This development is reshaping the M&A landscape, particularly in the United States, where venture-backed companies are turning to acquisitions as a strategic move.

Startups acquiring fellow startups have become a dominant force in the M&A space. According to Crunchbase data, the first eight months of 2024 has seen 252 of these types of deals, accounting for 39% of all M&A activity among US-based startups. This is the highest percentage in over a decade, signalling a significant change in how startup growth and exits are being managed.

To put this into perspective, from 2015 to 2020, startup-to-startup acquisitions never made up more than 29% of the total M&A deals involving US startups. Even in 2023, a year which was marked by heightened deal activity, this number only reached 35%. The current figures not only surpass these levels but also outpace the total number of deals recorded last year, which saw 296 acquisitions in total. This year’s momentum suggests that this trend is only accelerating, and is set to be the next big thing in the industry.

High-profile acquisitions

We have recently seen some high-profile deals in this space that highlight this new trend in M&A.

This year we have witnessed several high-profile acquisitions that underline the growing trend of startups acquiring other startups in the M&A space. These deals show the way startups are leveraging acquisitions to quickly scale, enter new markets, and enhance their technological capabilities.

August of this year saw startup Sentiment AI acquire startup LifeBrand. LifeBrand is a social media reputation management startup, that had had faced financial challenges, including layoffs and back pay disputes, prior to the acquisition. Sentiment AI, a company focused on artificial intelligence solutions, made this acquisition as part of its strategy to grow by integrating distressed or complementary AI companies.

In March, cloud cybersecurity startup Wiz bought out Gem Security, a startup specialising in cloud threat prevention, for $350 million. Shortly after, in a record-breaking move for the cybersecurity industry, Wiz secured $1 billion in new funding, giving the company a valuation of $12 billion.

Another high-profile deal happened in September, where ŌURA, the startup that created the popular Oura Ring, a smart ring offering personalised health insights and daily guidance, revealed plans to acquire Veri, a Finnish startup specialising in personalised metabolic health.

Is this the future of M&A?

The trend of startups acquiring other startups reflects the evolving dynamics of the tech-driven M&A landscape. This approach enables larger startups to rapidly expand their capabilities, address specific market needs, and accelerate innovation by integrating complementary technologies.

For smaller startups, being acquired offers a pathway to scale, access to resources, and market presence that would otherwise be challenging to achieve independently. As competition intensifies and markets become increasingly saturated, this trend is likely to grow, with startups viewing strategic acquisitions as a crucial tool for growth and staying competitive in a fast-paced environment.