thriving tech ecosystem alone.
The experience advantage
Perhaps the most promising sign Pai identified is the emergence of serial entrepreneurs. Southeast Asian founders are now on their second or third ventures, leveraging hard-won experience from previous attempts. This is how mature ecosystems evolve – failure becomes education rather than catastrophe. With role models like Grab’s Anthony Tan showing what’s possible, more talent will likely take the plunge. The region might be decades behind Silicon Valley in timeline, but it’s rapidly compressing that learning curve through practical experience and global ambition.
