Category: Knowledge

The rapid boom in AI is fueling unprecedented growth in data centers, unlocking significant new investment opportunities across the world.  Yet this surge also brings escalating energy demand that the region’s energy infrastructure is not yet prepared to support.  This creates an opportunity for investors to back innovations that will enable data centers to serve the increased demand from the tech sector while scaling responsibly from both a fiscal and environmental perspective.  This article will touch on some of the trends driving growth in Southeast Asian data centers, as well as the challenges and technologies that present a massive investment opportunity for venture capital investors.

How is AI Affecting the Energy Sector in Southeast Asia?

In the past year, AI applications have entered the mass market and taken hold of public consciousness.  With this boom in AI usage comes increased strain on global energy demand from data centers.  Experts forecast that the worldwide energy demand from data centers is expected to double by 2030, hitting up to 945 TWh[1].  In Southeast Asia, energy demand growth from data centers is expected to quadruple as the region looks to leverage cheap energy and operating costs to attract investment into data centers.  Compared to developed markets, SEA has on average 20% lower construction and operations costs for data centers.  Thailand and Malaysia in particular are expected to emerge as key hubs within the region if they can blend competitive energy costs (relative to Singapore, the current SEA leader in data centers) with improved energy infrastructure and stability.

Thailand’s Board of Investment is rapidly accelerating investment into data center projects, with $21 billion of applications approved in 2025 alone, 90% of which are concentrated in the Thailand’s Eastern Economic Corridor (EEC) region.[2]  Major global tech players have also committed significant capital to the Thai market, including Google, Microsoft, TikTok, and AWS.

What Challenges Does Data Center Growth Present?

While the growing demand for data centers presents a huge economic opportunity for the region, it also presents a massive challenge for the region’s energy infrastructure and a need to accelerate deployment of renewable energy resources.  As data centers look to increase their load capacity to cope with the demands of AI, there is also increased strain on transmission infrastructure.  New facilities are being designed to handle over 4x the load of older data centers (growing from 24 MW to 106 MW).[3]  Data centers are often clustered in the same area, often close to urban centers; apart from generally increased power demand, data centers also create problems for the grid in these clusters due to spikes in demand.  The power draw from a hyperscale data center could swing from 50 to 100 MW in the span of a couple seconds; existing grid infrastructure simply isn’t able to handle that kind of swing, creating a need for data centers to find alternative energy sources or buffers to manage the spike.

Further, the recent conflict in the Middle East has served to highlight the difficulty data centers in Southeast Asia may face in ensuring constant energy supply.  The hostilities have resulted in the closure of the Strait of Hormuz, through which Thailand imports a significant amount of LNG (the main fuel powering Thailand’s electrical grid).  This interruption in supply has resulted in rising costs for both fuel and electricity, and in aggressive energy-saving measures from the Thai government.  Such geopolitical disruptions underscore the need for not only nations to secure their energy supply, but for private companies like data center operators to maintain independent sources of energy.

To better serve the growing demand (not just from AI applications, but also increasing demand from the financial services sector to drive digital payments and online transactions), data centers are adopting higher density server racks and chips, which comes with higher cooling requirements.  The bulk of data center operating costs comes from energy usage, which is primarily comprised of servers (40-60%) and cooling (30-40%).[4]

What Sectors Should Investors Be Considering?

While the challenges in the region’s grid infrastructure also present an opportunity for investment in grid technologies, the more immediate solution for data centers lies in alternative energy sources and energy efficiency technologies.  Renewables are expected to play a large role in increasing the energy supply for data centers, though they come with the typical challenges: intermittency, predictability, and space constraints.  While data centers cannot run on solar alone (peak AI loads draw more power than can be supplied by current solar panel technology), solar represents one of the cheapest sources of energy for a data center, and can be deployed significantly faster than any alternative clean energy technology.  Regardless, major tech companies are already racing to invest in solar capacity to power their data centers, including Microsoft (which added 860 MW of new capacity in 2024) and Amazon (which has 13.6 GW of solar capacity under development).[5]

Other sources of clean energy that may be beneficial to data centers include nuclear energy and solid-oxide fuel cells (SOFCs).  Both these energy technologies have the capacity to operate 24/7 and come with predictable maintenance and refueling cycles, ideal for use at data centers that require 100% up-time.  From an investment perspective however, the upfront costs are significantly higher than solar, and nuclear reactors in particular have extremely long deployment timelines.  SOFCs may be an emerging area of interest as they are more compact and easier to deploy than alternative solutions.  While SOFCs are not currently carbon neutral (most SOFCs are fueled by natural gas), researchers are evaluating the use of alternative fuels, such as biogas, which would further reduce the emissions from the operation of SOFCs.  Even without alternative fuels, SOFCs can still offer significant emissions reductions compared to reliance on the energy grid, which in many countries is primarily powered by coal.  Startups like Bloom Energy and ATE are already working with EGCO to bring SOFC technology to Thailand.[6]

In addition to securing new, clean sources of energy, data center operators can also generate significant cost and emissions savings through energy efficiency technology.  There are wide varieties of energy efficiency plays, from layout optimization during the design phase, which can minimize hotspots and improve cooling flow within the data center to reduce energy consumption from cooling, to advanced cooling technology like direct-to-chip cooling that may use less energy than traditional air cooling systems (studies show this could reduce total facility energy usage by up to 40%)[7], or even digital twins for modeling, forecasting, optimizing, and automating the data center’s workload to minimize costs and wasted energy.  Startups like Phaidra and NexDCCool leverage agentic AI to monitor conditions in the data center and autonomously adjust cooling infrastructure to cut energy consumption.

Conclusion

While Thailand has a huge opportunity to benefit from the increased demand and growth in the data center market, investment in clean energy and energy efficiency technology is vital for local operators to capitalize on the opportunity.  While grid modernization may occur as a result of cooperation between policy makers, technology innovators, and energy conglomerates, data center operators can focus on ensuring they can maintain operations independent of the pace of grid infrastructure improvement.  Energy represents the main on-going cost for data center operators, and by adopting technology that minimizes both energy usage and waste, operators can maintain cost-competitiveness.  For Beacon VC, this represents a compelling opportunity to back technologies that not only reduce operational risk and costs, but also ensures that we can help shape a future where the growth of AI and the digital economy does not come at the expense of greater carbon emissions and environmental problems that may wreak havoc on the Southeast Asian region.

Authors: Krongkamol (Joy) deLeon, Thapanawit (Ping) Janthra

Editor: Woraphot (Ping) Kingkawkantong

Sources:

AI is set to drive surging electricity demand from data centres while offering the potential to transform how the energy sector works – News – IEA

These four charts sum up the state of AI and energy | MIT Technology Review

S&P Global Energy Releases Key Clean Energy+ Trends for 2026 as AI Growth and Geopolitical Shifts Reshape Global Energy Markets – Dec 9, 2025

Southeast Asian data-centre power demand is set to explode | Wood Mackenzie

From AI to emissions: Aligning ASEAN’s digital growth with energy transition goals | Ember

The Rise of Data Centres, Artificial Intelligence, and ASEAN’s Decarbonisation Goal – ASEAN Climate Change and Energy Project (ACCEPT)

Solar-Powered Data Centers: Why the Forecast Is Only Partly Sunny

Renewable Energy for AI Data Centers: A Complete Guide

The Startups Driving The Shift Towards Green Data Centers – Net Zero Insights

Data Center Energy Consumption Statistics & Data (2026)

Best Practices in Energy-Efficient Data Center Design in 2025 | Keentel

https://www.datacenterknowledge.com/energy-power-supply/tech-giants-pour-billions-into-solar-power-as-data-centers-strain-the-grid

https://www.bloomenergy.com/blog/the-ai-revolution-how-fuel-cells-are-solving-the-data-center-power-challenge/

Phaidra cuts data center cooling energy by 25% — and eyes a bigger prize

https://www.bangkokpost.com/business/general/2785217/microsoft-to-build-first-data-centre-in-thailand

https://www.reuters.com/technology/google-invest-1-billion-thai-data-centre-cloud-infrastructure-2024-09-30/?utm_source=chatgpt.com

https://osos.boi.go.th/EN/news/2163/Thailand-BOI-Approves-Investments-Worth-A-Total-of-US5-Bill/

https://press.aboutamazon.com/sg/aws/2025/1/aws-launches-infrastructure-region-in-thailand?utm_source=chatgpt.com

[1] https://www.iea.org/reports/energy-and-ai/executive-summary

[2] https://en.thairath.co.th/money/tech_innovation/tech_companies/2908916

[3] https://www.woodmac.com/news/opinion/southeast-asian-data-centre-power-demand-is-set-to-explode/

[4] https://thenetworkinstallers.com/blog/data-center-energy-consumption-statistics/

[5] https://www.datacenterknowledge.com/energy-power-supply/tech-giants-pour-billions-into-solar-power-as-data-centers-strain-the-grid

[6] https://sustainability.egco.com/en/newsroom/news/28/egco-group-together-with-egat-and-ate-co-ltd-joint-agreement-with-bloom-energy-corporation-usa

[7] https://www.weforum.org/stories/2025/12/data-centres-and-energy-demand/

Startup success is often told through its loudest wins: product breakthroughs, rapid user growth, and exciting market adoption. However, the real driver of survival and scale lies in the foundation: the financial reporting, accounting, and operational systems that form a startup’s truth engine. Without them, growth is guesswork and fundraising becomes fragile. According to CB Insights research (via SVFG), 82% of startup failures were due to cash flow issues, including mismanagement and poor strategic planning ¹. Therefore, building a robust financial discipline is not administrative overhead; it’s a strategic asset that builds investor confidence, accelerates fundraising, enables scale, and makes your company “due diligence ready” for a lucrative exit. This article dives into what good financial discipline looks like, how it drives growth and valuation, why it’s so often neglected, and the practical steps startups can take to build financial maturity at each stage.

