![]() “Highly recommend getting close to break even if you can, typically by cutting costs, raising prices, and getting laser focused on what’s essential,” Jason Calacanis tweeted. VCs have been ringing their own alarms, telling founders to wrap up their funding as quickly as they can and accept whatever price they need to to make it happen.Other companies are trying to quickly dole out stock grants to help employees who are already underwater after joining in the peak of the pandemic. As part of disastrous earning weeks, Robinhood cut 9% of its staff and Netflix laid off writers from its Tudum site.There’s plenty of signs that times have changed, starting at the top in the public market and then trickling down into startups. Calling the bubble “burst,” however, has been shown to be a bad practice. In the last few weeks, every conversation I’ve had with a VC or startup CEO has had a similar refrain: Has the music stopped, or is it just slowing? Most VCs seem to agree there is a pullback happening, and some deals just aren’t getting done. “If you are looking at raising money right now, you could be simultaneously looking at M&A options.We don’t talk about employees, no, no, no! “If you had not raised money in the last year, some of these companies will be looking at a possible sale,” Butler said. “Good companies will start looking for possible acquisitions right now, but I think the market could pick up later.”īutler said the market could see some distressed activity later in the year or early next as the VC market continues to experience a pullback. “I think you will see M&A pick up in Q1 next year,” Ghaffary said. While companies may be cheaper to buy, the money for those deals is more expensive this year.īut there may be a growing market for VC-backed private companies more than ready to listen to suitors. Money is also more expensive right now due to inflation and interest rates. Sellers want to wait because obviously they think prices could go up.” Nearing a possible M&A inflection pointĪlong with the fact startups are sitting on a lot of cash and may be waiting for the market to play out, it also is important to remember summer is a notoriously slow time for M&A deals and the current VC pullback is less than a year old. ![]() “You have buyers who want to wait because they believe the price may go down. “I think everyone went into a slowdown,” said Mike Ghaffary, general partner at Canvas Ventures. ![]() Others also see it as part of market dynamics when turbulence hits. Even some of those that may have spent a little wildly still may have raised enough money to have a long runway. While startups are often portrayed as free spenders, many are not. The record amount of financing raised in the last few years-2021 in particular-no doubt has cooled the need to find an M&A dance partner. Someone joked to me, ‘Hey, that used to be the cash balance of a public company.’” “You look at some of these balance sheets they have and they are sitting on $100 million or $200 million. “So many companies raised so much money last year,” Butler said. Big deals already announced this year include: Aptiv buying Alameda, California-based device software company Wind River for $4.3 billion Sony acquiring Bellevue, Washington-based gaming company Bungie for $3.6 billion and GSK buying Cambridge, Massachusetts-based clinical-stage biopharmaceutical company Affinivax for up to $3.3 billion.ĭespite those, deal flow is down from last year and industry watchers point to several reasons there has not been a run on “for sale” signs in Silicon Valley and other startup regions. That has not completely occurred, although notable transactions involving private companies have occurred. Since the venture capital market started to show cooling signs as early as late last year, it would be logical to assume the M&A market would have heated up as startups run out of financial runway and investors seek liquidity, ideally before a distressed sale. “It’s not terribly hot right now,” said Don Butler, managing director at Thomvest Ventures, about the M&A market for startups. Freelance Writers: How To Pitch Crunchbase News.
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