For startups in Malaysia and across Southeast Asia, the funding environment in 2025 looks nothing like the boom of 2021. Capital is retreating on a large scale and investors are becoming ever more demanding. The institutions still at the table, OSK Ventures International Bhd, NEXEA Ventures and Sunway Innovation Labs (Sunway iLabs), are each redrawing the boundaries of what is worth investing in, in their own way. This article sets out how the heads of the three institutions read the current situation and what they plan to do next.
- Three institutions, three roles
- How the three leaders see the winter
- What the data says: from peak to trough
- Why the failures matter: warnings left by governance gaps
- What the three institutions will do next
- Policy support: Angel Tax Incentive extended to the end of 2026
- Where things are heading, and what to watch
Three institutions, three roles
OSK Ventures International Bhd is the venture arm of the OSK Group. It focuses on equity investments in growth-stage technology companies in Southeast Asia, and has now launched two new funds, ET Fund II and OSK-SBI Fund II.
NEXEA Ventures is a venture capital firm focused on the early stage. It also runs a startup community and accelerator network, and is currently raising capital for its latest early-stage fund, with a target of completing the raise in the first half of 2026.
Sunway Innovation Labs (Sunway iLabs) is the corporate venture capital (CVC) and innovation lab arm of the Sunway Group. It is positioned to balance financial returns with strategic synergy for the group, and has built partnerships with Silicon Valley’s a16z, China International Capital Corp, and the UK’s Cambridge deep-tech ecosystem.
How the three leaders see the winter
Amelia Ong, Executive Director of OSK Ventures International Bhd, is cautious about the next 12 to 24 months. She said that if limited partner (LP) liquidity does not improve within the next six months, one can expect fewer deals, tougher investment requirements, and pressure on fund managers to shrink in size.
Justin Lim, Managing Partner of NEXEA Ventures, characterised the 2021 investment boom as an experiment in which discipline was lost. He noted that many investors at the time “followed the herd”, with poor-quality due diligence, and that local LPs, having failed to see returns, are now especially cautious. He also criticised the persistently low DPI (distributions to paid-in capital) in Southeast Asia, arguing that high valuations combined with excess capital are fundamentally a failed equation.
Karen Lau, Chief Operating Officer of Sunway iLabs, pointed out that investment preferences have clearly shifted. She said that two years ago iLabs did not actively ask founders about their AI strategy, but today it is the first hurdle in the evaluation, including whether founders can clearly explain their unique proprietary data, proprietary technology, the speed of their AI iteration, and how deeply the solution can be embedded in enterprise workflows.
What the data says: from peak to trough
According to Tracxn, Southeast Asian tech startups raised about US$2.06 billion (roughly RMB15 billion) in the first nine months of 2025, a 58% drop from US$6.2 billion in the same period of 2023 (data period: January to September 2025). At the peak, a Cento Ventures report shows that capital deployed in the second half of 2021 alone reached US$9.5 billion, the highest in the region’s history.
Turning to Malaysia, startups in Kuala Lumpur raised a combined US$17.3 million in the first nine months of 2025, with Petaling Jaya contributing another US$6.8 million (source: Tracxn, data for the first nine months of 2025).
Even so, Malaysia’s early-stage ecosystem still shows a degree of resilience. Datuk Amirul Feisal Wan Zahir, Managing Director of Khazanah Nasional Bhd, said in his keynote at the Malaysian Venture Forum 2025 that Malaysia attracted US$360 million in early-stage funding over two years, which he attributed to the trust built by founders and investors alike persevering through a difficult environment.
Why the failures matter: warnings left by governance gaps
Part of the reason the capital squeeze has been so fierce is that several high-profile failures exposed deep-seated weaknesses in the ecosystem.
The collapse of the Indonesian agritech unicorn eFishery, whose revenue investigators say was overstated by nearly US$600 million over nine months, has left its former CEO facing a criminal investigation. The Malaysian retirement fund body Kumpulan Wang Persaraan Diperbadankan (KWAP) was one of its investors.
The Singapore fashion platform Zilingo entered liquidation in 2023 after auditors found major financial irregularities.
The Malaysian example is the fashion e-commerce platform FashionValet, whose accumulated losses reached RM127 million by 2022 under the combined pressure of physical expansion and the pandemic. Khazanah Nasional Bhd had injected RM27 million, and Permodalan Nasional Bhd put in RM20 million.
Together, the three cases reveal similar warning signs: weak governance, distorted revenue figures, and a burn rate that could not be sustained. Justin Lim believes these failures have deepened investors’ wariness of companies without a clear path to profit, with insufficient execution discipline, or with untrustworthy exit routes.
What the three institutions will do next
OSK Ventures is deploying its two new funds on a “cyclical positioning” logic: investing during the downturn to exit in the upcycle over the next five to seven years. Amelia Ong said the firm is actively supporting portfolio companies to exit through mergers and acquisitions or IPOs, and is also launching a single-deal special purpose vehicle (SPV) platform aimed at high-net-worth individuals and family offices.
NEXEA Ventures is raising capital for its latest early-stage fund, which has begun deploying and is expected to hold its final close in the first half of 2026. Justin Lim stressed that NEXEA will continue to focus on founders with a clear mission and the ability to execute on the ground, and will keep building its startup community, with an emphasis on attracting under-represented groups of entrepreneurs.
Sunway iLabs is pursuing a dual-track strategy. On one track, it integrates portfolio companies into Sunway’s business units to speed up pilots and enterprise procurement. On the other, the Sunway Group has earmarked RM30 million specifically for practical AI applications, including substantive collaboration with its portfolio companies. Karen Lau positions this model as a “win-win”: it strengthens Sunway’s own AI capabilities while giving portfolio companies a sustainable path to scale.
Policy support: Angel Tax Incentive extended to the end of 2026
At the ecosystem level, the Malaysian government has extended the Angel Tax Incentive to 31 December 2026. The scheme is administered by the Angel Tax Incentive office under Cradle Fund Sdn Bhd. It was first introduced in 2013 to fill the funding gap at the early investment stage.
Under current rules, an investor must put a minimum of RM5,000 and a maximum of RM500,000 into a single startup and hold the shares for two years before applying for the tax exemption. The exemption equals the amount invested and is granted in the third year of holding.
The investee company must be a private limited company (Sdn Bhd) incorporated and operating in Malaysia, with cumulative revenue below RM5 million and no more than three years since incorporation. The angel investor must be a high-net-worth individual with net personal assets of RM3 million or more, or a high-income individual with annual income above RM180,000, while joint applicants must have a combined annual income above RM250,000.
Where things are heading, and what to watch
In Justin Lim’s view, the current capital contraction is not simply a disaster but a necessary correction that is long overdue. It is weeding out ineffective investors and unsustainable startups, and making room for founders who can truly execute.
Sivapalan Vivekarajah, Co-Founder and Senior Partner of ScaleUp Malaysia Accelerator, pointed to a structural problem in the Malaysian ecosystem: there is a lack of acquirers of scale locally, which blocks the mergers-and-acquisitions exit route, while an IPO exit presupposes profitability. Both routes require founders to put more effort into the fundamentals.
What to watch next is whether NEXEA can close its fundraise on schedule in the first half of 2026, whether OSK’s SPV platform can draw in family office money, and whether Sunway iLabs’ AI synergy model can deliver measurable scaling results for its portfolio companies. These three threads will, to a considerable extent, determine how the next phase of the Malaysian venture ecosystem unfolds.