What Good Financial Discipline Is

Good financial discipline is more than tracking expenses or filing taxes. It is the strategic backbone of a startup’s long-term viability. For founders, it means making difficult, intentional decisions within budget constraints, while setting a culture of truth, accountability, and financial stability across the team. Ultimately, financial discipline must be founder-led; no one else can set the tone. Core elements of strong financial discipline include:

When founders commit to financial discipline, the impact extends far beyond clean books. It directly influences how investors evaluate the business, how quickly it can scale, and ultimately, how much the company is worth.

The Hidden Cost of Poor Financial Discipline

A lack of discipline – manifested through inconsistent reporting, weak controls, or poor governance – is often a fatal flaw. Without clear insight into which products, customers, or business lines truly create value, founders may rely on metrics that obscure the company’s real financial position. This loss of visibility increases liquidity risk, accelerates cash burn, and can ultimately lead to business failure.

During fundraising, these weaknesses become even more damaging. Founders who cannot demonstrate reliable financial reporting and credible controls lose investor trust, face prolonged diligence cycles, and face valuations that fall short of expectations as investors perceive higher risk due to unreliable or questionable financial data. Whether founders like it or not, financial discipline is inevitable – and building it early, when the business is still small, is far easier and more cost-effective than attempting to retrofit it under pressure.

Regulatory and legal exposure further amplifies the risk. Non-compliance with accounting standards such as GAAP or IFRS, or with applicable regulatory requirements, can disrupt operations and result in severe penalties, including fines or the suspension of business licenses, as recent market examples have shown.

Conversely, good financial discipline provides the structural backbone for startups, enabling them to scale with control and effectively prepare for eventual exits. This discipline ensures that growth is not accidental; instead, it is strategic, measurable, and repeatable.

• Clarity in Unit Economics and Profitability: Disciplined financial management forces the startup to understand its Cost of Goods Sold (COGS), Customer Acquisition Cost (CAC), and Lifetime Value (LTV) with precision. This clarity is non-negotiable for scaling profitability. It allows management to identify which revenue streams are truly value accretive. This focus prevents the startup from burning capital on unsustainable business lines.
• Operational Resilience and Capital Efficiency: By maintaining rigorous budgeting, forecasting, and cash flow management, the startup ensures capital runway. This is crucial for navigating market downturns or unexpected operational challenges without resorting to a distressed capital raise or halting critical R&D. Capital efficiency, getting the maximum growth per dollar invested, becomes an internal cultural metric, not just an external requirement from investors. This efficiency dramatically improves the valuation multiples assigned during subsequent funding rounds or acquisition talks.
• Exit-Readiness and De-Risking: For an eventual exit (IPO or M&A), buyers or underwriters perform extensive due diligence. A startup with clean, auditable books, predictable financial models, and strong internal controls (the result of financial discipline) significantly de-risks the transaction. This reduction in risk translates directly into a credible and defensible valuation that satisfies both buyers and sellers, ensuring a more efficient and reliable closing process.

In summary, financial discipline is not simply a compliance requirement; it is a strategic differentiator. It reduces investment risk, strengthens investor confidence, and directly supports reasonable valuations. Ultimately, the structural foundation created by strong financial discipline transforms an ambitious idea into a predictable, scalable, and investable business. It moves the company’s story from “potential” to “proven, repeatable economic engine,” which is the ultimate determinant of valuation

Why Startups Typically Fail to Prioritize Financial Discipline

Founders are inherently wired to focus on product innovation and rapid sales growth. Consequently, financial discipline is often sidelined, leading to critical and sometimes fatal pitfalls that undermine long-term viability. These recurring missteps can be grouped into the following patterns that reveal why even promising startups often stumble.

1. The “We’ll Fix It Later” Mentality

Many founders treat finance as something to tidy up “when we’re bigger,” assuming growth will buy them time. In reality, this mindset turns minor bookkeeping gaps into structural weaknesses. What begins as a few uncategorized transactions or missing reconciliations compounds into months or years of financial blind spots that only surface during high-stakes moments like fundraising or due diligence. At that point, the cleanup becomes costly, distracting, and often impossible to complete under investor timelines.

When a company lacks visibility into runway, burn efficiency, or liabilities, it cannot make informed decisions about hiring, pricing, or capital allocation. The result is a business scaling in the dark until it runs out of cash.

2.Focus on Topline Metrics Over Economic Value

Another reason startups neglect financial discipline is the pursuit of top-line metrics such as revenue, user count, and app downloads because they are easy to measure and look impressive. However, these numbers say little about the business’s viability. Even when founders look deeper, over-reliance on the wrong metrics can be equally dangerous. For example, gross margin may be a meaningful efficiency indicator for asset-light models like SaaS, but it is insufficient for asset-heavy businesses, where depreciation, interest costs (the cost of debt used to finance those large assets), inventory, receivables, and cash flow management are far more critical.

This is why companies can raise massive capital and still fail. One US-based vertical farm raised more than $600M and even went public via SPAC, but collapsed because high operating costs kept unit margins deeply unprofitable. Similarly, an Asian B2B agricultural platform expanded into costly logistics and financing operations, and when its lending arm suffered high default rates, the weak economics became impossible to sustain, ultimately resulting in regulators revoking its business license. In both cases, impressive top-line metrics masked fundamentally broken unit economics, proving that growth without financial discipline is simply growth toward failure.

3.Lack of Strategic Finance Leadership

As highlighted earlier, financial discipline must start with the founder. A common mistake is delaying the hire of a finance leader or CFO to take charge of financial strategy. Without this role, finance remains backward-looking, focused on bookkeeping instead of enabling growth. A CFO provides a forward-looking viewpoint through planning, forecasting, and budgeting.

The absence of strategic finance leadership can be costly. Rapid growth without financial governance often creates disconnect between the company’s story and its economics, leading to misaligned priorities and operational inefficiencies. For example, a US co-working company expanded rapidly by taking on long-term lease obligations while generating short-term, flexible membership revenue, creating a fundamental mismatch in unit economics. Weak financial reporting and insufficient oversight obscured these risks as the business scaled. When losses became impossible to ignore, the model proved unsustainable, leading to dramatic downsizing and financial collapse. This case illustrates that even high-profile companies with strong market demand can fail when growth is not supported by strategic financial leadership and disciplined oversight.

These common pitfalls reveal a clear truth that financial discipline is essential and must be deliberately built. Fortunately, startups can take stage-appropriate steps to create a foundation for sustainable growth, investor confidence, and long-term viability.

What Startups Can Do to Build Financial Discipline at Each Stage

Building financial maturity is not a one-time fix; it is a strategic and phased journey that must evolve as the company grows. The following roadmap outlines the essential financial disciplines startups should implement at each stage to ensure readiness for investment and successful scaling.

Every startup must establish the fundamental GAAP reports: the Profit & Loss statement, Balance Sheet, and Cash Flow statement. These reports provide essential visibility into historical performance, financial position, and cash movements. This is why operational and unit-economics metrics – such as user engagement, churn, and Customer Acquisition Cost (CAC) – serve as an early-warning system. These provide real-time insight into customer behavior, growth efficiency, and future sustainability.

Consider a common startup trap: revenue is climbing 20% monthly, and net income looks healthy thanks to new annual contracts. On paper, it looks like a win. In reality, the engine is overheating. If the marketing spending doubled to hit those targets, the CAC has likely outpaced the Lifetime Value (LTV). The P&L creates a dangerous illusion of growth by showing ‘Higher Revenue’ and ‘Higher Spend’ as disconnected figures, hiding the fact that the company is spending more to acquire a customer than that customer will ever be worth.

