2025 Market Overview
Private equity investment in Southeast Asian AI companies reached $6.8 billion in 2025, a 45% increase from 2024's $4.7 billion. Singapore remained the dominant market, accounting for approximately 55% of total deal value, followed by Indonesia (18%), Vietnam (12%), and Thailand (8%). The growth was driven by a combination of factors: maturing AI companies reaching the scale that PE investors target, increasing sophistication of PE funds in evaluating AI assets, and a favorable exit environment as strategic acquirers — particularly global technology companies and large Asian conglomerates — accelerated their AI acquisition strategies.
The number of deals also increased, with 127 PE transactions in the AI sector across ASEAN in 2025, compared to 89 in 2024. However, the most notable trend was the increase in deal size. The average transaction value rose from $52.8M in 2024 to $53.5M in 2025, while the median deal size increased more significantly from $28M to $35M — suggesting that PE funds are deploying larger checks into fewer, more mature companies. We also observed a meaningful increase in growth equity transactions (Series B and later), which accounted for 62% of total deal value, up from 48% in 2024.
Deal Structures & Trends
Several structural trends emerged in 2025 that we expect to persist into 2026. First, structured equity instruments — particularly participating preferred shares with ratchet mechanisms — became more common in growth equity deals. PE funds are increasingly using these structures to protect their downside while participating in the upside, reflecting the valuation uncertainty inherent in AI companies where revenue projections are heavily dependent on technology risk. In our practice, we negotiated participating preferred terms in approximately 35% of PE-backed rounds in 2025, compared to 20% in 2024.
Second, co-investment and syndication structures became more prevalent. PE funds are managing concentration risk in AI investments by forming syndicates that distribute both risk and governance responsibilities. We structured several co-investment vehicles in 2025 where a lead PE fund took 60-70% of the round, with one or two co-investors taking the remainder. These structures require careful documentation — particularly around governance rights, information access, and drag-along/tag-along mechanics — to avoid conflicts between co-investors with potentially divergent investment horizons and exit preferences.
Third, earn-out and milestone-based deal structures appeared in PE transactions for the first time at meaningful scale. Historically, earn-outs were primarily an M&A tool, but we saw several growth equity transactions in 2025 where a portion of the investment was conditional on the company achieving specific technical or commercial milestones — such as model performance benchmarks, customer acquisition targets, or regulatory approvals. This trend reflects PE funds' desire to tie investment pace to demonstrable value creation in an asset class where technology risk is high.
Sector Focus Areas
Within the AI sector, PE investment in 2025 was concentrated in four sub-sectors. Enterprise AI infrastructure — companies providing AI development platforms, MLOps tools, and data infrastructure — attracted the most capital ($2.1B across 34 deals), driven by the thesis that AI adoption across Southeast Asian enterprises is still in its early stages and infrastructure providers will capture recurring revenue as adoption scales. AI-powered fintech was the second largest category ($1.8B across 28 deals), reflecting the deep penetration of digital financial services in ASEAN and the strong regulatory environment in markets like Singapore, where MAS has been actively promoting AI adoption in financial services through sandboxes and guidelines.
AI healthcare ($1.2B across 22 deals) was the fastest-growing category, with deal value nearly doubling from 2024. The growth was driven by several factors: Singapore's strong clinical research infrastructure, supportive regulatory environment through HSA's regulatory sandboxes, and the availability of high-quality medical data for model training. AI companies in diagnostics, drug discovery, and clinical workflow optimization attracted particular attention from PE funds with healthcare sector expertise. The remaining deal flow was distributed across AI in logistics and supply chain, AI in education, and horizontal AI applications.
2026 Outlook
Looking ahead to 2026, we expect PE investment in Southeast Asian AI to continue growing, though potentially at a more moderate pace as valuations adjust to higher interest rates and increased regulatory scrutiny. Several factors will shape the market. The EU AI Act's phased implementation will create compliance costs for AI companies with European exposure, which may slow some PE funds' deployment pace as they assess regulatory risk. However, Singapore's pragmatic regulatory approach — exemplified by the Model AI Governance Framework and AI Verify — positions Singapore-based AI companies favorably relative to competitors in less regulated markets.
We also expect to see more secondary transactions in 2025-vintage deals as early PE investors seek liquidity. The secondary market for AI company stakes is nascent in Southeast Asia but growing rapidly, and we have already been engaged on several advisory mandates for secondary transactions scheduled for the first half of 2026. For AI founders, the key takeaway from 2025's PE market is that capital availability is not the constraint — deal-readiness is. PE funds have abundant dry powder and a strong appetite for Southeast Asian AI. The companies that attract the best terms are those that can demonstrate not only strong technology and commercial traction, but also robust governance, clean legal structures, and clear paths to exit.