The phenomenon of a startup acquiring another startup is not new, but as companies stay in private markets longer and raise large war-chests, the frequency of this occurrence has increased. These acquisitions often happen as startups seek to diversify into new customer segments, absorb new talent, or acquire new technology (as just some of the reasons).
Using CB Insights data, we analyzed this trend in order to identify the most active private tech companies acquiring other companies within private markets.
Overall, the number of tech startups acquiring startups has increased significantly since 2011. That year saw fewer than 350 of these acquisitions, while 2015 saw more than 2x that number, at 736. The number also represented a 24% increase over the 2014 total.
This year we have already seen more than 440 of these types of acquisitions, putting 2016 on track to fall slightly below the 2015 peak. It’s possible that the slowdown is due to a general slowing of funding with companies having less cash on hand to make these acquisitions. Or it’s also possible that many companies are waiting for possible acquisition targets to set more realistic prices, after a frothy time in mid-2015 which saw many tech startups set sky-high valuations.
The trend could accelerate through the end of the year if valuations adjust. There were already seven of these transactions of $100M+ in 2016 through 8/30/2016, including Bitstrips and Vurb (acquired by Snapchat), Hayneedle (acquired by Jet.com), and Otto (acquired by Uber for $680M).
Most active startup acquirers of other startups
Dropbox has been the most active acquirer of other private companies, with more than 20 acquisitions including buying Clementine, Umano, and CloudOn this year. Infor, a software company targeting mid-sized enterprises, was second with 17 acquisitions.
Rocket Internet-backed Foodpanda and Delivery Hero have been rolling up other food-delivery startups around the world, making a combined 25 disclosed acquisitions of other private companies. India’s private company ecosystem has also seen well-funded players scoop up other startups. India-based Flipkart, Snapdeal, and Zomato all made the list. Pinterest has increased its activity significantly, making 9 of its 14 acquisitions from 2015 to 8/30/2016. In all, 18 still-private companies have made at least 8 acquisitions of other private companies.
While its 23 acquisitions puts Dropbox in first place among presently private tech companies, we took a look at some of the larger, now-public tech companies to see how many startups they acquired before they went public.
While Twitter reached approximately the same valuation as Dropbox in private markets, it also acquired more companies, 31 in total before it went public. Twitter was private for a little more than 6 years from its first funding, compared to Dropbox which is already into its 9th year since it graduated from Y Combinator.
Facebook also acquired 29 private companies before its IPO (though Facebook had a much higher valuation). Facebook was private for a little under 8 years since Peter Thiel wrote Facebook its first check, for $500K, in 2004.
Both Zynga and Groupon went on acquisition sprees, grabbing many startups in their space (with Groupon having a particularly international focus). HomeAway also acquired more than 10 startups before it went public including Escapia and Second Porch.
*Analysis included investor-backed acquirers
**Only company first exits were analyzed
***While we only analyzed private tech acquirers, we counted the investor-backed private companies they acquired regardless of sector in this analysis
Want more data on startup acquirers? Check out our venture capital database below.
This report was created with data from CB Insights’ emerging technology insights platform, which offers clarity into emerging tech and new business strategies through tools like:
- Earnings Transcripts Search Engine & Analytics to get an information edge on competitors’ and incumbents’ strategies
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- Company Mosaic Scores to evaluate startup health, based on our National Science Foundation-backed algorithm
- Business Relationships to quickly see a company’s competitors, partners, and more
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