For the prevalent SaaS business model, it is therefore essential to track forward-looking metrics that reveal granular efficiency, retention, and the overall health of the subscription engine, providing the necessary insight for strategic scaling. The metrics include:

Final Thoughts: Build the Foundation Before You Need It

Many founders only realize the importance of their financial situation when it’s too late – during a due diligence process, a funding crunch, or a missed acquisition opportunity. But building this foundation early isn’t just risk management; it’s growth insurance.

Treat your financial, legal, and governance systems as strategic assets, not admin tasks, and you’ll be ready when opportunity comes. Your numbers will speak for you, investors will trust you, and your team can move fast with clarity.

Now is the time to audit your company’s finance:

• Are your books investor-ready?
• Do you have visibility into your key metrics and cash flow?
• Can you produce accurate, defensible financials at any time?

If not, start small but start now. Build the muscle of discipline and transparency because when your financial foundation is strong, everything else can grow faster, stronger, and further.

Author: Supamas (Jae) Bunmee

Editors: Panuchanad (Pook) Phunkitjakran, Woraphot (Ping) Kingkawkantong

Source:

Why Choose a Fractional CFO for Your Startup? | SVFG

https://www.openvc.app/blog/startup-financial-model

SaaS Metrics Cheat Sheet.pdf

SaaS Metrics Cheat Sheet – The Ultimate Download File – The SaaS CFO

The artificial intelligence (AI) revolution is sweeping across Southeast Asia (SEA), and Thailand is keeping pace with this transformation. While major corporations are keen to integrate AI to streamline operations, a new generation of Thai startups is driving innovation by embedding AI into existing services to serve both businesses and end users.

This article will guide you through:

1. Thai User Behavior: How both end users and business users are adopting AI.
2. The Role of Thai Startups: How they are facilitating AI adoption.
3. Benefits to the Thai Economy: The broader economic advantages of AI.

Broader SEA Context: Thailand’s 🐘 Role in Advancing AI Revolution

Thailand’s AI market is projected to grow at an annual rate of 28.55%, with an estimated market value of 114 billion baht by 2030. This growth is fueled by a widespread adoption of AI across various sectors, from finance and healthcare to manufacturing and e-commerce. Government initiatives like the National AI Strategy and the Digital Thailand Plan are laying the groundwork for a robust AI ecosystem by investing in talent development and infrastructure. The government is also working on a balanced regulatory framework, with draft laws that both encourage innovation and establish ethical guidelines for AI use.

This approach positions Thailand as a strategic hub, not just for local growth but also for regional collaboration. The focus on developing a localized AI infrastructure, including small language models (SLMs) tailored to the Thai language and culture, gives Thai startups a competitive edge in serving the local market and potentially expanding to other SEA countries.

Thai User Behavior: How both end users and business users are adopting AI

👤End Users

Telenor Asia conducted a survey evaluating Thai’s perception on AI, and 3 out of 4 respondents are already using AI tools. Eighty percent of respondents believe AI has a positive impact especially in education and soc

ial media. Fifty percent of internet users trust information generated by AI.

Thai internet users, according to Telenor Asia, spend on aver

age, 5 hours online daily on mobile, which is 1.5 hours more than average spending by Southeast Asian

The high rates of AI tool usage, combined with a positive perception and strong digital engagement among the public, indicate strong growth and adoption of AI technologies. However, the lack of widespread trust in AI-generated content is still challenging to overcome. For Thailand to truly solidify its position as an AI hub, it must not only foster innovation but also actively work to build public confidence in the reliability and ethical use of AI. This suggests that while the “demand side” is strong, building the “trust and data privacy” infrastructure is a crucial next step.

💼Businesses

Based on a survey by IT market research firm IDC, titled ‘IDC Asia/Pacific Enterprise Cognitive/AI,’ Thailand ranks second to Indonesia in terms of AI adoption. Indonesia leads the ASEAN region with 24.6% of organizations adopting the technology, while Thailand accounts for 17.1%. Singapore is third with 9.9%, followed by Malaysia at 8.1%. AI adoption in Indonesia is primarily driven by major technology companies like Go-Jek, a ride-hailing and online payment giant, and Kaskus, the country’s largest forum and marketplace.

Similarly, a report by BCG on “Unlocking Southeast Asia’s AI Potential” shows that companies from Singapore, Indonesia, and Thailand rated themselves highly for their AI strategy-setting. Thailand and Singapore are emerging as regional frontrunners in AI adoption, driven by clear strategies and increasing investments in technology and talent. Although not in the top position in all aspects, Thailand is considered one of the top three in terms of AI adoption in a business context.

PWC Thailand predicts a rise in generative AI (GenAI) integration in business strategies. Vilaiporn Taweelappontong, Asia Pacific Financial Services Consulting Leader and Consulting Lead Partner at PwC Thailand, said

“In 2025, GenAI will advance and be utilized more seriously and widely to achieve business strategies. Last year, the sentiment towards GenAI in the Thai market was positive. We’ve seen many organizations integrate this technology across several areas, such as content creation, personalized marketing, customer support, games and entertainment development, and education,”

While large corporations are embracing AI, the widespread adoption of artificial intelligence (AI) among Thailand’s Small and Medium Enterprises (SMEs) is crucial for boosting operational efficiency and driving the national economy. With more than 3.2 million SMEs, these businesses constitute 90% of the country’s enterprises and employ half of the workforce. Today, the SMEs awareness of AI adoption is improving, despite ongoing concerns on cost of adoption and workforce readiness.

Given the strong drive for AI adoption among enterprises and the immense potential benefits for SMEs, Thai startups can play a crucial role in bridging this gap. By offering ready-to-use, “quick-win” solutions to enterprises and providing easily embedded services for SMEs, these startups enable businesses of all sizes to seamlessly integrate artificial intelligence into their operations and business strategies.

Thai end users are primarily using generative AI for personal use and productivity. While business-related use cases may take more time to fully adopt, due to a need for increased AI literacy, research suggests that both Thai people and businesses are very open to further AI adoption and keen to realize its potential benefits.

The Role of Thai Startups🛺: How they are facilitating AI adoption

Thai startups are at the forefront of AI adoption, actively integrating this technology to gain a competitive edge. According to the National Innovation Agency (NIA), Thailand has 800 active startups out of a total of 2,100, with a high concentration in Fintech and Business Solutions.

Beyond using AI for efficiency and cost savings, these startups are leveraging it to better serve customers and improve user experience, which helps them gain a stronger competitive advantage and brand perception. The approach to AI adoption varies significantly depending on the client:

• 👤For End Users (Individuals): AI adoption focuses on simplifying complex tasks and personalizing experiences. The AI is often actively operating in the background, or presented as a user-friendly feature. A prime example is Jitta’s platform, which makes sophisticated investment analysis accessible to everyday people. Similarly, food delivery platforms like LINE MAN use AI recommendation engines to analyze a user’s past orders and preferences, offering personalized suggestions for dishes and restaurants to enhance their experience and increase sales
• 👨‍💼For Small and Medium Enterprises (SMEs): AI is adopted to boost operational efficiency and automate workflows with limited staff. A prime example is FlowAccount’s AutoKey feature, which uses OCR technology to automate data entry from bills and receipts, saving significant time for SMEs. Another example is ZWIZ.AI, a Thai startup that offers an AI chatbot platform to help SMEs automate customer service, manage sales, and analyze customer data across social media channels, enabling them to handle customer interactions and sales around the clock.
• 🏢For Large Corporations: AI is integrated to enable strategic decision-making and optimize complex operations at a large scale. Primo’s “Bai Toey”, for instance, is an AI agent built on a Loyalty CRM system that excels at providing strategic analysis and recommendations by simplifying complex data for marketing teams. Another example for AI for marketing, ConnectX is a Customer Data Platform (CDP) that focuses on integrating and unifying customer data from multiple sources to enable real-time personalized marketing and automation.

The benefits of AI are extensive, primarily revolving around enhanced efficiency, data-driven decision-making, and fostering innovation. By automating repetitive tasks, AI frees up human resources to focus on creative and strategic work. Its ability to analyze vast datasets provides insight into business strategies and personalization. Furthermore, AI could act as a catalyst for a company’s reputation, positioning it as an innovative and differentiated leader in its field.

