Demand for high-priced startups has skyrocketed this year

The first quarter of the current calendar year has not yet ended, and the total amount of announced deals for the sale of startups worth more than $1 billion has already reached $54.5 billion, as noted by analysts at CB Insights. This amount already exceeds previous quarterly records in this area.

Image Source: Wiz

The deals announced so far this year include 11 startups valued at more than $1 billion each, compared with just two $1 billion-plus startups announced in the entire first quarter of last year, for a total of $3.2 billion. The boom in startup deals this year, analysts say, reflects investor confidence in the Trump administration’s ability to implement antitrust policies that allow venture-backed companies to get decent money for their assets.

Google’s $32 billion deal to buy Wiz is the largest deal in the venture-backed space. In March alone, three other big deals were announced: SoftBank agreed to buy Ampere Computing for $6.5 billion, Scopely agreed to pay $3.5 billion for Niantic’s gaming assets, and PepsiCo agreed to buy soda startup Poppi for nearly $2 billion. In artificial intelligence, two deals worth more than $4.5 billion were announced in March alone.

According to experts at Menlo Ventures, the expectations of sellers and buyers in the startup market have now begun to move towards each other, and therefore, after a long break, the number of deals is growing. In the difficult macroeconomic conditions of recent years, it has become more difficult for companies to attract capital through IPOs, but now the market has revived. The change in the head of the US Federal Trade Commission (FTC) should contribute to an increase in the number of mergers and acquisitions, since the previous leadership of the agency was against market consolidation. Buyers have accumulated a lot of money, and now they are ready to spend it on interesting assets. Moreover, deferred demand has been superimposed on investors’ interest in the topic of artificial intelligence.

It is noteworthy that the rise to power in the US of Donald Trump with his indomitable desire to increase customs tariffs had a positive effect on the capital market even taking into account the unpleasant consequences for the economy. Increased volatility in the stock market pushed business founders to look for buyers. In the new conditions, it is more difficult for startups to count on good revenue from an IPO, so they are more willing to sell their businesses to specific investors.

However, not all young companies are winners. There are more than 1,000 companies on the technology startup market whose capitalization exceeds $1 billion, but they have not yet found buyers and are not preparing to go public.