It may be the big funding rounds that grab the headlines when it comes to the startup world, but for investors it’s the exit that actually matters.

For the past few years the M&A market for startups has been slow — and the IPO pipeline nonexistent.

However, just as AI is taking over venture, perhaps it is doing that for the M&A and IPO markets.

OpenAI — which reportedly has doubled annualized revenue to $3.4 billion — opened up its wallet the past few days to make two deals happen. The creator of ChatGPT first bought search and analytics startup Rockset last week. The San Mateo, California-based company had raised nearly $118 million in capital, per Crunchbase. Terms of the deal were not disclosed.

Then just this week, the AI giant bought video collaboration startup Multi, previously Remotion, in what was reportedly an acqui-hire. The San Francisco-based company had raised $13 million to date, per Crunchbase.

Overall, M&A has picked up slightly involving startups, per Crunchbase data. The current quarter already has witnessed more activity than Q1, with more than 430 deals. However, those numbers are still relatively low compared to quarters in previous years.

While those two deals will not set fire to the M&A market, it doubled the amount of deals OpenAI had previously done according to Crunchbase. It may show a new willingness for inorganic growth, a desire nearly all Big Tech companies must gain as they get larger. With OpenAI’s ever-expanding revenue numbers and the value of the company ever increasing, it certainly has the wherewithal to easily become a Goliath among suitors.

However, M&A is not the only way to exit, and AI may be looking to help there too. Last week, artificial intelligence chips startup Cerebras Systems reportedly filed confidentially for an initial public offering.

It’s a good time to be an AI chip developer. Nvidia has become one of the most — if not the most — valuable companies in the world and funding is currently gaining traction in the sector. Astera Labs — which provides data and memory connectivity solutions for some of the biggest chipmakers in the world — had a successful IPO even though its shares have tailed off its highs.

Other companies that went public this year had strong AI ties — like biotech Tempus AI — or played up their AI connections strongly — like Reddit.

Public investors are clearly intrigued by the AI tech play and where it may lead.

Investors have waited a couple years for the IPO and M&A markets to open back up, and it would not be surprising for AI to lead that charge — just as it seems to be leading everything else.

If big AI companies like OpenAI and perhaps Nvidia — which is showing interest in taking on the cloud services providers — start to get acquisitive and more startups think the time is right to test the public market, investors may start to see those long-awaited returns rolling in.

Things that caught our eye and other stuff:

• The soap opera at Stability AI took another turn this week, as investors that included ex-Facebook President Sean Parker committed $80 million to take over the artificial intelligence-driven visual art startup. Per a story in The Wall Street Journal, the new investors made a deal with suppliers to forgive some $100 million owed by Stability and also negotiated for the startup to be released from $300 million in future obligations. It’s the latest twist for Stability, which locked up a $101 million raise led by Coatue, Lightspeed Venture Partners and O’Shaughnessy Ventures in 2022. The company did not release a valuation at the time, but Bloomberg reported the new cash infusion valued the company at around $1 billion. However, in spring of last year Forbes reported Stability AI’s founder Emad Mostaque made exaggerated statements about both his own background and his generative AI startup. At the time, some AI researchers disputed the startup’s claims that it created the image generator Stable Diffusion, an open-source project developed by researchers. It also was reported the London-based startup was looking to raise an additional $1 billion of capital at a multibillion-dollar valuation, but talks had stalled. In March, reports surfaced that Mostaque left the company after an investor revolt. The company said in an internal memo it was trying to “right-size” the business after a period of unsustainable growth, per the report. Finally, in April the startup laid off 10% — estimated to be about 20 people — of its workforce, per a report by CNBC. That’s quite the whirlwind — even for an AI startup.
• Another round that caught our attention this week was raised by a Palo Alto, California-based startup. MEandMine, a developer of AI-flagging to identify psychological risks in young children, raised $4.5 million in funding led by K5 Global. The startup offers AI-powered screening to identify students’ psychological risks in real time by playing games with data points that are used for AI-flagging, allowing teachers, counselors and others to screen early and make informed decisions. Initial results from its California school pilots show a 91% accuracy, the company says. MEandMine’s algorithm launches games based on individual students’ makeup, and can help them center themselves.

Related Crunchbase Pro list:

• Global Venture-Backed M&A

Related reading:

• Deal-Making Involving VC-Backed Startups Picks Up Slightly, But Still Slow
• Accounting Startup Klarity Books $70M Series B — Report
• AI Chip Startup Etched Captures $120M In Hot Market
• Stability AI Newest Addition To Unicorn Stable
• Stability AI’s Founder Made Misleading Claims — Report
• Stability AI Lays Off 10% Of Staff — Report

Illustration: Dom Guzman

The largest new entrant was xAI, which raised $6 billion and officially joined The Crunchbase Unicorn Board in May 2024. The company was valued at $24 billion. 