Arguments Against AI Adoption 💢📣

AI adoption, while promising, also presents specific challenges depending on the client. Here’s a breakdown of the key arguments against AI adoption for different client segments:

For End Users (Individuals) 👤

1. Trust and Credibility: The primary challenge is a lack of trust. According to a Telenor Asia survey, only half of Thai internet users trust AI-generated information. This is often linked to AI “hallucinations,” where the system produces plausible but completely false data. This inherent unpredictability makes users hesitant to rely on AI for critical decisions like financial or health planning, given the “black box” nature of the technology.
2. Privacy Concerns: As AI tools become more personalized, they require access to personal data. Users may be concerned about how their data is collected, stored, and used, especially if the service is a free or low-cost application.
3. Digital Literacy: While many Thai people are digitally engaged, a lack of deep digital literacy could lead to misuse of AI tools or an over-reliance on AI-generated information without proper verification.

For Small and Medium Enterprises (SMEs) 👨‍💼

1. Cost and Complexity: For SMEs with limited budgets, the initial investment in AI-embedded solutions can be a significant barrier.
2. Talent Gap: SMEs often lack the in-house talent to manage, troubleshoot, or customize AI systems. They may be entirely dependent on the software provider for support, which can be costly and slow.
3. Over-reliance and Loss of Expertise: The automation provided by AI could lead to a dependency on the technology, potentially eroding the in-house expertise of the SME’s workforce.

For Large Corporations 🏢

1. Integration Challenges: Large corporations typically have complex legacy systems. Integrating new AI technologies into these existing systems can be a massive technical challenge, leading to high costs, delays, and operational disruptions.
2. Data Security and Governance: With the immense scale of data that corporations handle, using AI raises significant concerns about data security, privacy, and compliance. A breach in an AI system could expose millions of customer records, leading to severe financial and reputational damage.
3. Ethical and Bias Issues: AI models can perpetuate and amplify existing biases, leading to discriminatory outcomes and significant brand risk. This is further complicated by “hallucinations” in GenAI, where a system can produce entirely fabricated information. The combination of these issues—bias and hallucinations—poses a dual risk, as decisions could be based on flawed or nonexistent data, severely impacting a company’s reputation and bottom line.
4. “Black Box” Problem: For corporate leaders, making decisions based on AI outputs can be difficult if they don’t understand the underlying logic. This lack of transparency can lead to a trust issue within the organization, making it harder to get buy-in for AI-driven strategies.

Takeaways ✏️ for Startups Serving AI Solutions to Different Client Segments

From a business perspective, the debate about adopting AI for a startup in Thailand revolves around distinct advantages in terms of market strategy, resource allocation, and scalability. The “better” choice depends on a business’s specific goals, resources, and target market.

To effectively meet the diverse needs of different clients, startups must tailor their approaches for individual, SME, and corporate customers.

Benefits to the Thai Economy📈💸: The broader economic advantages of AI

A report by Access Partnership indicates that the adoption of AI could unlock at least 2.6 trillion Thai baht in economic benefits for Thailand’s businesses by 2030, which represents 15% of the total AI opportunity for Southeast Asia.

The widespread adoption of AI by Thai startups is not just a technological trend; it is a powerful engine for national economic growth and a key factor in positioning Thailand as a leader in Southeast Asia.

• Empowering SMEs as the Economic Backbone: With over 3.2 million SMEs accounting for 90% of all businesses and employing 50% of the workforce, their productivity is directly tied to the health of the Thai economy. AI-embedded solutions, like FlowAccount’s AutoKey, provide these businesses with accessible tools to automate manual tasks, boost operational efficiency, and free up resources to focus on growth.
• Boosting National Productivity: By automating repetitive processes across various industries—from accounting and customer service to manufacturing and logistics—AI can significantly increase national productivity. This allows businesses to do more with less, leading to higher output and improved competitiveness in both domestic and international markets. For example, LINE MAN Wongnai leverages AI to optimize its vast delivery network, using machine learning to plan the most efficient routes for its fleet of riders and ensure timely deliveries.
• Fostering Innovation and New Industries: AI-native startups are creating entirely new business models and industries. Jitta, for example, is not just a tech company; it is building a new financial services sector that democratizes sophisticated investment strategies. This kind of innovation attracts foreign investment, creates high-value jobs, and diversifies the national economy beyond traditional sectors.
• Attracting Talent and Becoming an AI Hub: The high rates of AI adoption and positive public perception of the technology, coupled with significant digital engagement, create a fertile ground for AI innovation. As Thai startups succeed, they build a reputation for the country as a dynamic tech hub. This, in turn, attracts global talent and capital, further accelerating the growth of the AI ecosystem and solidifying Thailand’s position as a regional leader in the digital economy.

The benefits of AI adoption to Thai economy are significant. The AI could boost economic value, industry-specific benefits, and broader societal and environmental impact. To successfully navigate Thailand’s growing AI landscape, startups must recognize that a one-size-fits-all approach is no longer effective. The key lies in a nuanced understanding of their target clients and a tailored strategy to meet their distinct needs and concerns. Ultimately, solutions must solve pain points and create tangible value for customers. Successful startups must continuously adapt to serve the evolving and growing needs of their clientele.

Sources:

https://www.peoplemattersglobal.com/article/technology/the-journey-of-ai-adoption-in-asean-countries-19636

https://www.telenorasia.com/digital-lives-decoded/thailand-pressrelease/

https://www.pwc.com/th/en/press-room/press-release/2025/press-release-31-01-25-en.html

https://web-assets.bcg.com/2d/5a/2b923a054e2b9423e61e77f442f7/unlocking-southeast-asias-ai-potential-vf-20250407.pdf

https://accesspartnership.com/opinion/ai-for-all-in-thailand-building-an-ai-ready-economy-with-google/#:~:text=Last%20year%2C%20we%20shared%20that,AI%20opportunity%20for%20Southeast%20Asia.

Electric vehicles (EVs) are gaining momentum globally, but in Southeast Asia, adoption remains in its early stages—fragmented, uneven, and facing a distinct set of hurdles. Yet the region also presents a compelling opportunity: rising urbanization, growing interest from governments and investors, and early signs of market readiness are laying the groundwork for change. This article explores Southeast Asia’s EV landscape through a supply chain lens, examines key barriers to mass adoption, and identifies practical pathways to accelerate progress—drawing on global lessons while applying a local lens to make solutions work in this unique context.

Why EV Adoption Matters

The shift to EVs is about more than just modernizing transportation. It is a critical step toward climate and public health goals.

Climate Imperative

Transportation accounts for 20–25% of global CO₂ emissions. Decarbonizing road transport is essential for countries aiming to meet their national climate targets and commitments under the Paris Agreement. EVs, alongside cleaner energy generation, form a key part of this transition.

Public Health

Internal combustion engines emit harmful pollutants like nitrogen oxides (NOx), sulfur dioxide (SO₂), and fine particulate matter (PM2.5), which contribute to respiratory diseases and premature deaths. EVs significantly reduce both air and noise pollution, improving quality of life, especially in congested cities.

Southeast Asia’s EV Landscape

Low Adoption, High Potential

Even with strong growth in recent years, EV adoption in Southeast Asia remains modest, with electric vehicles making up just around 10% of new passenger vehicle sales in 2024. This contrasts sharply with more advanced markets, with EVs making up 43% of sales in China, 22.7% in Europe, and 88.9% in Norway. So far, growth has been limited due to high Total Cost of Ownership (TCO), infrastructure gaps, and limited consumer trust.

Regional Leaders Emerging

Amid the region’s slow overall adoption, there are signs of progress and leadership. Thailand is becoming a production hub, attracting global players like BYD and Great Wall Motor. Vietnam’s VinFast is expanding globally as a homegrown EV brand. Indonesia is building a battery supply chain, tapping into its nickel reserves. These moves show early momentum and growing regional ambition in the EV space.

Venture Capital as a Growth Engine

Alongside government efforts and industrial investments, venture capital and corporate venture capital (CVC) are backing startups in areas such as battery technology, EV fleet platforms, charging infrastructure, and financing solutions, helping to fill gaps that are not yet addressed by large corporations or governments. According to CB Insights’ State of Climate Tech 2024 Report, equity funding for electric vehicle technology peaked at $23.7 billion in 2021 and remained strong in 2022. While funding dropped to $4.8 billion across 243 deals in 2024, driven by macroeconomic headwinds, high interest rates, and investor caution, this trend is widely seen as cyclical rather than structural. The long-term outlook of the industry remains positive as EV adoption continues to rise steadily, supported by falling battery costs, improving charging infrastructure, and stronger regulatory mandates for zero-emission vehicles. As the EV sector matures and demand for scalable, localized solutions grows, venture funding is expected to rebound, especially in underpenetrated regions like Southeast Asia.

Key Challenges to Mass EV Adoption in Southeast Asia

Despite recent progress, Southeast Asia’s EV ecosystem remains underdeveloped across nearly every segment of the supply chain. These weaknesses pose both practical and psychological barriers to widespread adoption.

