Growing Pains or Red Flags? The eFishery Saga and Southeast Asia’s Startup Crossroads

How the eFishery controversy underscores the urgency for stronger governance in a rapidly maturing ecosystem

A Shaken Startup Ecosystem in Southeast Asia

Southeast Asia’s startup ecosystem has been profoundly shaken by the recent turmoil surrounding eFishery, a celebrated Indonesian aquaculture startup once valued at over $1 billion. Founded in 2013, eFishery pioneered smart feeding technology to enhance the productivity of smallholder fish and shrimp farmers. However, allegations of financial misconduct in late 2024 revealed a pattern of inflating revenue figures since at least 2018, tarnishing its reputation and raising broader concerns about governance and transparency.

These allegations of financial misconduct have inevitably cast a spotlight on its Board of Directors (BOD) and institutional investors, raising questions about oversight and governance. eFishery’s investor roster includes prominent names such as Temasek, SoftBank Vision Fund, Northstar Group, Aqua-Spark, Wavemaker Partners, 500 Global, Abu Dhabi Development (ADQ), KWAP, UOB Venture Management - among others.

Given the severity of the allegations, it’s natural to scrutinise the role of these investors and the BOD in monitoring the company’s financial practices. But look eFishery engaged reputable accounting firms, including PricewaterhouseCoopers (PwC) and Grant Thornton, to audit its financial statements. Despite these audits, allegations have surfaced that the company inflated its revenue and profits over several years (of course both PwC and Grant Thornton have not commented to these developments at the point of writing).

Not an isolated incident

The recent saga is part of a broader recent trend within Southeast Asia’s rapidly growing startup ecosystem, which has attracted significant investments from global venture capitalists. Despite this growth, several high-profile companies have faced allegations of financial misconduct, prompting increased scrutiny of the region’s corporate governance practices.

1. Zilingo (Singapore): Founded in 2015, this Singapore-based fashion technology startup expanded rapidly across multiple markets. In 2022, Zilingo suspended its CEO amid allegations of financial irregularities, including unexplained payments to entities unrelated to its operations. An internal investigation led to her dismissal, and the company eventually ceased operations in 2022.

2. Tanihub (Indonesia): Another Indonesian agritech startup aiming to revolutionize the agricultural supply chain by connecting farmers directly with consumers and businesses. Despite its noble mission, the company faced challenges related to financial management and operational scalability. Reports indicated issues with cash flow management and delayed payments to farmers, leading to questions about its financial practices and sustainability.

3. Investree (Indonesia): A peer-to-peer lending platform in Indonesia established to bridge the financing gap for SMEs. The company encountered challenges related to loan defaults and transparency. Concerns were raised about the platform’s due diligence processes and the accuracy of information provided to investors, underscoring the importance of robust risk assessment mechanisms in fintech startups.

4. Honestbee (Singapore): Launched in 2015, this Singaporean online grocery and food delivery service expanded into several Asian markets. The company faced financial difficulties in 2019, leading to suspension of operations in multiple countries. Investigations revealed that the CEO and co-founder had allegedly misused company funds for personal investments, including purchasing private properties. In March 2020, Honestbee filed a lawsuit against him for breach of fiduciary duties.

5. Fashion Valet (Malaysia): Co-founded by Vivy Yusof, the startup faced scrutiny over financial practices in 2022, raising questions about transparency and sustainability.

6. VNG (Vietnam): Vietnam’s first tech unicorn faced investigations in 2024, raising concerns about its financial reporting and corporate governance.

7. UangTeman: The fintech startup faced allegations of poor governance, mismanagement, and layoffs amidst financial instability, tarnishing its reputation.

8. Skola: A once-promising edtech startup that collapsed due to allegations of financial mismanagement and unsustainable growth strategies.

But is this unique to Southeast Asia?

Whilst this is undoubtedly concerning, and the list above warrants serious scrutiny from investors and regulators, it may also reflect a natural phase in the evolution of a growing ecosystem. With increasing liquidity and market activity, more bad actors are inevitably exposed. Consider some of these notable cases:

1. Luckin Coffee (China): Backed by prominent investors such as GIC and Centurium Capital, the company fabricated $310 million in revenue in 2019, leading to its delisting from Nasdaq.

2. iQiyi (China): Often referred to as the “Netflix of China,” the Baidu-backed platform faced allegations in 2020 of inflating user and revenue figures to attract more funding.

3. GoMechanic (India): Supported by Sequoia Capital, the co-founder admitted to overstating revenue figures, resulting in a massive fallout in early 2023.

4. Byju’s (India): Backed by marquee VCs like Sequoia Capital India, Lightspeed, and Prosus Ventures, the edtech giant faced scrutiny over delayed audits and financial mismanagement.

