How are startup financings and M&A impacted by the pandemic? (through November 2020)

Back in April of this year I wrote “Are financings and M&A slowing down during the pandemic?” with the goal of sharing the Techstars view of how things have been changing given the events of 2020. Here’s an update to that data through the end of October, 2020. Remember, the graphs show when the activity starts (comes across our virtual “desk” at Techstars for the first time). I’ll continue to try to update and share it as we get more information.

Total M&As YTD

  2019: 59

  2020: 68

The M&A data implies that the market “flinched” in April 2020. The one data point we saw in April 2020 was near the end of that month. Almost nobody was starting new M&A transactions in April. But, as the stock market came back so did the acquirers, just as quickly. And towards the end of this year it seems to be greatly accelerated year over year. My take on this is that the experienced acquirers are now deal hunting or at a minimum doing business as usual. Those that are less experienced are still on the sidelines. Now, through November, M&A is really up but some of this activity is in smaller deals. As some startups have realized that they can’t raise a new round and continue to go it on their own in some cases, perhaps acquirers are being significantly more opportunistic?

Total Financing YTD

  2019: 560

  2020: 567

For financings, the data shows that there’s still no meaningful change in the activity level in general. July of 2019 was a bit of an outlier for Techstars, with 71 financings starting that month. This was a high for the year (2019) up to that point. In 2020, we’re seeing financings continue on relatively the same pace as last year, adjusted up slightly for the size of our portfolio growing at about 500 companies per year which is about 20% over 2019 data. Takeaway: VCs have capital and they’re deploying it. Sure, maybe valuations have adjusted downward slightly, but the pace feels unchanged or even slightly up from our early stage perspective.

file under: Startups