To understand the roadblocks to mass EV adoption, it’s important to examine the EV value chain from raw materials to recycling. This supply chain lens offers a structured view of the ecosystem’s maturity and highlights where bottlenecks exist.

In this analysis, we assess the maturity level of each supply chain stage in Southeast Asia by comparing:

• • The current state of EV-related capabilities in SEA to that of more advanced economies (such as China, the EU, and the U.S.), where the EV ecosystem is already scaled and integrated.
  • The ideal maturity needed to support mass adoption, drawing parallels to the level of infrastructure and ecosystem development that currently supports internal combustion engine (ICE) vehicles in Southeast Asia (e.g., widespread service networks, financing availability, and resale markets).

In essence, a stage is considered “low” or “very low” in maturity if it significantly trails either benchmark, highlighting its inability to meet the demands of a mainstream EV transition today.

A Supply Chain Perspective

In this analysis, we focus on the mid to later-stage of the supply chain, where Southeast Asia still exhibits a very low to low level of maturity. These are the most pressing challenges because they directly impact the availability, affordability, and trust in EVs. Other segments further down the chain, like vehicle assembly or branding, have existing workarounds or substitutes that can suffice temporarily. However, until the foundation is in place, scale and sustainability will remain out of reach.

1. 1. Infrastructure Gaps

• • Charging Infrastructure: One of the most visible barriers to EV adoption is the lack of widespread, reliable charging infrastructure. Public chargers per EV remain low across the region, and few fast-charging corridors exist to support intercity travel. Land acquisition for charging points, especially in urban areas, is both expensive and logistically complex.
  • Grid Readiness: Electricity grids in most countries are not yet ready for the additional load that mass EV charging would bring. Distribution networks require major upgrades, and smart tariffs that encourage off-peak charging are still missing or underutilized.

1. 2. Distribution and Financing Barriers

• • Consumer Awareness: Consumer misconceptions continue to slow EV adoption. Many consumers still worry about range limitations, safety concerns, and long charging times. These concerns are compounded by a lack of familiarity with new EV brands like BYD or VinFast, which don’t yet enjoy the same recognition as legacy automakers.
  • Financing Constraints: Financing is another critical hurdle. Auto loans, especially for EVs, are less accessible in many emerging Southeast Asian markets [because?]. Even where subsidies or tax incentives exist, they are often inconsistent or insufficient to meaningfully close the affordability gap. Low expected resale values further deter buyers and financiers alike.

1. 3. After-Sales Ecosystem

Beyond the purchase, EV owners face a thin after-sales service network. Certified EV repair centers and trained technicians remain rare, especially outside major cities. Battery maintenance, replacement cost, and long wait times for service all contribute to buyer hesitation and reduce confidence in long-term ownership.

1. 4. Recycling and Second-Life Use

Battery disposal is the next looming challenge. Most Southeast Asian countries still lack clear policy frameworks and infrastructure for EV battery recycling. As a result, batteries are often exported or discarded improperly, raising environmental risks and limiting the value that could be extracted from second-life applications such as energy storage.

The Bottom Line

The lack of maturity in critical supply chain stages does not just delay EV adoption. It creates a chain reaction of systemic obstacles that undermine the entire ecosystem.

• • Limited charging infrastructure leads to range anxiety, which discourages buyers and weakens demand. Without consumer confidence, EV deployment remains slow, further reducing the incentive for private and public investment in charging networks.
  • Low resale values discourage financing institutions, which in turn makes it harder for consumers to afford EVs. Without financing, upfront costs remain a major barrier for low- to middle-income consumers, the segment most likely to drive mass adoption.
  • An underdeveloped after-sales ecosystem erodes trust. Consumers fear the long-term costs and inconveniences of maintenance, especially for something as complex and battery-dependent as an EV. This mistrust reduces word-of-mouth promotion and hampers brand loyalty.

Together, these issues form a self-reinforcing cycle. Without strategic interventions to address them, particularly at the foundational supply chain stages, Southeast Asia risks falling behind in the global EV transition.

Solutions to Accelerate EV Adoption: Policy and Private Sector in Tandem

Mass adoption of electric vehicles (EVs) in Southeast Asia requires coordinated effort between governments and the private sector. While public policy can lay the groundwork by reducing systemic barriers, de-risking investments, and setting standards, private sector players are often the ones driving innovation, scaling solutions, and meeting consumer needs on the ground.

In this section, we present a two-fold approach, policy solutions and private sector initiatives, drawing on global best practices to tackle the key challenges identified earlier. We highlight real-world examples from companies that are already implementing these solutions, offering inspiration for practical models. At the same time, we consider Southeast Asia’s unique barriers and explore how these strategies can be adapted to address them effectively.

Figure1: The policy and private sector solutions to challenges in each supply chain stage

Driving EV adoption in Southeast Asia requires close coordination between governments and the private sector, each with distinct but complementary roles. Governments set the national direction through regulation, incentives, and infrastructure planning, while also helping to reduce investment risks. The private sector brings innovation—developing vehicles, charging solutions, and business models—and works with policymakers to ensure infrastructure is efficiently deployed and user-friendly. When aligned, this partnership creates the foundation for a scalable, integrated EV ecosystem.

One standout example is the partnership between Gogoro and the Taiwanese government. Recognizing the challenges of developing charging infrastructure, the government provided subsidies for both electric scooter purchases and battery-swapping stations, while integrating Gogoro’s network expansion into urban planning strategies. In response, Gogoro built a dense network of battery-swapping stations and pioneered a subscription-based battery model, making EV ownership more convenient and affordable. This public-private coordination allowed Taiwan to rapidly scale EV adoption, especially in cities, demonstrating how aligned incentives and integrated planning between sectors can overcome infrastructure bottlenecks and foster sustainable mobility.

Another interesting area where collaboration between governments and the private sector is driving EV adoption is in smart grid solutions. One notable example is the FLOW project in Europe, a consortium of 30 organizations, including Enel X Way, supported by the European Union under the Horizon Europe program. This initiative aims to enhance electric mobility by integrating smart charging and vehicle-to-grid (V2G) technologies, thereby improving grid flexibility and stability.

These two examples are just the beginning. As outlined throughout the EV supply chain, there are vast opportunities for collaboration between the public and private sectors, from infrastructure to after-sales services and recycling. For Southeast Asia, adopting and adapting these models can help foster meaningful partnerships, align national strategies with market innovations, and ultimately accelerate EV adoption across the region in a way that fits its unique needs and development stage.

Adapting Global Models to Southeast Asia

While solutions exist, Southeast Asia faces some unique challenges:

• • Economic Disparity is a core consideration. Many consumers in Southeast Asia prioritize affordability, making two- and three-wheeled vehicles a more viable entry point than high-cost passenger EVs. Battery swapping models are especially promising for urban commuters and delivery services. Additionally, concessional funding from institutions such as the Green Climate Fund or Asian Development Bank can help close the financing gap, while countries can simultaneously invest in promoting local EV manufacturing to drive down costs and build industrial capacity
  • Policy Fragmentation remains a barrier. Different agencies within a single country often operate separately, and cross-border cooperation is limited. Establishing national EV councils could help align energy, transport, and industry strategies under a unified roadmap. On a regional level, platforms like ASEAN could be leveraged to harmonize standards, encourage regional value chains, and foster joint infrastructure initiatives. Public-private partnerships (PPPs), when structured effectively, can accelerate infrastructure rollouts by combining state support with private-sector innovation.
  • Diverse national and local contexts further complicate standardization. Countries differ widely in geography, urbanization, and transport habits. Instead of one-size-fits-all solutions, policymakers and companies should prioritize hyperlocal innovation such as tuk-tuk electrification projects or mobile charging units for rural areas. Digital platforms can play a role in expanding access to EV services, especially where physical infrastructure is limited. Finally, city-level collaborations with startups and utilities can provide sandbox environments for testing scalable models, ensuring bottom-up innovation complements top-down planning.

By adapting global models to fit local realities, Southeast Asia can chart its own path to a sustainable, inclusive EV future.

The Role of Financial Institutions in Scaling EVs

Financial institutions play a critical role in accelerating EV adoption by bridging funding gaps and reducing investment risks across the ecosystem. One of the major hurdles in EV financing is the perceived low resale value of EVs, which weakens the value proposition for lenders and deters traditional financing.

