APAC startups haven't quite cured the VC hangover

Five years after venture capital markets reached their peaks globally, APAC startups appear to be stuck in a holding pattern. Dealmaking dropped for four consecutive years following 2021, indicating a shift away from venture-style risk. However, 2026 marked the first year investment increased, according to new PitchBook research. While a recovery seems to be underway, the findings suggest APAC's startup ecosystem may not be fully back to its previous health.

Companies funded during the 2020 to 2021 boom have struggled with raising multiple rounds and navigating an exit. Only 20.4% of them managed to secure two or more rounds, while just 9.7% successfully exited. In comparison, the cohort funded between 2016 and 2017 had a 24.4% rate of raising two-plus rounds and a 14.9% exit rate. The companies from the 2020 to 2021 group were also less likely to fail, with 40.3% remaining active without raising further capital, compared to 32.5% in the 2016 to 2017 cohort.

Moreover, 7.5% of the 2020 to 2021 group went out of business within four years of 2021, while 15.7% of the 2016 to 2017 group faced the same fate.

The data indicates that APAC companies may have been forced to become more capital-efficient, allowing them to extend their runway. However, it remains uncertain whether this period of lean times made the companies operationally and financially healthier. The decline in company attrition, combined with the rise of AI threatening SaaS models, the Sino-US geopolitical tensions, food and oil price inflation, and public market volatility, suggests many active APAC startups are still grappling with finding their footing as the market recovers.