What the numbers say: The number of venture-backed startups acquiring other startups dipped to 82 in Q1 2023, down from 137 such transactions completed in Q1 2022. Deals completed have dropped consistently every quarter since Q1 2023, with values stabilizing around the 90 mark in each quarter in the second half of 2022.
Relevance: The downward trend can also be seen in global M&A deals involving VC-backed startups. In Q1 2023, M&A deals involving cybersecurity and fintech startups declined 57% YoY and 37% YoY.
What happened: The trend contradicts initial expectations about an uptick in M&A activity due to the shortage of venture capital. M&A activity has remained subdued as founders are unwilling to accept lower valuations. However, that may change in the latter half of this year as startups run out of cash, forcing some to resort to M&A due to a lack of venture capital. Whit Bouck, a partner at Insight Partner, said, "I think it's likely the market at large will see an increase in M&A activity."
