Funding for the generative artificial intelligence (GenAI) sector in the Association of Southeast Asian Nations (ASEAN) is projected to increase by 50 percent year-over-year in 2025, according to the latest report from GenAI Fund.
The “ASEAN GenAI Startup Report 2024” attributes this anticipated growth to rising venture capital confidence, the emergence of enterprise Corporate Venture Capital arms, and an increase in mergers and acquisitions within the region.
Currently, Singapore leads the ASEAN GenAI landscape, housing 44 percent of the region’s GenAI startups, followed by Vietnam with 27 percent and Indonesia with 13 percent.
However, the report forecasts a shift in this distribution over the next 18 months, highlighting Vietnam’s growing appeal as an outsourcing hub due to its robust technical talent and lower operational costs.
A significant 92 percent of ASEAN GenAI startups are now focusing on business-to-business (B2B) or business-to-business-to-consumer (B2B2C) models, marking a departure from the region’s traditional business-to-consumer (B2C) focus.
The top sectors attracting investment include productivity and business solutions (26 percent), healthcare and wellness (13 percent), and financial services (13 percent).
Despite the optimistic projections, GenAI startups face several challenges. These include slow enterprise onboarding processes, difficulties in executing effective proofs of concept (POCs), achieving product-market fit, and competing with established software as a service (SaaS) providers and major tech companies.
The report also highlights the complex relationship between GenAI startups and big tech firms. While cloud providers like AWS, GCP, and Azure are essential for infrastructure, they also pose competition.
Additionally, foundation model providers such as OpenAI and Anthropic offer critical capabilities that may overshadow startup offerings as they evolve. Nevertheless, there is a growing trend of GenAI startups leveraging big tech partnerships to go-to-market (GTM) with enterprises.
Funding-wise, 50 percent of ASEAN GenAI startups are either bootstrapped or angel-funded, with 41 percent having secured pre-seed or seed funding. Only 16 percent of these startups are currently profitable, underscoring the sector’s early-stage development in the region.
The comprehensive report is based on an extensive database of 700 GenAI startups, surveys of 250 startup respondents, and in-depth interviews with 25 featured startups. It also incorporates insights from over 15 prominent venture capitals, accelerators, and incubators, including Lightspeed Ventures, DO Ventures, Wavemaker, and Ascend Vietnam Ventures (AVV).
“This report underscores our commitment to positioning ASEAN as a global leader in AI innovation,” said Laura Nguyen, Partner at GenAI Fund. “By sharing these insights and actively supporting the ecosystem, we aim to catalyze growth and drive enterprise adoption of GenAI technologies across the region.”