Venture Backing Fuels More AI Deals

"More venture-capital-backed firms are buying artificial-intelligence startups, holding off public market debuts as they bulk up on products and services, startup founders and investors say.

Venture-backed startups spent roughly $8 billion acquiring an estimated 72 AI startups last year, compared with 49 in 2020, according to 451 Research, a unit of analytics provider S&P Global Market Intelligence.

Since the start of January there have been at least 30 such deals, the S&P unit added, noting that there were only seven in all of 2017.

"We see VC-backed startups acquiring other VC-backed startups on a near-weekly basis," said Andrew Gazdecki, chief executive of San Mateo, Calif.-based startup marketplace MicroAcquire, noting that targets include many early-stage AI developers.

"Never before have I seen so many Series-A and Series-B companies hiring corporate development folks and in-house investment bankers," he added.

Romitha Mally, founder of business advisory firm Mally Collective and a former vice chairman of investment banking at UBS Group AG, said getting acquired by a larger startup would have seemed less attractive a year or so ago when the IPO market was stronger.

Between January and March, the number of startup exits via IPOs and special-purpose acquisition company mergers fell 45% from the previous quarter, while overall startup funding dropped 19%, according to CB Insights. Over the same period, the number of acquisitions remained roughly steady at 2,983 deals, the research firm said." [1]

1. Venture Backing Fuels More AI Deals
Loten, Angus.
Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 12 Apr 2022: B.4.