The landscape of small and mid-sized deals is not demonstrating long-term growth as a core area for M&A, by many metrics. The total deal value for purchases ranging between $100 million and $300 million last year, for example, remained stubbornly below levels routinely observed nearly a decade ago. This stagnation is particularly telling, suggesting that despite a general increase in startup formation and venture capital deployment over the past decade, the exit market for this crucial segment has not kept pace. This particular range of acquisitions often represents strategic tuck-ins for larger corporations—companies that have demonstrated product-market fit and some revenue, but are not yet massive scale-ups. The fact that deal values here have not surpassed historical norms implies a cautious approach from acquirers, perhaps focusing on higher-value targets or building capabilities in-house rather than consistently acquiring mid-sized players.

Moreover, the cumulative value of these numerous smaller transactions can be dwarfed by a single, exceptionally large exit. A recent example underscores this disparity: Google’s just-completed $32 billion acquisition of cybersecurity firm Wiz is worth more than four times the total sum of all U.S. startup deals under $300 million combined from the past year. This illustrates a bifurcation in the M&A market, where blockbuster deals continue to make headlines and represent massive capital injections, while the broader base of smaller acquisitions, though numerous, contributes a comparatively modest aggregate value. This phenomenon reflects a market where exceptional growth and strategic importance are heavily rewarded, often at the expense of a wider distribution of significant exits across the startup spectrum.

Even with these caveats, the market for small and mid-sized acquisitions is showing signs of recovery from recent lows. Startup purchases in the $100 million to $300 million range hit a trough a couple of years ago, coinciding with a broader economic slowdown and tightening monetary conditions. Since then, they have rebounded, and this year is off to a brisk start, offering a glimmer of hope for founders and investors seeking exits. This uptick suggests a degree of market stabilization and renewed confidence among acquirers, albeit not yet reaching the exuberance of past peaks. The rebound could be attributed to companies having adjusted to higher interest rates, more realistic valuation expectations from sellers, or strategic imperatives driving specific acquisitions.

Smaller Deals Shrink More

The trend of subdued activity is even more pronounced in the segment of smaller, disclosed-price acquisitions, specifically those under $100 million. The volume and value of these deals reached a low point in 2024 and have since made a modest comeback, but they remain well below their peak performance. These sub-$100 million purchases represent a mixed bag for returns, encapsulating a wide spectrum of outcomes for founders and investors.

On the positive side, investors can still recoup solid profits from companies that raised only a few million in seed funding and successfully sold for prices in the tens of millions. These are often strategic acquisitions for technology or talent (known as "acqui-hires"), where the acquiring company gains a crucial piece of intellectual property or a highly skilled team. For early-stage venture capitalists and angel investors, such exits, even if not multi-billion-dollar unicorns, can provide attractive returns on their initial small investments, validating their investment theses and freeing up capital for new ventures. These deals are essential for the health of the early-stage funding ecosystem, demonstrating that not every success needs to be an IPO.

However, in other cases, startups have sold for considerably less than the sums they raised in venture investment, signaling a "soft landing" or, in unfortunate instances, a distress sale. Crunchbase data aggregates several examples of such deals from the past year, illustrating this challenging reality. A notable example is Rad Power Bikes, a company that garnered significant venture funding and market presence, but ultimately filed for bankruptcy before being acquired this month. Such instances highlight the inherent risks in the startup world, where even well-funded and seemingly successful companies can face insurmountable challenges, leading to exits that prioritize salvage value over investor returns. These scenarios can result in significant losses for later-stage investors, though they may still provide some recovery for creditors and early stakeholders.

No Power Buyers

A notable characteristic of the current market for small and mid-sized startup purchases is the absence of a "power acquirer." Out of 181 sub-$300 million startup acquisitions tracked since 2024, Crunchbase data indicates that no single buyer executed more than two such deals. This fragmented acquisition landscape is quite distinct from periods where a handful of dominant tech giants or large corporations might consistently acquire numerous smaller companies to bolster their product portfolios, talent pools, or market share.

Several factors could contribute to this trend. Firstly, increased antitrust scrutiny on major tech companies might make them more hesitant to engage in a high volume of disclosed acquisitions, especially those that could be perceived as consolidating market power. Secondly, the strategic imperatives for acquisitions might be more diverse and distributed across various industries rather than concentrated within a few dominant players. Companies across sectors—from healthcare and finance to manufacturing and logistics—are increasingly looking to acquire innovative startups to accelerate digital transformation, gain new technologies, or enter emerging markets, leading to a wider array of acquirers. This fragmentation suggests a more diverse, albeit less concentrated, demand for innovative startup assets.

That said, there are companies with a larger number of funded startup purchases, but they often do not report prices for all or most of their deals. Examples include industry stalwarts like Cisco and Eli Lilly, as well as emerging tech players such as Cloudflare, CoreWeave, Databricks, Workday, and Wonder, among others. When a price isn’t disclosed, it becomes challenging to gauge how founders and investors fared on the deal. Non-disclosure often suggests that the transaction is primarily an acqui-hire for talent, a strategic technology tuck-in where the IP is valuable but the revenue stream is nascent, or simply a deal where the price is not deemed material enough for public announcement. In some cases, it could also indicate a lower-value acquisition that founders and investors might prefer not to publicize. While most of these active buyers certainly possess the financial capacity to pay well, whether they choose to do so, or if the circumstances of the acquisition warrant a substantial payout, remains an open question for deals without disclosed prices.

Broader Economic Context and Future Outlook

The current M&A environment for small and mid-sized startups is inextricably linked to broader economic trends. The 2021 peak in acquisitions was fueled by a confluence of factors: ultra-low interest rates, abundant venture capital, sky-high tech valuations, a "growth at all costs" mentality, and a surge in SPAC activity. Companies were aggressively pursuing growth, and acquisitions were a quick path to achieving it.

The subsequent decline and the current plateau below those peaks can be attributed to a reversal of many of these conditions. Higher interest rates have increased the cost of capital for acquirers, making leveraged buyouts more expensive and reducing the appetite for speculative acquisitions. Economic uncertainty, inflation, and geopolitical tensions have led to a more cautious approach, with companies prioritizing profitability and efficiency over aggressive expansion. The "tech correction" in public markets has also cascaded into private markets, leading to more realistic, and often lower, valuation expectations for startups. Furthermore, the slowdown in venture funding has created a capital drought for many startups, pushing some towards exits they might not have considered previously, often at less favorable terms.

Looking ahead, the outlook for small and mid-sized M&A will depend on a delicate balance of these macroeconomic factors and corporate strategies. A sustained period of economic stability, coupled with a potential reduction in interest rates, could reignite acquisition activity. However, it’s unlikely to return to the frothy levels of 2021 without a significant shift in market dynamics and investor sentiment. Instead, the market might settle into a more mature phase, characterized by strategic, value-driven acquisitions rather than speculative bets. This environment will continue to present both opportunities and challenges for founders and investors, where demonstrating clear value, sustainable growth, and a path to profitability will be paramount for securing favorable exit outcomes. The "in-between" exits, while not always celebrated with fanfare, will continue to form the backbone of liquidity for the vast majority of venture-backed companies.