Founders Should Think Before They Raise

The CB Insights report on private tech company M&A in 2012 just came out and there are some very interesting trends highlighted by the report. Overall, 2,277 private tech companies were acquired for an aggregate disclosed value of $46.8 billion. Interestingly, 50% of the exits were for less than $50 million and 76% of the companies had not raised any venture financing prior to their exit.

This highlights just how careful and thoughtful entrepreneurs should be when they consider venture financing. For most venture-backed companies, an exit for less than $50 million is nothing to write home about. Yet for a team of founders with perhaps the help of some angels, a $50 million outcome can be quite meaningful.

Continuing another trend, New York City had the second most exits behind only California and it had the highest share of internet acquisitions. In addition, Facebook and Google topped the list of acquirors with 12 each.  Excluding Instagram, however, Facebook only spent $87 million on 2012 acquisitions which reflects a focus on talent acquisitions and tuck-ins.

Private equity investors have become increasing active in late-stage venture investing as well as public tech company buy-outs, like the proposed Dell going private transaction. This interest has not, however, extended to the private tech M&A market where strategics represented 94% of the acquirors and private equity shops represented a mere 6%.

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