Introduction to Startup Acquisitions
We used to think that when a startup bought another startup, it was probably a small deal. However, this is no longer the case. With the rise of heavily funded unicorns, they are now more willing to spend large sums of money to buy complementary startups. This trend is evident in the increasing number of startup-to-startup acquisitions, with at least 423 U.S. venture- or seed-backed companies selling to other private, VC-funded companies in the past year.
The Big Spenders
Some startups are spending huge amounts of money on acquisitions. Stripe, a payments technology provider, made the largest purchase in the past year, buying fintech startup Bridge for $1.1 billion. Other notable acquisitions include Infinite Reality’s purchase of Touchcast for $500 million and Rokt’s acquisition of mParticle for $300 million. These startups have raised significant amounts of funding, with Stripe raising $9.4 billion and Infinite Reality securing $3.4 billion.
Most Active Buyers
Some startups are not only spending a lot of money but also making multiple acquisitions. Databricks, for example, has acquired at least 11 companies in the past five years, including a $1.3 billion purchase of MosaicML. Automattic, the company behind WordPress, has made 29 acquisitions, including a $125 million purchase of chat app Beeper. Other active buyers include Stripe, Infinite Reality, GrubMarket, Scopely, and Epic Games.
Notable Acquisitions
Some notable acquisitions in the past year include:
- Stripe’s purchase of Bridge for $1.1 billion
- Infinite Reality’s purchase of Touchcast for $500 million
- Rokt’s acquisition of mParticle for $300 million
- Databricks’ purchase of MosaicML for $1.3 billion
- Automattic’s purchase of Beeper for $125 million
An Expected Evolution
The trend of startups making large acquisitions is expected to continue. With many mature, high-valuation venture-backed companies choosing to stay private, they have the capital reserves and appetite for growth to make significant acquisitions. This could lead to private companies taking a larger role in startup M&A, especially with public markets in correction territory.
Conclusion
In conclusion, the startup acquisition landscape is changing. With heavily funded unicorns willing to spend large sums of money, we are seeing a significant increase in startup-to-startup acquisitions. As the trend continues, it will be interesting to see how it shapes the startup ecosystem and the role of private companies in startup M&A. With the rise of private companies making large acquisitions, it’s likely that we’ll see more significant deals in the future.