Development banks such as the Asian Development Bank (ADB), Green Climate Fund (GCF), and International Finance Corporation (IFC) stepping in to address this by offering concessional loans, guarantees, and anchoring blended finance programs that help shift the risk profile for commercial financiers. These instruments enhance the risk-adjusted return for private lenders, unlocking capital that would otherwise remain sidelined. The table below outlines some key examples of lending programs offered by these institutions that directly support EV ecosystem development:

Venture capital and CVC firms play a pivotal role by backing early-stage companies developing EV-enabling technologies that traditional lenders may consider too risky. In Southeast Asia, startups like Muvmi (Thailand-based electric tuk-tuk ride-hailing platform) and Sleek EV (Thailand-based electric motorcycle subscription and fleet service) have attracted venture funding to scale innovative business models tailored to urban mobility needs and local consumer behavior. These early investments not only support product development and deployment but also lay the groundwork for broader commercial or public financing. By funding local innovation, VCs help accelerate the development of scalable, context-specific solutions that can drive long-term EV adoption across the region.

Commercial banks are also stepping in, partnering with automakers to provide green auto loans, fleet financing, and flexible EV leasing schemes that lower upfront costs for consumers and businesses alike. On the innovation front, venture capital firms and corporate venture capital arms are fueling the growth of enabling technologies by backing startups in areas such as charging infrastructure, battery innovation, and fleet management software.

Insurance providers are adapting to the evolving mobility landscape by developing EV-specific products that offered added reassurance for both drivers and fleet operators. One example is usage-based insurance (UBI), where premiums are determined by actual vehicle usage and driving behavior. In Singapore, NTUC Income has partnered with Carro to offer UBI policies for EVs, using telematics to track mileage and encourage safer driving, providing more affordable and flexible coverage.

Battery performance is also a major concern for many EV buyers. To address this, automakers like Hyundai and Kia offer long-term battery warranties, up to 10 years or 100,000 miles, guaranteeing performance and protecting against capacity drops below a certain threshold. These innovations help mitigate perceived risks and make EV ownership more financially predictable.

Conclusion: The Road Ahead

Southeast Asia’s journey toward electric mobility will not follow the same script as Europe or China. The region’s transition must reflect its own economic diversity, infrastructure gaps, and social fabric. Rather than copying models wholesale, Southeast Asia must chart a tailored path that meets the needs of its people and cities.

To move the needle on EV adoption in Southeast Asia, all key stakeholders must act in concert, each playing a distinct yet interdependent role across the EV value chain. This collaborative effort is essential to effectively address the three underlying systemic obstacles: the limited charging infrastructure, the challenge of low resale values, and the underdeveloped after-sales ecosystem.

• • Governments are the foundational enablers, driving EV adoption by providing targeted incentives and establishing clear, consistent regulations. They can alleviate range anxiety by subsidizing charging infrastructure and modernizing the grid, while promoting consumer confidence through stable purchase incentives and support for battery health certification programs. By funding vocational training and setting service standards, governments also lay the groundwork for a trusted after-sales ecosystem.
  • Startups and private sector players are central to innovation and execution, bringing market agility to solve region-specific challenges. They can rapidly deploy localized charging networks and introduce innovative solutions like battery swapping to ease infrastructure concerns. To address low resale values, these companies can offer flexible financing models such as battery leasing or guaranteed buy-back programs. Furthermore, they are vital in developing accessible and specialized after-sales services and digital platforms that build consumer trust and loyalty.
  • Financial institutions, including development banks, commercial lenders, and insurers, play a pivotal role in bridging funding gaps and managing risk, making the ecosystem financially viable. They facilitate the capital-intensive deployment of charging infrastructure through targeted loans and risk guarantees. To mitigate concerns over low resale values, they can offer tailored EV loan products with favorable terms and develop insurance solutions that cover battery value.

With deliberate coordination across sectors, Southeast Asia has the potential not just to catch up, but to define its own electric future, one that is inclusive, sustainable, and uniquely suited to the region.

Author: Benjamas (Air) Tusakul

Editors: Krongkamol (Joy) deLeon, Woraphot (Ping) Kingkawkantong

Reference

https://www.climatescorecard.org/2025/03/chinas-annual-domestic-ev-retail-sales-reached-11-million-units/#:~:text=and%20Action%20Alert-,Domestic%20Market%20Penetration%20Rate%20for%20New%20EV,50%25%20for%20Seven%20Consecutive%20Months&text=2024%20was%20a%20banner%20year,vehicles%20(EVs)%20in%20China

https://www.statista.com/statistics/1129656/global-share-of-co2-emissions-from-fossil-fuel-and-cement/

https://www.iea.org/energy-system/transport

https://www.reuters.com/business/autos-transportation/norway-nearly-all-new-cars-sold-2024-were-fully-electric-2025-01-02/

https://www.eea.europa.eu/en/analysis/indicators/new-registrations-of-electric-vehicles

https://www.eia.gov/todayinenergy/detail.php?id=63904

https://www.nationthailand.com/business/automobile/40049132

https://vinfastauto.us/

https://www.reuters.com/business/autos-transportation/norway-nearly-all-new-cars-sold-2024-were-fully-electric-2025-01-02/

https://www.gogoro.com/news/taiwan-2040-2w-subsidy/

https://www.gogoro.com/news/gogoro-tsmc-sustainable-transportation-initiatives/

https://corporate.enelx.com/en/media/press-releases/2022/07/a-strong-european-team-empowers-users-for-widespread-electric-mobility-uptake

https://www.topspeed.com/ev-battery-warranties-manufacturer-coverage/

https://www.income.com.sg/about-us/corporate-information/press-releases/income-expands-coverage-of-electric-vehicles-with-

Introduction

Southeast Asia has seen dynamic economic growth and increasing energy demand, however this growth has traditionally been driven by fossil fuels, which has led to both significant environmental challenges and concerns about long-term energy security.  As governments within the region grapple with the impacts of climate change on the local economy and populace, energy efficiency solutions have emerged as a key way for corporations to maintain economic growth while lowering the negative impact on the planet.  Burgeoning advancements in the Internet of Things (IoT) and Artificial Intelligence (AI) have made it possible for building owners to leverage real-time data to optimize energy consumption across a wide spectrum of electrical systems.  This article explores the factors driving demand for energy efficiency in the region, the current investment landscape, and the key success factors for emerging contenders in the industry.

Why is Demand for Energy Efficiency Rising in Southeast Asia?

In Southeast Asia there are a number of factors driving the conversation surrounding energy efficiency solutions.  These factors include a growing absolute demand for energy to drive economic growth, higher temperatures and occurrence of extreme weather events due to GHG emissions, macroeconomic headwinds creating a renewed focus on optimization and cost reductions, and policy tailwinds from various governments within the region.

Energy demand in this region has tripled in the past 20 years, and is expected to continue to skyrocket.  Research from the International Energy Agency notes that Southeast Asia alone will account for 25% of the increase in global energy demand to 2035, and is expected to surpass the European Union in energy consumption by 2050.[i]  As much of Southeast Asia’s energy production is still driven by fossil fuels, the region’s rising energy consumption will also continue to drive increases in GHG emissions.  Governments may be increasingly concerned about rising energy demand as shocks in the global market drive up energy prices that local business and consumers can ill-afford, and which often require government subsidies to blunt the impact to the local population.

Figure 1: Fossil Fuel Subsidies and Prices in Southeast Asia

In addition to rising energy demand in general, Southeast Asia is also subject to extreme temperatures, and thus increased demand for cooling, as well as pollution problems in many major Southeast Asian cities which can put increased strain on HVAC systems.  To maintain comfortable temperatures and breathable air indoors, HVAC systems operate by circulating air both from outside the building and within the building itself over cooling coils.  As outdoor temperatures rise, HVAC systems must expend more energy to cool the fresh air circulated from outside the building.

The depressed macroeconomic environment in many countries, particularly Thailand with a 1.8% GDP growth forecast for 2025[ii], have led to corporations with renewed emphasis on finding opportunities to reduce costs.  Among other cost reduction possibilities, energy efficiency stands out as an area with low technological risk that can help businesses reduce a major operating expense without affecting output.

Further, there are multiple policy tailwinds driving the growth of energy efficiency solutions in Southeast Asia.  For example, Singapore’s Green Mark Certification Scheme was updated in 2021 to mandate sustainability improvements (including energy efficiency) in buildings over 5,000m².[iii]  Thailand is aiming to reduce its energy intensity by 36% by 2037, which includes mandatory sustainability considerations in certain buildings over 2,000m².[iv]

What Technologies Are Decarbonizing Buildings?

Thailand’s Building Energy Code (BEC) considers five areas for analyzing the sustainability of a building: Envelope System, Electric Lighting System, Air-Conditioning System (HVAC), Water Heating Appliances, and Renewable Energy System.  The first four of these areas are focused on building improvements which can reduce the energy requirements for operating a building, thereby contributing to decarbonization even if a building is still powered by the grid (which in Southeast Asia still relies heavily on fossil fuels), whereas Renewable Energy System refers to implementation of onsite clean energy production and storage.

