Friday, July 12, 2013

146 Seed/Angel Companies Acquired Since 2012. Big returns, or flight from the “Series A Crunch?”

Since 2012, 146 seeded companies have been picked up prior to raising a follow-on round of financing, according to CB Insights.

Nearly 100 of these acquisitions have been companies in the Internet sector. With a string of big company tech CEOs from Yahoo’s Marissa Mayer to Twitter’s Dick Costolo voicing their ambitions to be “mobile-first” companies, acquisitions of mobile-based seed/angel companies are accelerating quickly as well as comprising 30% of all seed/angel acquisitions so far in 2013 compared to 23% in 2012 as shown below.


The data is this article is drawn from CB Insights, the market research firm that together with the Angel Capital Association produces the HALO Report on angel activity.  You should expect the latest HALO update shortly.  

If you missed our recent article on the innovative way the angels at Launchpad are preparing for increased acquisitions, you can find it here.

CB Insights remains a firm believer in the dreaded “Series A Crunch,”  which is sometimes blamed on “moron angel investors.”  You can find our opinion here.  Nonetheless, we feel obliged to present the CB Insights view below.

With the Series A Crunch underway, acquirers from Yahoo to Salesforce are snatching up Internet and mobile companies running out of cash, says CB Insights. 

“In our Series A Crunch report, we explained that the glut of seed deals since 2009 combined with consistent level of Series A activity is creating a natural selection process that will result in over 1000 startup orphans (yes – tech companies who are going to die). But not all of those trending towards orphan status will get there, as many are being acquired whether for talent or technology before they officially close up shop.  Whether you call them acqui-hires or soft landings or asset purchases,  since 2012, there have been 146 seeded companies that have been picked up prior to raising a follow-on round of financing (often presumably because they couldn’t).

“While our Seed Investing Report found that seeded companies took slightly more than 13 months to raise follow-on financing on average, the average time between a company’s seed or angel funding and their acquisition was closer to 18 months with a median of 15 months.”

Cali and NY Top Seed/Angel M&A Activity

California leads M&A activity for seed and angel-backed companies, followed by New York and Massachusetts which aligns well with venture capital fundings stats. While a number of companies including Google (acquired France-based Sparrow in 2012) and Yahoo (acquired UK-based Summly in April) have pursued complementary technologies or talent internationally, close to 90% of the acquired seed/angel companies since 2012 were based in the U.S.

If you’re an investor who has some companies in the portfolio that might benefit from a soft-landing, a list of the top acqu-hirers of seed and angel-backed companies can be found on the ‘Research’ tab, after logging in to CB Insights.
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