Published:
Jul 24, 2021
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It isn’t just the financing section of FTC’s newsletter that’s grown in 2021, startup-to-startup M&A is up to record highs this year. According to a recent Crunchbase report, intra-startup M&A (VC-backed companies acquiring VC-backed companies) reached a record high of 286 deals YTD, which is more than the previous full year record of 203 deals set in 2016. This trend comes on the back of record VC funding and IPO volumes in 2021.
In addition to startups being flush with cash, one school of thought believes these deals are encouraged because selling founders have developed a liking for stakes in high-growth startups. Equity in high-growth technology firms is often more attractive to today’s sellers than the all-cash corporate offers of yesteryear. Acquisitions are also moving more quickly -- some of these deals close in only 30 days vs the previously typical ~60-90 day timeline.
Strategically, these buyouts are enabling startups to quickly expand their reach into new regions. Last year, Stripe acquired Paystack for over $200m to supercharge their African expansion ambitions. Klarna bought Sofort to double its merchant numbers. Other subtle factors drive startup M&A as well. Though not new, the ‘acqui-hire’ is now not always seen negatively, but rather as an acquirer willing to pay a premium to keep a full engineering or product team intact.
Time will tell whether this Gen Z inspired shopfest will last … but we wouldn’t be surprised to see the word inorganic on pitch decks in the months to come.
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