• • Envelope System: all components related to the structure of the building, including walls, ceilings, and windows
  • Electric Lighting System: the lighting fixtures and control of lighting in the building
  • Air-Conditioning System: electrical systems used to control the climate inside the building, including ventilation systems and chiller plants. In cooler climates, this vertical maps to heating systems rather than air-conditioning
  • Water Heating Appliances: boilers used for heating water used throughout the building
  • Renewable Energy System: all components related to the production and storage of energy onsite, including solar panels and battery energy storage systems (BESS)

In the context of Southeast Asia, Air-Conditioning System stands out as a key vertical due to the region’s heat and humidity.  Innovations in Envelope System and Renewable Energy System could provide long-term cost savings, but are likely to see longer sales cycles and slower adoption due to the high implementation costs.  While there is a need to optimize Electric Lighting Systems and Water Heating Appliances, neither is a vertical where the particular characteristics of the Southeast Asian market creates a demand or level of importance significantly different from the rest of the world.

Within Electric Lighting System, Air-Conditioning System, and Water Heating Appliances, the major trend is the use of IoT sensors and building analytics to reduce unnecessary energy consumption.  Previous generations of building management systems leveraged timers to automate the on/off settings for various electrical systems within a building based on expected occupied times.  In today’s buildings, IoT sensors, meters, and other smart technology devices allow for the collection of massive amounts of data relevant to the operations of a building.  AI/ML algorithms can process data from a wide array of sources to identify and automatically adjust the building’s systems to match the optimal configuration.  For example, older building management systems may turn off the HVAC system during pre-programmed lunch hours, whereas new energy efficiency solutions can adjust the temperature and ventilation rate based on real-time occupancy rates and external weather conditions.  IoT and AI can also enable predictive maintenance of key electrical systems to avoid both waste and downtime, both of which can generate cost savings and increased productivity for building owners.

Where Are Investors Focusing Their Attention?

The investment landscape throughout 2024 and into 2025 has been down across the board in climate tech, however investors are still finding opportunities to deploy in energy management.  Industry research estimates that the global market for energy retrofits in commercial buildings should reach $191.3 billion by 2029.  Data from CB Insights indicated that in the past 5 years investors have poured over $1 billion into commercial energy management startups.[v]  While much of the funding has been concentrated in developed markets, Southeast Asia is starting to see an increase in startups looking to innovate in this space.

Figure 2: Market Map of Energy Efficiency in APAC Region

Startups and electronics conglomerates alike are investing in and developing new energy efficiency solutions.  From an investors’ perspective, data on strategic acquisitions by larger players of emerging startups within this space also indicates compelling exit opportunities for startup investments.

Figure 3: Recent Exits for Energy Efficiency Startups

What to Look for in Energy Efficiency Solutions?

Energy efficiency is not a new concept, but adoption has been slow.  Electricity prices in Southeast Asia have typically been lower than many parts of the world (often due to government subsidies); in economic booms this may have reduced the pressure to implement new efficiency solutions as corporations focused their investments on opportunities for growth, but in challenging macroeconomic environments priorities shift towards finding cost reductions.  Further, many of the solutions which have been on the market require lengthy implementation cycles and high upfront costs – with new technologies and sales models, this is no longer the case, which may help accelerate the rate of adoption.

With so many energy efficiency solutions in the market, what should investors be looking for?  First and foremost, startups must show that their solution offers high energy savings to their customers.  While there is much talk regarding sustainability standards and ESG considerations, the bottom line for most businesses remains financial, therefore adoption becomes smoother when startups are able to prove significant cost reductions resulting from the investment in a new energy efficiency solution.  The early adopters of course will be corporations where electricity accounts for a high percentage of their operating expenses, but as profit margins tighten in periods of low economic growth, finding low-cost opportunities to reduce any operating expenses becomes higher priority.  JLL estimates that energy retrofits could generate anywhere between 10% (for light retrofits focusing on optimization) to 40% (for deep retrofits on Mechanical, Electrical, and Plumbing) energy savings in office buildings.  Given the range in energy savings potential, startups should consider the return on investment and payback periods as key metrics that customers consider from a commercial and budgeting perspective.

Second, scalability has long been a concern for venture investors when evaluating this market.  Startups should consider their implementation timelines and complexity as hefty implementation requirements may be off-putting to both potential customers (looking to minimize disruptions to their business) and investors (looking for business models which can rapidly expand).  The ability to leverage strategic partnerships for implementation and market expansion can be a key factor in the startup’s success.

Lastly, startups which can find strategic partnerships with governments and financial institutions to connect potential customers with subsidies, incentives, or financing may have an advantage in driving faster adoption.  The exact same macroeconomic environment which is driving demand for energy optimization also means that corporations and building owners may have limited budget for the initial upfront cost.  Go-to-market models incorporating access to financing or that allow for use of subscription models to lower the initial capital expenditures can help with rapid customer acquisition.

Conclusion

The drive for energy efficiency in Southeast Asia is not only a result of increasingly pressing concerns surrounding the environmental impact of energy consumption, but also a key economic concern for governments and corporations alike as they seek for continued productivity improvements to drive regional growth.  The region’s booming energy demand necessitates a shift in traditional energy consumption patterns; leveraging new technology to minimize unnecessary and unproductive energy consumption can offer substantial potential for both cost savings and emissions reductions.

The advancements in IoT and AI stand to supercharge the transformation.  From predictive maintenance to real-time monitoring and optimization, these technologies offer unprecedented levels of data-driven insights and automation. Such information can translate to significant operational efficiencies and productivity booms for building owners.

The investment landscape for energy efficiency solutions is strong, as significant investment is required to complete the transition.  There has been continued growth in the funding for energy efficiency startups, as well as a vibrant acquisitions market offering compelling exit opportunities for venture investors.  Venture investors looking to make a move in the market should be on lookout for startups with a clear commercial cost savings proposition, scalable solutions which can be easily implemented, and teams who can provide low-cost adoption, whether through strategic partnerships with financing providers or through innovative business models.  These companies will be best positioned to capitalize on the growing demand in the region and offer a compelling “why now” proposition to corporate customers.  The journey towards a truly energy-efficient Southeast Asia is early but poised for a boom, driven by advancements in technology and rising investments.

Author: Krongkamol (Joy) deLeon

Editors: Wanwares (Pin) Boonkong, Woraphot (Ping) Kingkawkantong

References:

[i] IEA Southeast Asia Energy Outlook

[ii] https://www.imf.org/external/datamapper/NGDP_RPCH@WEO/AS5/SEQ/IDN/MYS/SGP/THA/

[iii] https://www1.bca.gov.sg/buildsg/sustainability/regulatory-requirements-for-new-buildings-existing-buildings-undergoing-major-aanda

[iv] https://www.apec.org/docs/default-source/Satellite/EGEEC/Files/60/Economy_Updates_-_Thailand.pdf

[v] Data from CB Insights, Commercial and Industrial Energy Management Market Report

Introduction: The Institutional Gateway to Digital Assets and the Trust Imperative

Blockchain technology has matured beyond its origins. It now powers a diverse universe of digital assets, poised to unlock unprecedented institutional opportunities and drive business innovation. From alternative investment like ETFs and ETPs to stablecoin payments and efficiency-enhancing real-world asset tokenization e.g. bonds, equity, private debt, the institutional allure is undeniable.

This surge in institutional interest is fueled by several tailwinds: greater regulatory clarity, a maturing ecosystem of service providers such as custody, trading infrastructure, compliance solutions, data analytics, risk management tools, and rising client demand for yield. However, the linchpin for widespread and sustainable adoption lies in establishing robust trust – trust among market participants, regulators, and investors. This trust is built upon a foundation of comprehensive risk management and cutting-edge technology.

Recent event underscores this trust imperative. The Bybit heist, with approximately $1.46 billion in stolen crypto assets, demonstrates that even crypto-native companies are vulnerable to sophisticated attacks like supply chain exploits, UI manipulation, and social engineering. These complexities pose significant challenges for institutions, particularly those new to the digital asset space.

At Beacon VC, we believe that robust risk frameworks and advanced technologies are essential prerequisites for secure institutional engagement with digital assets. This conviction shapes our investment thesis: identifying opportunities in the infrastructure, tools, and services that empower this trust-building process.

In the article, we will walk through key vulnerabilities for institutions entering digital asset space, guideline on how to build comprehensive risk frameworks, technology landscape for digital asset compliance solutions, and how building these two foundations can create trust internally and externally.

Navigating the Labyrinth: Key Vulnerabilities for Institutions

Institutions venturing into digital assets face a spectrum of unique risks, stemming from both internal and external sources. These risks are amplified by the nascent nature of the digital asset class, characterized by challenges such as insufficient investor education, regulatory frameworks struggling to keep pace with the evolving digital asset landscape, and developing infrastructure, which collectively contribute to heightened fraud, market manipulation, money laundering, and overall market instability.  This is further compounded by regulatory uncertainty and the borderless nature of digital assets, which facilitate cross-border threats and often outpaces businesses’ ability to protect investors. These internal and external vulnerabilities give rise to the following specific risks for institutions.

