VCs shift to proven startups as AI takes centre stage

Cautious investors are putting capital in fewer companies.

Venture capital investors are shifting toward startups with clearer paths to profitability, moving away from speculative early-stage bets.

Investors are becoming more selective after the rapid funding cycle earlier in the decade, focusing on companies with stronger business fundamentals and sustainable growth prospects. Artificial intelligence (AI) is expected to remain a key focus for investors in the coming years, analysts said.

“The deployment approach now is very much toward companies that have unit economics that can deliver profitability in the relatively short term,” Nick Cocks, a partner at Velocity Ventures Pte. Ltd., told Singapore Business Review via Zoom. “The continual funding of losses is now a bygone era.”

Data from Tracxn Technologies Ltd. showed total funding for tech startups in Singapore edged up 1.59% to $5.85b last year even as deal activity slowed sharply. Funding rounds fell to 201 from 359 a year earlier.

The figures suggest investors are concentrating capital in fewer companies whilst becoming more cautious about their bets. The median deal size rose 40% to about $8.92m last year amongst AI-Native rounds, according to Tracxn.

“This suggests that investors are making fewer bets overall but concentrating capital into a smaller number of startups,” Tracxn founder Neha Singh said in a separate Zoom call.

Princeton Digital Group (Singapore) Pte. Limited led tech firms’ funding rounds last year, raising $1.7b in a Series C round. It was followed by Digital Edge (Singapore) Holdings Pte. Ltd., which raised $877m from a Series D round.

Completing the top five were Airwallex (Singapore) Pte. Ltd., which raised $427.4m in a Series G round, Supabase Pte. Ltd., which raised $269.4m in a Series D round, and TransferTo Mobile Financial Services Ltd., which raised $194m in a Series D round.

Investors said the change in strategy reflects a more disciplined investment environment after years when capital flowed freely into high-growth startups.

“Gone are the days back in the early 2020s when a lot of investors were chasing more top-line growth,” Zen Liew, investment director for Singapore at Gobi Partners Venture Capital, said in a Zoom interview.

Singapore remained Southeast Asia’s main startup funding hub, accounting for more than 60% of the region’s deal count, said Mike Maté, general partner at Kickstart Ventures, Inc.

“What we saw in Singapore mirrors the region more broadly: capital becoming more selective, not less available,” he said in an emailed reply to questions.

Maté said investors are prioritising startups with demonstrable unit economics and credible paths to profitability, with fintech and green technology leading funding activity.

Artificial intelligence is expected to be a major focus for venture investors this year as companies adopt the technology across industries.

Maté said AI startups could attract funding even before reaching traditional profitability benchmarks because of their potential to scale rapidly.

“Disciplined deployment and compelling technological acceleration… should make 2026 a more interesting vintage than 2025,” he said.

Government support is also expected to drive investment. Singapore has launched several initiatives to boost the sector, including a $1b expansion of the Startup SG Equity programme to support emerging and growth-stage technology firms.

Investors are also seeing greater participation from global capital, including institutional investors, family offices, and foreign funds from markets such as South Korea and Japan, Liew said.

Even as venture funding stabilises, industry participants said stronger exit opportunities are needed to sustain investment momentum.

Cocks said the sector must expand exit routes beyond mergers and acquisitions by drawing private equity firms into earlier funding rounds and revitalising the initial public offering (IPO) market.

Data from the Singapore Exchange showed six companies had listed as of March 17, with UI Boustead Real Estate Investment Trust raising about $973.6m in its debut offering.

Market watchers expect more than 20 listings this year, compared with 13 IPOs in 2025 that raised more than $2.5b.