Fewer outsized exits have fuelled questions about the model. The real issue may be whether we’re judging the region too early.
“SEA VCs don’t have power laws.”
It is the kind of statement that gets a reaction in a room full of venture investors. But underneath the provocation sits a legitimate question.
Venture capital is built around the idea that returns are highly uneven. Most investments will not determine the outcome of a fund. A small number of exceptional companies will.
Historical data supports that view. In aggregated Horsley Bridge data covering hundreds of venture funds since 1985, roughly 6% of investments generated around 60% of total returns. Commonfund’s analysis of 35 years of venture investing tells a similar story: its top 15 portfolio companies represented only around 1% to 2% of invested cost, yet generated an average of 38% of total value.
This is the conventional venture power law.
The question is whether Southeast Asia has produced enough extreme outcomes for the same model to work in practice.
The case against the power law in Southeast Asia
There is a reason for the scepticism.
Power-law investing needs genuinely outsized outcomes. A portfolio can tolerate a substantial number of investments that return little or nothing only if its biggest winners become large enough to compensate for them.
Southeast Asia’s liquidity environment has made that harder to demonstrate.
PitchBook reported that while regional exit activity improved in 2025, projected exit value remained far below the $58.5 billion peak recorded in 2021. Acquisitions accounted for more than 83% of Southeast Asian VC exits in 2025 year-to-date, while many of the region’s most highly valued private companies continued to delay liquidity.
There is another telling statistic. The 30 highest-valued startups tracked by PitchBook had a median age of nine years, older than the median age at exit for VC-backed companies in Southeast Asia.
That matters because private valuations alone do not return capital to LPs. For the power law to translate into realised fund performance, eventually those exceptional companies need to produce liquidity.
The sceptical argument, therefore, has some weight. Southeast Asia has so far produced fewer realised venture outcomes at extreme scale than more mature markets, while its exit environment remains relatively constrained.
But that is only one side of the story.
The market is already becoming more concentrated
If power laws are characterised by a small number of outcomes dominating the rest, Southeast Asia’s funding market is beginning to show some striking asymmetry.
In 2025, startup funding recovered to $3.51 billion in the second half, up from $1.86 billion in the first half. But DealStreetAsia noted that the recovery was driven largely by a small number of outsized transactions rather than a broad increase in activity. The region also produced four new unicorns during the year, compared with one in 2024.
Then came the first half of 2026.
Southeast Asian venture-backed companies raised $7.25 billion across 217 transactions, the strongest first-half funding total since 2022. At the same time, deal volume fell to its lowest level since at least 2018.
And one transaction changed the entire picture.
DayOne’s $4.5 billion Series C represented more than 60% of the region’s total funding. Remove that deal and Southeast Asian funding actually fell 21% compared with the previous half-year period.
This is not proof that Southeast Asian venture returns follow a power law. Funding concentration and realised investment returns are not the same thing.
But it does demonstrate something important: the region’s private capital market is already capable of producing extreme concentration around a very small number of companies.
The question is whether those companies eventually produce similarly outsized outcomes for their early investors.
Are we judging the region too early?
Southeast Asia’s institutional venture ecosystem has also developed relatively quickly.
Between 2010 and 2020, annual capital invested in Southeast Asian startups increased roughly 50-fold, while the number of active regional venture firms grew substantially. By 2021, the region had produced another wave of technology unicorns and attracted record levels of startup investment.
That does not mean Southeast Asia simply needs more time and the power law will inevitably emerge. There are structural differences between markets, exit environments and company-building ecosystems that cannot be explained away by age alone.
But maturity matters when comparing realised venture outcomes.
Many of Southeast Asia’s largest venture-backed businesses remain private. Others are only beginning to approach the point where major liquidity events might become realistic. Judging the region purely by realised exits today may therefore provide an incomplete picture of companies whose value creation has not yet translated into distributions.
There is also a broader change happening globally. Commonfund recently argued that AI is making venture returns even more concentrated. Looking at venture exits since 2023, it found that the top 1% of companies accounted for the overwhelming majority of exit value, even after adjusting for unusually large individual outcomes.
If the global venture curve is becoming steeper, the importance of getting meaningful exposure to the eventual winners may increase rather than diminish.
And that creates another problem.
Finding the outlier is only half the equation
Power-law discussions usually focus on selection: did the manager invest in the company that eventually broke away from the rest of the portfolio?
But identifying an outlier and maintaining exposure to it are two different things.
An early-stage investment might begin with a relatively modest cheque. If the company succeeds, later rounds can become dramatically larger. Maintaining ownership may require substantially more capital, while increasing exposure to one company can conflict with the concentration limits, reserve strategy and portfolio construction assumptions of the original fund.
Success can therefore create its own constraint.
A manager may have the conviction. It may have the relationship with the company. It may even have access to additional allocation.
What it may not have is enough capacity inside the original fund to take the entire opportunity.
That is where structures such as co-investment vehicles and special opportunities SPVs can become relevant. Rather than changing the construction of the core fund, a manager can potentially create additional capacity around a specific investment and bring other investors alongside it.
A real-world example: Antler
Antler recently encountered this kind of situation with a late-stage AI infrastructure opportunity.
As an investor that participates from inception through later-stage opportunities, Antler can develop meaningful exposure to companies as they scale. In this case, the available opportunity became larger than what its underlying funds could practically accommodate on their own.
Antler established a $15 million special opportunities vehicle with Auptimate, creating additional capacity around the transaction and allowing institutional capital to participate alongside it.
The example does not prove that power laws work in Southeast Asia, nor is it intended to. It illustrates a different point: when an early-stage investment develops into a much larger opportunity, fund managers may need additional structures if they want to keep participating without altering the construction of their core fund.
Read the full success story: How Antler structured a $15M special opportunity →
So, do SEA VCs really have a power law problem?
The evidence does not give us a simple yes or no.
Southeast Asia has not yet produced the same depth of realised, extreme venture outcomes as longer-established markets. Liquidity remains a genuine constraint, and fewer large exits make it harder to demonstrate the traditional power law through realised fund returns.
At the same time, the region’s private markets are already displaying significant concentration. H1 2026 provided an unusually clear example: the strongest first-half funding total in years arrived alongside the lowest deal volume since at least 2018, with one company accounting for most of the capital raised.
Perhaps, then, the more useful question for fund managers is not simply whether they believe in the power law.
It is whether their portfolio strategy is prepared for asymmetric outcomes.
Can you build enough exposure to potential outliers? Can you maintain meaningful ownership as the strongest companies scale? And if an opportunity eventually becomes too large for the original fund, do you have another way to participate?
Because finding the outlier matters.
Being structured to stay with it may matter just as much