by Scott Denne
A late burst of large deals raised last year’s venture capital exit totals to spectacular from subpar as startup investors leaned on new names for exits. In the final six weeks of the year, five of the companies VCs sold were valued at $1bn-plus, after seeing just one such exit per quarter earlier in the year. And although the deal values jumped at the end of the year, VCs, throughout 2018, saw a steady stream of liquidity from vendors that have recently expanded their startup acquisitions.
According to 451 Research’s M&A KnowledgeBase, venture investors sold $40.4bn worth of tech targets in 2020, a dramatic drop from last year’s record $85.6bn but still finishing as the third-highest annual total since the dot-com days. The final weeks made all the difference. The $13bn combined value of just five acquisitions brought the annual total from just below the $28bn of VC exits from a typical year in the 2010s. And that surge came with little help from the buyers that propped up the exit market earlier in the last decade.
Instead, acquirers that have only recently emerged as major sources of liquidity boosted the annual totals. Here’s a sampling:
Just before Thanksgiving, PayPal spent $4bn for Honey, its largest-ever acquisition and only the second time it’s paid 10 figures for a startup (it bought iZettle for $2.2bn in May 2018).
With barely a week to go in the year, F5 Networks paid $1bn for Shape Security, a deal that followed its March purchase of NGINX for $670m, which was previously its largest acquisition.
After printing a pair of nine-figure startup purchases in 2018, Splunk joined the $1bn club, paying slightly more than that for SignalFx, an early-stage cloud performance-monitoring specialist.
By contrast, the companies that, from 2010-18, bought the most startups – Google, Microsoft, Cisco and Oracle – slowed their activity. As a group, those vendors acquire 31 startups in a typical year, our data shows. Last year they purchased just 20, the fewest ever in the decade, and only Google, with eight deals, including its $2.6bn pickup of Looker, was notably active. To put 2019 into context, Microsoft bought as many VC-funded vendors (five) last year as Palo Alto Networks, a security provider that has only inked 12 acquisitions in its entire history.