Do western people discriminate tech startups from developing countries?

I generally don't research where various things I'm using come from. However, if I see the same types of issues in an app or website that I would generally see in a phishing email, alarms start going off in my head and questions start getting asked... "Is this a legitimate service?", "Is my information going to be stolen or sold?", "Is there a backdoor for government access?"... stuff like that. Making sure any English used is correct and a user doesn't run into any non-translated sections goes a long way.

Of course, I'm more paranoid than most. I won't even use apps, by anyone other than Apple, that do anything with facial recognition, as I assume they are all harvesting data to use for nefarious means. The success of Snapchat makes it pretty clear I'm in the minority. Apple gets a pass from me, because they have a revenue model I understand that doesn't involve selling user data and they make a point of doing the stuff on-device whenever possible. They also aren't going to destroy their reputation over a few bucks.

Discrimination is unfortunately very real. Whether it will impact your company, or what lengths you should go to in order to appear "Western," is dependent on your product, your intended market, and your marketing strategy. It could be sufficient to hire native English speakers to write your documentation and marketing materials, or it might be a good idea to rent virtual offices, hire more Westerners for your staff, etc. Don't be so paranoid as to go to extremes unless you feel pushback. Many Asian companies are quite accepted and successful on their own in the West, so assume the best unless proven otherwise.

Discriminated by who? Users, or investors? If the latter, does South Asia not have its own investors to step in?

Yes it is very obvious