Global and regional startup funding remained sluggish in 2025, even though investors collectively were not facing a liquidity shortage. Data from S&P Global Market Intelligence shows that private equity and venture capital (VC) investors continued to hold substantial reserves of uncommitted capital, known as dry powder, amid slowing investment and fundraising activity.

As of March 2025, global private equity dry powder stood at approximately US$2.18 trillion. This was only slightly below the record high of US$2.305 trillion recorded at the end of 2023. These figures indicate that investment capital has not dried up overall, even as the pace of deployment has slowed.

S&P Global attributes the slowdown primarily to growing investor caution amid macroeconomic pressures, delayed exits, and valuation corrections in riskier assets. Global fundraising declined for three consecutive years from 2022 to 2024, while divestment activity progressed more slowly.

Against this backdrop, the slowdown in Indonesia’s startup funding can be understood as part of a broader global trend rather than an isolated phenomenon. This pattern is illustrated by Tech in Asia’s data on startup funding in Indonesia from 2019 to 2025.

After peaking in 2021, funding value declined significantly in subsequent years. The number of deals also fell, although the contraction was less pronounced than the decline in investment value.

The faster decline in funding value relative to deal frequency indicates that investment activity has not come to a complete halt. Investors are still making deals, but at smaller ticket sizes. This pattern is reflected in the average investment value per deal, which shows that transaction sizes have contracted since 2022 and have yet to return to their pre-correction levels.

Shrinking deal sizes point to growing investor caution, as reflected in funding data over the past several years. Amid market uncertainty, investors have tended to reduce their capital exposure per investment, tighten their selection processes, and avoid large-scale commitments.

This pattern differs from a situation in which the market is experiencing an actual capital shortage. In such circumstances, the number of deals typically declines while transaction sizes remain relatively stable, as investors concentrate their capital on assets they consider the safest.

This behavior is also reflected in several global reports. EY noted that although total funding remained relatively resilient in early 2025, deal counts continued to decline as investors became more selective.

Meanwhile, InnoVen Capital reported that investors were taking a more cautious approach to capital deployment, focusing on startups with stronger business fundamentals, even as deal sizes continued to increase at certain funding stages.

In Indonesia, this selectivity is evident in the declining frequency and size of startup funding deals, suggesting that the slowdown is more closely associated with investors holding back on investment decisions. To understand the broader impact of this selectivity, changes in market momentum can be examined through an investment activity index.

The index illustrates changes in funding intensity over time, using 2019 as its baseline. This approach allows movements in funding value and deal counts to be assessed relative to market conditions before the startup ecosystem entered its expansion phase.

The investment activity index shows a sharp increase in 2021, reaching its peak in 2022 before declining consistently through 2025. The decline reflects weakening market intensity rather than the disappearance of investment activity. Funding continues, but at a considerably slower pace than during the previous period of exuberance, when capital flowed rapidly and valuations rose aggressively.

At the regional level, the slowdown has occurred despite relatively abundant available capital. Bain & Company’s Asia Pacific Private Equity Report 2025 found that total dry powder held by private equity investors in Asia-Pacific increased consistently from 2019 and peaked in 2023.

By mid-2024, Bain estimated that dry powder had begun to decline. However, this was not driven by a surge in investment activity, but rather by weaker fundraising. Private equity fundraising in Asia-Pacific fell by approximately 22 percent in 2024, reflecting growing caution among global institutional limited partners (LPs) amid challenging macroeconomic conditions.

Despite the decline, Asia-Pacific’s dry powder remained above its pre-pandemic average. This indicates that investors collectively still have substantial liquidity, even as pressure to deploy capital increases amid a limited supply of investment opportunities that meet their risk and valuation criteria.

A similar view has been expressed by participants in the global venture capital industry. Sequoia Capital Partner Roelof Botha has described the VC industry as facing a structural imbalance.

“I think there is a major problem in the VC industry. There is too much money,” Botha said, as reported by Business Insider. He described the situation as a risk of investing without generating returns, with too much capital chasing too few high-quality companies.

According to Botha, these conditions have made investors increasingly sensitive to pricing and risk, particularly in later-stage funding rounds that require substantial capital commitments. Funding rounds that were previously relatively easy to secure are now more frequently delayed or subject to valuation adjustments as global investors become more cautious.

Tech in Asia’s data on Indonesian startup funding shows a pattern consistent with the broader market slowdown of recent years. By investment stage, early-stage funding (seed and pre-seed) consistently accounted for the largest number of transactions throughout 2019–2025.

Although early-stage deal activity surged in 2022, transaction volumes declined significantly afterward, particularly during 2023–2025. This reflects the widespread impact of tighter capital deployment across the startup ecosystem.

By contrast, later-stage funding, particularly Series A and Series B and above, has faced greater pressure. After peaking in 2021 and remaining relatively resilient in 2022, deal activity at these stages fell sharply in 2023 and continued to weaken through 2025.

Beyond equity-based funding, non-equity deals, such as strategic investments, venture debt, grants, and bridge financing, have shown a relatively more stable pattern. Although transaction volumes increased in 2021 and 2022, non-equity deals also experienced a correction during 2023–2025, but the decline was less pronounced than in later-stage funding.

This suggests that investors are still deploying capital, but through more defensive and flexible deal structures as caution over valuation risks and market uncertainty continues to grow.