China's crackdown on its tech sector has also contributed to capital injections to the region, causing valuations of many startups to outpace their business principles, Justin Hall, a partner at Golden Gate Ventures, said at the Reuters Next conference.
"One of the biggest factors when it comes to the irrational valuation ... is the influx of U.S. and global money. There is an extraordinary amount of money coming into the region ... and the end result is that you have ... too much money chasing after too few deals," Hall said.
Golden Gate's portfolio companies include payments platform Stripe and delivery firm Ninja Van.
In the first half of 2021, the number of investments in the region surged 20% over the year ago period to a record, with Indonesia and Singapore attracting the lion's share of funding, according to a report by Southeast Asian venture capital firm Cento Ventures. Total fund inflows amounted to $4.4 billion.
Investor interest is being driven by the region's growth potential, with its internet economy forecast to more than double to $360 billion in gross merchandise volume by 2025.
Such interest has helped spawn several multi-billion dollar businesses recently.
Grab, the region's biggest ride-hailing and delivery firm, will make its market debut on Thursday on Nasdaq after a record $40 billion merger with a special purpose acquisition company (SPAC). Its Indonesian rival GoTo Group raised $1.3 billion last month, ahead of an IPO planned for next year.
Dmitry Levit, a partner at Cento said, however, these companies were not necessarily a template for smaller unicorns.
"I would say the recipe of raise a massive round for Indonesia only has kind of played out," he said, adding that there were opportunities in Vietnam and other Southeast Asian countries.
(Reporting by Sayantani Ghosh and Miyoung Kim in Singapore; Editing by Kim Coghill)
By Sayantani Ghosh and Miyoung Kim
