The Philippines overtook Indonesia in equity funding value in the first half of the year as investments in startup firms in Southeast Asia fell to a six-year low, driven by rising regional uncertainties due to political unrest.

In a report by Singapore-based financial platform DealStreetAsia and Ayala-led venture capital (VC) Kickstart Ventures Inc., Southeast Asia saw its equity investment reach $1.8 billion from January to June, the lowest first-half figure since 2019.

The amount, which covers 229 deals, was 21-percent lower than $2.33 billion across 365 deals in the first half of 2024.

The Philippines logged $86.4 million in equity funding across 15 deals in the first six months, down by more than half from $191 million in the same period last year.

Despite the decline, the Philippines managed to edge out Indonesia’s $78 million, which came from the region’s second-highest deal volume, at 34.

This positioned the Philippines at fourth place in Southeast Asia in terms of deal value. Singapore was at the top spot in the region with $1.2 billion, followed by Vietnam ($275 million), and Malaysia ($196 million).

Kickstart Ventures general partner Joan Yao said she is hopeful that the Philippines’ funding momentum will continue into the second half, driven by its rapidly growing middle class and vibrant digital ecosystem.

Financial technology (fintech) continues to dominate funding for Philippine startups, with Neobank Salmon securing $28 million—the largest equity deal in the country for the first half of the year.

Yao said there is a likelihood that funding will further diversify in the second half, as companies in healthcare and food and beverage (F&B) have already attracted significant capital.

For instance, cloud kitchen firm CloudEats secured $17.8 million in investments, while dialysis center operator NephroPlus raised $7 million.

With late-stage deals remaining scarce in the country, Yao said investments into early-stage deals reflect rising investor confidence in these firms due to their stronger governance and clearer path to predictably.

This optimism, however, depends on how other countries in the region are holding up in terms of their economic and political climate, which directly influences funding interest.

“I don’t know how long it will take Indonesia to bounce back from their own challenges. But we have to think about it, investors globally, for better or worse, they see Southeast Asia as one region. And what affects Indonesia has, to some extent, an effect on all of us,” said Yao in an interview on Wednesday, Sept. 17.

“So, you kind of hope that they will recover because that sends the message to everyone that Southeast Asia, including the Philippines, is a good place to do business,” she added.

From about $200 million in the first half of last year, Indonesia plummeted to $78 million this year, stemming from corruption concerns that erupted into widespread protests last month.

DealStreetAsia head of data research Andi Haswidi, who hails from the Indonesian capital of Jakarta, noted that while protests have died down, political unrest could be right around the corner if their government makes “another major mishap.”

Haswidi said these uncertainties are not exclusive to Indonesia since it’s also happening in other Southeast Asian countries.

In the Philippines, there is growing political outrage due to corruption involving anomalous flood control projects, with nationwide protests being planned and some already taking place.

Amid these potential headwinds to capital, Haswidi said these issues should not influence the strategy of venture capitalists and startups.

“Political factors influence everything but at the same time, it’s really the effort of how VC ventures have been trying. Remember that 90 percent would fail for sure, but what they’re doing is building the ecosystem,” he said.

Yao, meanwhile, noted that startup founders are built for these uncertainties. She said the willingness to build a company from the ground up reflects that they are “ready to go through hell or high water.”