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Written by Alex Wilhelm

To get big faster, younger unicorns start buying startups sooner

In the name of getting big quick, it seems like some of the most valuable private tech companies are turning to mergers and acquisitions (M&A) as a way to accelerate business growth. So-called “unicorns”—privately-held technology companies which achieve billion-dollar valuations sometime before (or as a direct result of) going public or exiting via M&A—are chomping at the bit to make their first acquisitions, suggesting a mounting pressure on companies to grow even quicker.

Analysis of Crunchbase data indicates that, on average, recently founded unicorn companies are more likely to make their first M&A transactions sooner after founding than their older counterparts. In other words, younger unicorns buy other companies earlier. Here’s the data.

The narrowing gap between founding and first M&A

Using M&A data for companies in Crunchbase’s unicorn list, we found out when unicorn companies made their first M&A transactions on average. (We detail a bit more of the methodology in a note at the end.) Companies founded in more recent years were quickest to hit the M&A trail.

Eleven unicorn companies founded in 2007 took an average of roughly 8.33 years before making their first acquisitions. At time of writing, 29 unicorns founded in 2012 have made their first startup purchases, averaging just 4.1 years before doing so.

Note that there’s a bit of a sampling bias here. To an extent, it’s expected that unicorn companies founded in more recent years will have a lower average age of first acquisition, because there are many unicorn companies which haven’t yet made their first M&A deals.

The bulk of all M&A transactions by unicorns (not just the first ones) occur within the first seven years after founding.

We should take recent years’ dramatic reduction in average time until first acquisition with a heftier grain of salt (again, there are plenty of unicorns which haven’t yet gone shopping for startups). Even with that caveat made, averages have steadily trended lower between 2007 and 2012, after remaining steady (across an admittedly small sample set) since the start of the unicorn era.

This suggests that younger unicorns are increasingly using M&A transactions as a way to accelerate their path to massive market power.

It’s a big move for a company to buy another one. There’s all the financial particulars to negotiate, the legal and regulatory hurdles to clear, and the inevitable friction of integrating teams and technology from one entity with another. And that’s when the process is amicable and goes smoothly. The amount of time and resources a company commits to carrying out an M&A strategy is nontrivial, so it’s understandable why a company would put this process off to a later date or eschew it entirely. That high-growth tech companies are pursuing such a time and energy-intense strategy earlier on in the venture life-cycle points to the benefits M&A can bring to startups seeking to scale speedily.

Methodology notes

We found this by analyzing the set of acquisitions made by companies in Crunchbase’s list of unicorns, which we used as a proxy for “high-performing private technology companies” as a collective whole. We found the time elapsed between unicorns’ listed founding dates (which, note, have varying levels of precision) and the date of their first-ever acquisitions, regardless of whether the acquirer had achieved unicorn status. We then plotted the resulting data in a couple of ways.

More information about Crunchbase News’s methodology can be found on a dedicated page on this site.

Uber’s IPO targets April, Stash stacks cash and YC shakes it up

Hello and welcome back to Equity, TechCrunch’s venture capital-focused podcast, where we unpack the numbers behind the headlines.

This week was a lot of fun. Connie Lozios took the captain’s chair in San Francisco while I manned the sails, and we had Female Founders Fund’s founder Anu Duggal in the studio to round out our crew.

It was a week of conclusions. Our prior notes on YC and Uber and a few other things came home to roost. But, you’re busy, so let’s sink our teeth into the good stuff:

Uber’s IPO lands in April: Right before we hit record, news broke that Uber’s IPO will land in April. This isn’t an unexpected result, but it is one that is long-expected. With Lyft’s S-1 live, and in the wild, it’s time for Uber to, ahem, shift and catch up? Regardless, the company’s possible $1 billion raise to fund its research arm is another indicator that Uber is serious about going public. You know, that, and the fact that it’s filed privately.

Q1 IPO pace was slack: Aside from Lyft’s public S-1, there’s been an annoying dearth of public progress on the IPO front from tech’s biggest players. Sure, some companies filed to go public privately, but that’s more annoying than helpful. My point here was undercut by the Uber news, but if Lyft doesn’t debut in March then it’s going to be a complete first-quarter miss.

Stash raises $65 million: Another of the neo-banks raised capital this month, with Stash stacking a fresh $65 million dollars. The firm was coy about the round’s participants (odd), and silent on its new valuation (more normal, but still annoying). What matters is that Stash now has more dosh on hand to compete with Chime and Acorns, each of which recently raised big new rounds this year.

Changes at YC: As expected, and presaged on this very show, Sam Altman is graduating himself to the chairman’s seat at Y Combinator. That and the firm is finding office space in San Francisco. That’s more evidence that the center of gravity has truly shifted here in Northern California. Sand Hill Road is more Route 66 than it is a hyperloop.

And with that failed attempt at a joke, I give up. We’re back in seven days!

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With these numbers, it’s no surprise SoftBank is investing in Latin America

After SoftBank announced its plans to launch a $5 billion innovation fund in Latin America, we reached out to the good folks at the Latin American Venture Capital Association (LAVCA) for some context, and what they told me only validates the reasoning behind SoftBank’s interest in the region. (In 2017, we reported on the growing interest in Latin America.)

Let’s start with some numbers. Venture funding in Latin American startups is up — way up — from previous years. Specifically, LAVCA’s data shows that VC funding more than doubled in 2017 to $1.14 billion compared to $500 million in 2016. While 2018 numbers haven’t been finalized, LAVCA is projecting another record year with venture investments topping $1.5 billion.

If you combine private equity and venture investing, the numbers are even more impressive. LAVCA estimates that PE and VC fundraising together in Latin America in 2017 totaled $4.3 billion, up from $2.3 billion in 2016.1

Julie Ruvolo, director of venture capital for LAVCA, said all this “fits squarely in this larger momentum that’s been building over the last year or two.”

“We’ve been seeing the continued, and increased, entry of significant global players in the market,” she told Crunchbase News. “Plus, we’ve been seeing an uptick in $100 million-plus rounds, which was a relatively rare thing in Latin America.”

Also unsurprising is the breakdown of where the majority of venture dollars have gone in Latin America. Brazil led the region across all stages of VC investment, capturing 73 percent of VC investment dollars in 2017 and the first half of 2018 (201 startup investments totaling $1.4 billion). Mexico was the second most active market by number of deals (82 startup investments totaling $154 million), but Colombia saw more money invested ($188 million over 23 deals).

Here’s a quick rundown of just some of the bigger deals that took place during that same time frame:

It’s worth noting that fintech is the top sector of VC investment by dollars and number of deals in Latin America. The region also hosts a number of unicorns, including Brazilian ride-hailing startup 99; Colombian last-mile delivery service Rappi; Brazilian learning systems provider Arco Educação; and Brazilian fintech startup Stone Pagamentos.

With all this innovation and investing going on in Latin America, there is clearly large potential. And SoftBank is now poised to capitalize on that.

  1. The fundraising and investment data LAVCA collects is specific to fund managers that have raised capital from third-party institutional investors/limited partners and doesn’t account for other types of private capital investors, like a SoftBank fund or sovereign wealth fund, corporate, etc.