by Scott Denne
As we noted in a recent report, the number of $1bn-plus venture exits has plummeted from last year’s high because so far, most of the tried-and-true startup acquirers are siting on the sidelines this year. Still, the total amount paid to acquire startups is tracking for an exceptionally high finish, and that’s coming as several companies print their largest acquisitions of venture-funded companies this year.
The most active acquirers of venture-backed startups have been largely inactive this year, leaving it to new buyers to write the largest checks. And although this year’s pace is behind last year’s record of $85.6bn, 2019 is on track for an exceptionally high $37.8bn.
The most frequent acquirers – Alibaba, Cisco Systems, Microsoft, SAP, among others – drove last year’s record sales of VC companies. According to 451 Research’s M&A KnowledgeBase, none of those buyers have paid nine figures for a startup this year. In fact, only one of the 10 most frequent buyers of VC companies over the last decade (Google) has printed a $100m-plus startup purchase in 2019.
This year’s largest deals, by contrast, have come from acquirers that are spending more on startups than they ever have before.
In the year’s largest exit, Uber, just ahead of its IPO, printed its first-ever 10-figure deal, paying $3.1bn for Careem, a Middle Eastern ride-share company.
Carbonite and Fortive both printed their first $500m-plus startup acquisitions.
F5 Networks did the same when it bought NGINX, its first acquisition of any kind in five years.
Palo Alto Networks has scaled up its deal-making in recent years, crossing the $500m mark for the first time with its purchase of Demisto.
Of all the organizations to pay $500m or more for a VC portfolio company this year, only Google had done so in a previous year, according to the M&A KnowledgeBase. Alphabet, Google’s parent company, is no stranger to acquiring startups – our data show it has acquired more (104) than any other buyers since the start of the decade. But its $2.6bn Looker acquisition was different than the deals it’s done previously. It’s the company’s first $1bn-plus startup purchase since 2014, and the first time it’s ever paid such an amount for an enterprise software business (venture-backed or otherwise).