5. Trella (India): An Indian logistics startup, funded by local VCs, faced allegations of falsifying metrics to secure further rounds of venture capital.

6. Theranos (US): Founded by Elizabeth Holmes, Theranos claimed to have developed revolutionary blood-testing technology. The company raised significant capital from investors but was later revealed to have misled stakeholders about the capabilities of its technology, leading to its dissolution and legal consequences for its executives.

7. FTX (US): A cryptocurrency exchange led by Sam Bankman-Fried, FTX collapsed amid allegations of misappropriation of customer funds and fraudulent activities, leading to significant financial losses for investors and users.

8. GetSwift (Australia): Backed by Blackbird Ventures and Regal Funds Management, the logistics software company misled investors by failing to disclose lost contracts and overstating revenue, resulting in legal action and share suspension.

9. Boomerang (Australia): Supported by AirTree Ventures and Rampersand, the car rental comparison platform inflated financial performance and misrepresented growth metrics, leading to leadership changes and a business pivot.

10. Blue Sky Alternative Investments (Australia): Backed by Sequoia Capital and AustralianSuper, the asset manager overvalued its assets and misrepresented its financial health, ultimately collapsing and leaving investors with significant losses.

11. 1Page (Australia): Funded by BlueChilli and Sydney Angels, the recruitment software startup inflated revenue and customer base, leading to investigations and eventual delisting from the ASX.

12. Big Un (Australia): Supported by Alex Waislitz’s Thorney Investments, the video production startup misled investors about revenue sources and engaged in related-party transactions, resulting in share suspension and regulatory investigations.

13. iProsperity (Australia): Backed by Mayfair 101 and other private investors, the property investment firm ran a Ponzi scheme and falsified financial statements, leading to its collapse and the founder fleeing the country.

Two wrongs do not make a right, but let us also be fair—fraudulent transactions and dishonest founders are not unique to Southeast Asia. These cases highlight that such issues arise even in ecosystems that are considered more developed or mature. The key takeaway for investors and regulators globally is the necessity for stricter governance, thorough due diligence, and a commitment to transparency at every stage of funding.

Recognising Success Amidst Challenges

Despite these setbacks, Southeast Asia remains home to many thriving startups that demonstrate integrity and strong governance:

1. Grab (Singapore): Super-app for ride-hailing, food delivery, and financial services.

2. Sea Group (Singapore): Parent company of Shopee (e-commerce) and Garena (gaming).

3. GoTo (Indonesia): Merger of Gojek (ride-hailing, fintech) and Tokopedia (e-commerce).

4. Razer (Singapore): Global leader in gaming hardware and software.

5. Lazada (Singapore): E-commerce platform owned by Alibaba.

6. Bukalapak (Indonesia): E-commerce platform empowering SMEs, now listed on IDX.

7. Traveloka (Indonesia): Leading travel and lifestyle platform in SEA.

8. Carousell (Singapore): Classifieds platform connecting buyers and sellers (Series D+ funding).

9. Kopi Kenangan (Indonesia): Rapidly expanding grab-and-go coffee chain (Series C+ funding).

10. Carsome (Malaysia): SEA’s largest car e-commerce platform (Series D+).

11. Carro (Singapore): Singapore’s equivalent of Carsome, a leading car marketplace (Series D).

12. Halodoc (Indonesia): Telemedicine platform backed by Series D+ funding.

13. PropertyGuru (Singapore): Real estate technology platform, now public.

14. ShopBack (Singapore): Cashback and rewards platform, scaling with Series E funding.

15. Xendit (Indonesia): Payments infrastructure company achieving unicorn status after Series D funding.

16. Tiki (Vietnam): Leading e-commerce platform backed by Series C+ funding.

17. Nium (Singapore): Cross-border payments platform with unicorn status after Series D funding.

18. Ninja Van (Singapore): Logistics and last-mile delivery services with Series E funding.

19. Glints (Singapore): Talent recruitment platform with $50 million Series D funding.

20. Aspire (Singapore): A fintech startup offering business banking and financial services for SMEs, which secured Series C+ funding in 2023 and continues to expand across the region.

These success stories, to name a few, highlight the region’s potential and the importance of fostering a sustainable ecosystem.

Learning from the Crisis

These incidents point to systemic issues in corporate governance. One significant concern lies in the composition of Boards of Directors (BODs). Many members are non-operators with academic credentials, often MBAs, who lack operational experience. In BOD meetings, discussions tend to focus on conceptual strategies rather than operational realities. This disconnect delays the discovery of irregularities, allowing issues like financial misconduct to fester undetected.

