

Most tech startups acquired in 2012 had no VC funding - skreech
http://www.zdnet.com/most-tech-start-ups-acquired-in-2012-had-no-vc-funding-7000010561/

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gyardley
I'd expect this to be the case every year.

Companies can only acquire companies they can afford. When you take outside
investment, your investors want a significant return, which places a floor on
your acquisition price. The value you have to create gets bigger, and the pool
of companies that can acquire you gets smaller.

Raising money is hard, but should you want to and manage to, it's very easy to
paint your self into a high-valuation corner that blocks all sorts of
opportunities to make life-changing amounts of money.

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pg
No, raising money doesn't put a floor under your acquisition price. It puts a
floor under the acquisition price at which the founders make money.

So while a company can certainly paint itself into a corner by raising too
much, that phenomenon is not what's responsible for the statistic quoted in
this article. If you paint yourself into a corner by raising too much, it
doesn't decrease the probability that your company will be acquired, just how
much money you'll make personally if it is.

If anything, raising too much money _increases_ the probability a company will
be acquired, because (by definition of "too much") it increases the
probability the company will fail, and a fire-sale acquisition is the default
outcome for companies that have raised a lot of VC funding.

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gyardley
Fair enough, fire-sales happen all the time.

Perhaps I should have written 'puts a floor under your acquisition price until
your company fails.'

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pg
This is rather a meaningless statistic, because acquisitions have a power-law
distribution. Most acquisitions are HR acquisitions.

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asanwal
Our firm (CB Insights) put out the report that this article references so some
additional color on this.

Unfortunately, there is no data to support PG's assertion above (or refute it)
about most acquisitions are HR acquisitions so I won't try to address that
part of his comment.

The power law is real. Only 0.35% of private tech company acquisitions in 2012
were > $1B (8 of 2277). And more than 50% were less than $50M and more than
80% were less than $200M (of those with disclosed values).

If you really like graphs, the full report is here -
[http://www.cbinsights.com/reports/Private%20Tech%20Company%2...](http://www.cbinsights.com/reports/Private%20Tech%20Company%20M&A%20Report%20-%20CB%20Insights.pdf)

~~~
pg
What definition of "institutional funding" did you use in the report? The
wording implies that you didn't count angel investments as institutional
funding. So how do you treat angel-sized investments by VCs? Does
"institutional investment" mean only series A rounds and later, or would that
also include a $100k investment by a VC firm in a seed round?

Also, what is your definition of an institutional investor? Do you count
super-angels like Jeff Clavier and Aydin Senkut?

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mappum
This makes sense, because companies that don't take VC funding are the ones
that didn't need it because they were turning profits from the start. However,
there are a LOT more companies that don't get VC funding and never succeed.

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seanmccann
Or they have little to no profit, run out of money, and seek an aquihire.

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jasonmccay
Right ... this scenario is _far_ more likely as, at the moment, it is very
much in vogue for larger companies to snatch up the engineers around smaller,
flailing companies that did not have enough revenue to sustain and could not
attract funding to keep the engine running longer.

Many acquisitions that I saw this year were either starving engineers or soft
landings.

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JDDunn9
Less than 1% of companies get VC funding, so getting funded makes you more
than 24x more likely to get acquired.

I wish the report had more bayesian probabilities to account for survivor-
bias.

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dangoldin
Seems like a vanity statistic to me. Most companies don't have VC funding so
this is to be expected. At least compare this data to prior years.

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pbreit
I would need to see a list of the companies before drawing too many
conclusions. Is there some reason the list is not available?

~~~
justinbeaver
It appears that the company behind this study is running a business selling
data - that's why.

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nikcub
Based on raw numbers, true - based on returns, not even close. It is hard to
find a $1B+ or multi-hundred million acquisition that doesn't have a VC
investment.

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photorized
I think many of those were acqui hires.

