Web 3.0, which is in its early stages of development, is soon going to dominate the internet and create unprecedented opportunities for companies worldwide. Southeast Asia is at the forefront of this revolution, which had lagged behind the West in the earlier two epoch-making Web 1 and Web 2 evolutions that created significant amounts of wealth for companies in the developed countries.

But that will change now as the internet has penetrated far corners of the earth, allowing innovations to emerge from different parts. Web3 will throw up massive opportunities over the next few years. Some experts predict that Web3 blockchain technology will be worth over 6 trillion dollars in 2023 and is expected to grow at a CAGR of 44.6% till 2030.

In the next decade, finance, media, healthcare, entertainment and every other sector are expected to adopt Web3-related technologies. Cryptocurrencies, which work on blockchain and Web3, have seen a rise in Southeast Asian countries, where a large percentage of people are still out of the traditional banking system. Decentralized finance or DeFi created waves in the region, as seen in the phenomenal number of players in the play-to-earn platform Axie Infinity, whose bottom has fallen out now.

In Singapore, there are over 400 blockchain-related startups. Emurgo, which is a regional blockchain company, has operations in Singapore and Japan, while Infinity Blockchain is in Vietnam and Taiwan. WIR Group, which went public in Indonesia, has been developing products for Metaverse and its offshoot AR&CO is deploying augmented reality products in 20 countries. Indonesia has Tokocrypto and Indodax cryptocurrencies.

In the early part of this year, Openspace Ventures, a Singapore-based VC firm, launched Ocular – a $20-30 million fund with a focus on crypto. Others are also hitching onto the bandwagon like the $50 million fund started in December last year by the United Overseas Bank of Singapore and Signum Capital, which is a Web3-native fund management company. Thai entrepreneur Supachai Kid Parchariyanon recently announced the SeaX fund with an investment of $60 million.

SEA will lead the Web3 revolution, but VCs hesitant

Despite all the action, venture capitalists in Southeast Asia have been slow to back startups that are emerging locally, including Axie Infinity. It was Andreesen Horowitz that invested early on in Axie Infinity developer Sky Mavis and Yield Guild Games, while crypto-native funds from other parts of the world have been pouring millions of dollars into Web3 startups in the region that have been showing promise. For example, Indonesia’s crypto wallet Pintu raised $35 million last year from investors that were not known locally, including Spartan Group, Pantera Capital and Castle Island.

But there are practical difficulties in investing in Web3 and crypto startups. Many funds do not allow putting money into cryptocurrency companies, which allocate digital tokens and cryptos instead of equity to investors. There has been a wait-and-watch approach especially after the recent shakeup of the entire crypto industry. But this could come back to haunt VCs in the region as the entire digital and investment landscape is changing fast and for the better.