Startup M&A Surges as VC-Backed Companies Buy Rivals

Venture capital firms aren’t the only ones thinking about exits and liquidity these days. Many startups themselves are stepping into the role of buyer, snapping up other young companies as the tech industry continues to adjust to a slower funding environment.

According to data from Crunchbase, nearly 400 deals took place in 2024 where startups acquired other startups, marking a 31% increase compared to 2023, when the number barely reached 300. The final months of the year were particularly active, suggesting that startup acquisitions may be regaining momentum after a quieter period.

While these numbers are still far below the record-breaking years of 2021 and 2022, when close to 1,000 startup-to-startup acquisitions were completed, they still represent a noticeable improvement over 2020, which saw fewer than 300 such deals.

Not Just Small Deals

It’s easy to assume that startup acquisitions mostly involve small companies buying even smaller ones for modest sums. However, 2024 saw several notable transactions involving hundreds of millions—or even billions—of dollars.

One of the biggest announcements came in October when fintech leader Stripe revealed plans to acquire stablecoin infrastructure platform Bridge for $1.1 billion.

Another major deal took place in June when market intelligence platform AlphaSense agreed to purchase data insights provider Tegus in a $930 million acquisition.

Healthcare tech also saw movement. In August, digital pharmacy company LetsGetChecked bought Truepill for $525 million.

Meanwhile, cybersecurity startup Wiz was particularly active. The company first acquired New York-based cloud detection startup Gem Security for $350 million in March. Later in November, it added another cybersecurity firm, Dazz, in a $450 million deal.

Interestingly, many of these acquiring startups had recently secured large funding rounds themselves. Wiz raised $1 billion at a $12 billion valuation, while AlphaSense secured $650 million at a $4 billion valuation, giving them the financial firepower to pursue acquisitions.

Why Startup Acquisitions Are Rising

For venture capitalists, one major challenge over the past few years has been returning money to their investors, often referred to as limited partners. The slowdown in IPOs and large exits has made it harder to generate returns.

As a result, acquisitions have become an increasingly important path to liquidity. The number of deals involving venture-backed companies increased in 2024 compared to the previous year, showing signs that the M&A market may be slowly recovering.

However, the market isn’t without its challenges. Many startups that once commanded sky-high valuations during the tech boom of 2021 and 2022 are now facing reality. In many cases, acquisitions are happening at significantly lower prices than founders and investors might have expected just a couple of years ago.

According to Louis Lehot, a partner at Foley & Lardner, mergers and acquisitions in most industries are gradually returning to historical norms. The tech sector, however, has been slower to rebound due to recent regulatory scrutiny from U.S. authorities.

Lehot suggests another reason behind the rise in startup acquisitions: portfolio consolidation. Stronger startups with access to capital are increasingly buying smaller companies that may be struggling to raise new funding in a tougher venture market.

With changes underway at regulators like the Federal Trade Commission and the United States Department of Justice, it’s still unclear how the M&A landscape will evolve.

For now, Lehot believes the industry will gain a clearer picture soon.

“I think by the second half of the year, we should know where we stand,” he sai

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