• Internal Vulnerabilities: These vulnerabilities arise from within the institution’s own technology, operations, and human factors.
  • These relate to the systems and infrastructure used to manage digital assets.
    • Private Key Compromise: can result in irreversible asset losses. Examples: supply chain attacks (third-party vendor), phishing, malware.
    • Cybersecurity Breaches: Weaknesses in cybersecurity defenses can be exploited. Examples: network intrusions, ransomware attacks, DDoS attacks.
    • Smart Contract Vulnerabilities: Flaws in smart contract code can be manipulated. Examples: code exploits, flash loan attacks.

• • Human-Centric Risks: These vulnerabilities stem from human error, lack of awareness, or inadequate control.
    • Lack of Adequate Training/Awareness: A deficient understanding of digital asset risks exposes institutions to increased operational and security risks due to employee errors.
    • Weak Internal Controls/Governance: Insufficient controls and governance create opportunities for errors, fraud, or unauthorized activities.
    • Operational Inefficiencies/Errors: Inefficient processes and human error in managing digital asset operations e.g., manual processes for transactions, reconciliation, or reporting can lead to losses and increased risks.  
    • Absence of Clear Policies/Procedures: Lack of well-defined internal policies for digital asset activities e.g., absence of policies for acceptable use, incident response, or employee trading can increase vulnerabilities and inconsistencies.

• External Vulnerabilities: These vulnerabilities arise from factors outside the institution’s direct control.
  • Regulatory Risk: Failure to comply with regulations can result in penalties and legal issues such as deficiencies in KYC/AML controls. Furthermore, the inherent uncertainty in the evolving regulatory framework for digital assets creates a risk that any related decision may become non-compliant.
  • Counterparty Risk: Risks associated with entities with which an institution interacts in the digital asset space, including exchanges, custodians, DeFi protocols, and other financial institutions. This risk encompasses the potential for these entities to default on their obligations, experience financial distress, or suffer operational failures.
  • Protocol and Smart Contract Risks: technology or DeFi protocols that an institution uses. This includes risks from vulnerabilities in the underlying blockchain consensus mechanisms, potential for forks or network splits, and exploits of flaws in the code of smart contracts, which can lead to loss of funds or disruption of operations.
  • Market-Related Risks:
    • Market Manipulation and Fraud: Digital asset markets’ novelty and, in some cases, lack of regulation make them susceptible to manipulation e.g., pump-and-dump schemes and fraud.
    • Geopolitical and Systemic Risks: External events e.g., government actions, network outages, significant market events can impact on the digital asset market. For instance, geopolitical tensions can lead to divergent and conflicting regulations across jurisdictions, creating a complex operating environment for institutions, while state-sponsored cyberattacks could target critical digital asset infrastructure, leading to systemic risks. These external factors introduce a layer of uncertainty that institutions must be prepared to navigate.

Considering these internal and external vulnerabilities, institutions face not only the risk of direct financial losses but also significant reputational risks. Both internal failures and external associations can severely harm an institution’s standing. Therefore, the next crucial step is to establish robust risk frameworks and leverage technology to proactively address and mitigate these potential financial and reputational risks.

The Cornerstones of Trust: Comprehensive Risk Frameworks

Institutions venturing into digital assets must prioritize robust risk frameworks that encompass governance, security, compliance, market risks, and operational aspects. These frameworks are essential not only for regulatory compliance, but also for sound internal operations.

Frameworks such as the Digital Asset Security Control Practices (DASCP) framework offer a valuable baseline for the industry. The DASCP is highlighted because its comprehensive and adaptable design is particularly well-suited to the digital asset space, enabling institutions to navigate current challenges and foster an inclusive resilient financial ecosystem that can evolve alongside technological advancements. DASCP employs a layered approach, establishing foundational principles, identifying associated risks, and designing flexible controls to address those risks.

The principles cover critical areas as the following from top priority as a necessary requirement to subsequent priority to achieve full potential.

• Legal Certainty: Ensure operations comply with current and evolving legal frameworks
• Regulatory Compliance: Align processes, controls, and procedures with specific rules and regulations issued by relevant regulatory bodies
• Resilience and Security: Build robust infrastructure and processes to withstand disruptions and protect data/assets
• Safeguarding Customer Assets: Establish strong governance and controls to securely manage client holdings
• Connectivity and Interoperability: Enable seamless transactions and settlements across diverse networks for efficient operations
• Operational Scalability: Design efficient, cost-effective systems through standardization and automation to handle increasing volume

Ultimately, institutions must tailor their risk management strategies to their specific circumstances, considering factors such as governance structure, business partner and service provider evaluation, data acquisition and analytics, transaction monitoring, and threat monitoring.

The Technological Imperative: Building Secure Foundations

In the preceding section, the necessity of comprehensive risk frameworks is emphasized to guide institutions in navigating the complexities of digital assets. These frameworks provide blueprints, and technology provides the necessary tools and infrastructure to execute that blueprint, enabling practical implementation and automation of the frameworks. According to Research and Markets, the Regulation Technology (RegTech) market is experiencing significant growth, projected to rise from US$ 7.55 billion in 2023 to US$ 42.73 billion by 2031, with a CAGR of 24.2%. This growth rate is likely even higher for the digital asset-specific RegTech segment, driven by increasing regulatory scrutiny, institutional adoption, the complexity of digital assets, the rise in illicit activities, and the demand for transparency and trust, necessitating specialized solutions for compliance, risk management, and security. As digital assets move toward mainstream adoption, RegTech plays a pivotal role in this transformation, leveraging technologies such as machine learning, AI, natural language processing, blockchain to bring digital transformation to compliance, focusing on areas like blockchain analytics, smart contract verification, risk intelligence, streamlined reporting, and combining advanced algorithms with human oversight.

In response to these evolving technological demands, digital asset compliance solutions can be categorized based on the fundamental requirements and challenges institutions faced when engaging with digital assets, ensuring security and adhering to regulatory obligations. Building upon the discussion of internal and external vulnerabilities and the importance of risk frameworks, this categorization demonstrates how technology provides practical tools to manage those risks. Specifically, custody solutions address private key compromise, cybersecurity solutions defend against cyberattacks, blockchain analytics and forensic tools help combat money laundering and fraud, and compliance automation enables compliance with regulatory demands. It follows logical progression from the foundational need for secure asset storage to the ongoing requirements for monitoring, risk management, and automated compliance processes.

These four categories represent the core pillars of a robust digital asset compliance framework for institutions, each addressing a fundamental requirement for security, regulatory adherence, and operational efficiency, collectively contributing to building the necessary trust for wider institutional adoption of digital assets.

Securing Trust: Implementing Risk Management and Technology

Building trust, both internally and externally, is crucial for the successful adoption and integration of digital assets by institutions. Internally, robust risk frameworks and secure technologies are essential to foster confidence among leadership, employees, and shareholders, facilitating internal buy-in by demonstrating effective risk management and secure asset handling. A well-trained and informed workforce is also vital for security and compliance.

Externally, institutions must demonstrate a proactive and responsible approach to build trust with stakeholders. This involves assuring clients of the safety of their digital assets through robust custody solutions and transparent reporting, providing regulators with assurance of compliance and market integrity via proactive engagement and adherence to evolving standards, and establishing credibility in the broader market through publicly share their security protocols and certifications or undergo independent audits and attestations to provide third-party verification of their security and compliance measures. A strong security and compliance posture mitigates reputational risk and attracts talent and partnerships by signaling a commitment to best practices.

Conclusion: Driving the Future of Institutional Digital Asset Adoption

The path to widespread institutional adoption of digital assets is paved with trust. This trust is not a given; it must be earned through the diligent implementation of robust risk management frameworks and the strategic deployment of advanced technologies. By proactively addressing vulnerabilities and prioritizing security, compliance, and operational efficiency, institutions can unlock the transformative potential of digital assets. Looking ahead, as trends like MiCA, institutional DeFi, and real-world asset tokenization reshape the landscape, the need for trust will only intensify. Beacon VC recognizes the pivotal role of companies developing the trust infrastructure necessary for this evolution, and we are committed to supporting their growth and innovation.

Building upon this concept of trust, the question, “Beyond Trust: The Next Frontier for Institutional Digital Asset Strategies,” warrants careful consideration to further explore the potential of institutional digital assets.

Author: Wanwares Boonkong (Pin)

Editors: Supamas Bunmee (Jae), Woraphot Kingkawkantong (Ping)

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