Key Lessons:

1. Strengthen BOD Expertise

   The drive for fast growth often leads to boards prioritising strategic visionaries and well-connected individuals over experienced operators. While ambition is important, boards must also include professionals with deep operational expertise who can scrutinise the day-to-day realities of a business. These individuals are better equipped to ask probing questions, spot early warning signs of misconduct, and challenge unsustainable growth strategies.

2. Enhance Governance and Accountability

   The pressure to deliver rapid growth can sometimes incentivise founders and executives to prioritise optics over substance—inflating metrics or cutting corners to meet investor expectations. To counteract this, startups—particularly those at Series B and beyond—should institutionalise governance structures.

   1. Audit Committees: Dedicated teams to oversee financial reporting, ensure compliance, and identify anomalies.

   2. Ethics Committees: Platforms to enforce a code of conduct, evaluate conflicts of interest, and promote organisational integrity.

      These committees should operate independently, with clear reporting lines to the board, ensuring transparency and accountability without interference from executive leadership.

3. Foster Investor Confidence Through Transparent Reporting

   Fast-growing startups often focus on delivering attractive narratives to investors, but this can lead to selective or inflated reporting. Transparent financial disclosures, regular third-party audits, and proactive governance measures not only rebuild trust but also serve as a safeguard for founders and investors alike.

As Southeast Asia’s startup ecosystem scales, the rush to secure market dominance often comes at the expense of sound governance practices. Institutionalising ethics and audit committees at the post-Series B stage could act as a critical safeguard. These bodies would provide a counterbalance to growth-at-all-costs cultures, ensuring startups scale sustainably while retaining investor confidence and market credibility.

By embedding these principles, Southeast Asia’s startup ecosystem can transform growing pains into opportunities for long-term stability and success.

The Case for a Regional Governance Standard?

As Southeast Asia’s startup ecosystem scales, the region faces a critical moment. The race for market dominance has often come at the expense of sound governance practices. To address these challenges and restore investor confidence, the establishment of a regional governance standard is essential.

This standard could mandate the inclusion of independent ethics and audit committees in post-Series B companies, along with regular compliance reporting to investors. By institutionalising such measures, Southeast Asia can create a culture of accountability that balances growth aspirations with long-term sustainability.

Who To Lead And Some Ideas

1. Industry Associations and Organisations

   Industry associations like SVCA, MVCA, and AMVESINDO can spearhead the development and enforcement of such standards. These efforts could serve as a blueprint for other SEA markets, ensuring that growing pains are transformed into opportunities for building a resilient and credible startup ecosystem. Some ideas:

   1. Develop standardised governance frameworks, including mandatory ethics and audit committees for Series B+ companies, and promote them as an industry best practice. VCs that fail to adopt these standards signal a lack of managerial competence and accountability, raising red flags for investors.

   2. Host training programs for founders and board members on corporate governance and ethical leadership.

2. Institutional Investors

   Sovereign wealth funds, which are often Limited Partners (LPs) in Southeast Asia’s VC ecosystem, are uniquely positioned to drive governance reforms. Their influence stems not only from the capital they deploy but also from the precedent they set for governance expectations across the ecosystem.

   To ensure governance improvements, these funds can utilise side letters—binding agreements signed alongside LP subscription documents—to mandate specific practices. These provisions could include:

   1. Incentivising Compliance

      1. Offer tax incentives, grants, or access to government programs for startups that adopt robust governance practices.

      2. Encourage voluntary compliance by recognising startups that excel in governance through awards or certifications.

   2. Supporting Whistleblower Protections

      1. Enhance whistleblower protection laws by ensuring financial security, such as guaranteeing up to 12 months’ salary, to encourage the early reporting of financial misconduct or unethical practices. This would provide a safety net for whistleblowers and foster a culture of accountability.

Moving Forward: A Call for Better Governance

To strengthen Southeast Asia’s startup ecosystem, Boards of Directors (BODs) must balance strategic vision with operational insight. While fresh, innovative perspectives are critical to driving startups forward, they must be complemented by seasoned professionals who bring practical experience and the ability to identify potential risks early. This balance ensures that startups are better equipped to navigate challenges, uphold transparency, and build investor confidence.

At the same time, it is important to frame these incidents within the context of a maturing ecosystem. Fraudulent activities, while unacceptable, are not unique to Southeast Asia. These are growing pains, reflective of an increasingly vibrant and competitive startup landscape. Overblowing such challenges risks unfairly tarnishing the region’s reputation and deterring future investments.

The key is not to lose sight of the progress made. Robust governance, combined with a measured approach to addressing these issues, will ensure that Southeast Asia remains a hub for innovation and entrepreneurship, poised for sustainable growth and global impact.