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Join The Information for AI Agenda Live on Wednesday, September 23, at SFMOMA. We’re bringing together the industry’s most influential researchers, founders, and investors to preview the next wave of innovation—from breakthroughs in continual learning models to the latest bleeding-edge applications.Learn more here. Welcome back! Achieving the largest IPO in history wasn’t the only record that SpaceX set. It’s now agreed to complete the largest acquisition of a venture-backed startup in history, its $60 billion dollar purchase of Cursor. The acquisition will make its founders billionaires, and it should provide billions in returns for investors like Thrive Capital and Accel. It also gave venture investors hope that other mega deals for startups are coming. You don’t have to go far back to find the last record-setting acquisition of a venture-backed startup. Google earlier this year completed its acquisition of cybersecurity startup Wiz for $32 billion. Chip designer Groq netted about $20 billion for its backers when it entered into a licensing agreement with Nvidia late last year. Similarly, Meta Platforms’ investment in Scale AI resulted in a $14 billion payout. While there have only been a handful of acquisitions in the double-digit billions, there has been a wave of other sizable deals. My colleagues reported this week that Qualcomm is in talks to buy venture-backed Tenstorrent, and the two parties have discussed a price between $8 billion and $10 billion. In April, ServiceNow completed its purchase of AI startup Armis for over $7 billion. Adobe almost bought Figma for $20 billion in 2022, but later ran into obstacles with regulators. Villi Iltchev, managing partner at early stage investment firm Category Ventures, noted that venture capitalists have been overly optimistic about acquisitions for the past 20 years, each year resulting in “great disappointment.” He says that finally, “we have a vibrant M&A environment.” Iltchev noted that companies are buying “not just leaders at the top of the market,” but the industry is also seeing a healthy volume of sizable deals. He referenced MaintainX, which recently sold for over $3 billion. The reasons for this are plentiful. Many founders and their investors are looking for an exit. Past investments have resulted in more than 1,000 startups valued at more than $1 billion—which is not nothing but not enough to go public. At the same time, larger technology companies are willing to spend big dollars to get top notch AI or security talent. Plus, many of the biggest publicly traded tech companies, from Meta to Snowflake, were previously venture-backed or have board members at VC firms invested in startups that would make good targets. This overlap means they often hear about startups that may be open for a sale. It makes sense that many of these startups and public companies would tie the knot. But perhaps one of the biggest reasons is the changed regulatory landscape. Google-Wiz saw what happened with Adobe-Figma and waited for the changed administration to pull the trigger.
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