The current economic climate and geopolitical tensions have made it more challenging for startups in Asia to secure funding. This has also impacted venture capital firms, resulting in a decrease in the number of funds being closed. However, despite these difficulties, some firms are still managing to close significant funds, such as securing funding for startups in Asia, which has become increasingly difficult due to the economic downturn.

According to Akio Tanaka, co-founder and partner at Headline Asia, a Tokyo- and Taipei-based VC firm, the VC market is experiencing a cyclical downturn characterized by high interest rates, reduced liquidity, and cautious investor sentiment. Tanaka made this statement in an interview with TechCrunch, where he discussed the current state of the venture capital firms in Asia.

Despite the challenging environment, Headline Asia recently announced the completion of its largest fund to date, Headline Asia Fund V, which raised $145 million to invest in tech startups across the Asia-Pacific region. The fund will focus on supporting startup founders who are building companies that target digital transformation and cross-border operations in Japan, Taiwan, and Southeast Asia, with selective investments in South Korea. Headline Asia invests in early-stage startups, from seed to Series A, with check sizes ranging from $1 million to $5 million in e-commerce, logistics, fintech, IP, and AI.

The backers of Headline Asia’s fifth fund include a mix of public and private entities, such as Japan Investment Corporation (JIC), the National Development Fund of Taiwan (NDF), Korea Venture Investment Corporation (KVIC), and SME Support Japan. These investors have demonstrated their commitment to supporting the growth of startups in the region.

Headline Asia’s new fund has already invested in 17 companies, including Newmo, a Japanese taxi and ride-sharing startup; Jenfi, a Singapore-based company providing revenue-based financing for digital businesses and startups in Southeast Asia; and Pi-xcels, a Tokyo- and Singapore-based startup that delivers NFC-enabled tech for merchants to send receipts to their customers. These investments demonstrate the fund’s focus on supporting innovative startups in the region.

Some investors in Southeast Asia are becoming more cautious and prefer to make safe investments that generate profits, rather than investing in high-growth, high-risk tech startups. However, Headline Asia aims to make investments that these investors won’t, focusing on early-stage startups with high growth potential.

Tanaka emphasized that early-stage valuations are still where the most outsized returns are made, especially in today’s exit environment, where later-stage valuations have compressed and liquidity remains limited. This highlights the importance of investing in early-stage startups with high growth potential.

Tanaka also expressed excitement about opportunities in Japan, where many startups have traditionally focused on the local market. However, Headline Asia is interested in global startups coming out of Asia, whether it’s Japanese startups going international or Southeast Asian or North Asian startups going global.

Headline Asia is part of the Headline global network, with regional offices in the U.S., Europe, and Latin America. The VC firm has approximately $4 billion in assets under management and has backed over 100 startups across its five funds. The firm employs 10 investment professionals in Tokyo, Taipei, and Singapore.

The closure of Headline’s newest fund comes on the heels of other Asia-focused VC fundraises. Antler closed a $72 million Southeast Asia fund in August, and MindWorks Capital, a Hong Kong-based VC firm, completed a fourth Pan-Asia fund at $220 million in October. In November, Indonesia VC firm Intudo secured $125 million across two funds, including $50 million for a fund to invest in downstream natural resources and renewable energy.