For Southeast Asian startups, distress may show up before the cash runs out

In Southeast Asia, startups and growing companies are finding early signs of potential financial distress before cash reserves are exhausted. AlixPartners, a global consulting firm, has identified four key warning signs: declining access to quality capital, a gap between EBITDA and cash generation, missed milestones and targets, and senior management turnover.

These indicators are becoming more difficult to overlook as insolvencies rise across the region. Insolvency rates in Asia increased by 39% in 2025, with significant jumps in key financial hubs like Hong Kong and Singapore. For Southeast Asia's startup ecosystem, these findings are particularly relevant as businesses navigate a funding landscape where capital is more expensive and less forgiving.

Investors are scrutinizing unit economics, lenders are assessing cash flows, and founders are realizing that survival depends more on discipline than headline growth. The first warning sign is a company's reduced access to quality capital. This occurs when a business can no longer secure funding from reliable sources such as banks or institutional investors and must turn to higher-cost or less sophisticated providers.

In Asia, where smaller and privately held companies make up 97% of the financial landscape, this shift is especially concerning, as many firms lack detailed financial disclosures. The second warning is a persistent discrepancy between EBITDA and actual cash flow. While EBITDA is a common metric for assessing operating performance, it does not account for essential costs like debt servicing, taxes, and asset depreciation.

This gap is becoming increasingly significant as interest rates remain elevated. The third indicator is a series of missed milestones and commitments. Repeated failures to meet targets, delayed filings, and changes in fundraising plans can signal deeper issues within the company, particularly in a market where trust is crucial. Finally, senior management turnover is emerging as a red flag.

Frequent changes in leadership can indicate underlying problems, such as disagreements over valuation or performance, and create instability that can further strain the company's financial health.