So far this year, around 50 new unicorns have joined the board, adding close to $100 billion in value.

In addition, several companies already at unicorn valuations raised billion-dollar funding rounds at higher values. This includes CoreWeave, Scale AI, Wiz and Wayve. CoreWeave was valued at $19 billion, almost 8x its 2023 valuation of $2.4 billion, due to demand for its AI- driven data center infrastructure.

Unicorn exits

The majority of unicorn exits this past month were below their last private values.

Hangzhou-based Zeekr, an electric vehicle company, went public on the NYSE at a $5.2 billion value. Zeekr was last valued in 2023 at $13 billion. And Bengaluru-based insurance provider Digit Insurance listed at a $3 billion value on the BSE and NSE exchanges in India, $1 billion below its 2022 valuation.

Global investor Permira acquired a majority stake in Israeli unicorn BioCatch, a biometric intelligence company, for $1.3 billion. This was the single exit above its last private value, a secondary financing in 2023 which valued BioCatch at $1 billion.

API security company Noname Security, based in Palo Alto, California, was acquired by public cloud security company Akamai Technologies for $450 million, well below its $1 billion valuation from 2021. And Israeli parking app Pango acquired London-based ride hailing app Gett for $175 million, a steep discount from its 2018 value of $1.5 billion.

Here are the new unicorns in May by sector.

AI

• Elon Musk‘s xAI, a 1-year-old foundation model company based in Burlingame,  California, raised a $6 billion Series B funding at a $24 billion value. Participants in the round include Valor Equity Partners, Vy Capital, Andreessen Horowitz, Sequoia Capital, Fidelity, Prince Alwaleed Bin Talal and Kingdom Holding Co. among others.
• Bay Area-based WEKA, a data platform for AI workloads, raised a $140 million Series E funding from existing investors. Valor Equity Partners led the funding for the 10-year-old company, which valued WEKA at $1.6 billion.
• London-based Builder.ai, a no-code AI powered app developer, raised a $250 million Series D led by the Qatar Investment Authority. The 8-year-old company announced a partnership and equity financing from Microsoft earlier in May.

Web3

• Los Angeles-based Farcaster, a decentralized social network built on Ethereum, raised a $150 million Series A. The funding to the 3-year-old company was led by crypto investor Paradigm, with participation from a16z crypto, Haun Ventures and Union Square Ventures among others, valuing the company at $1 billion.
• Humanity Protocol, a blockchain unique identity platform using biometrics, raised a $30 million seed funding led by Kingsway Capital. The company, which was founded less than a year ago, was valued at $1 billion.

Financial services

• Los Angeles-based Altruist, a digital wealth management service for wealth advisers, raised a $169 million Series E led by Iconiq Growth. The 5-year-old company was valued at $1.5 billion.

Data and analytics

• San Francisco-based Sigma Computing, a cloud analytics platform incubated at Sutter Hill Ventures, raised a $200 million Series D. The funding for the 9-year-old company was led by Avenir Growth Capital and Spark Capital, and valued Sigma at $1.5 billion.

Related Crunchbase unicorn queries

• The Crunchbase Private Unicorn Company List
• New unicorns in 2024
• New unicorns in 2023
• Unicorns in the U.S.
• Unicorns in Asia
• European unicorns
• Unicorns from LatAm
• Emerging unicorn leaderboard
• Exited unicorns

Methodology

The Crunchbase Unicorn Board is a curated list that includes private unicorn companies with post-money valuations of $1 billion or more and is based on Crunchbase data. New companies are added to the Unicorn Board as they reach the $1 billion valuation mark as part of a funding round.

The unicorn board does not reflect internal company valuations — such as those set via a 409a process for employee stock options — as these differ from, and are more likely to be lower than, a priced funding round. We also do not adjust valuations based on investor writedowns, which change quarterly, as different investors will not value the same company consistently within the same quarter.

Funding to unicorn companies includes all private financings to companies that are tagged as unicorns, as well as those that have since graduated to The Exited Unicorn Board.

Exits analyzed here only include the first time a company exits.

Please note that all funding values are given in U.S. dollars unless otherwise noted. Crunchbase converts foreign currencies to U.S. dollars at the prevailing spot rate from the date funding rounds, acquisitions, IPOs and other financial events are reported. Even if those events were added to Crunchbase long after the event was announced, foreign currency transactions are converted at the historic spot price.

Illustration: Dom Guzman

Clarification: This story has changed since its original publication: Builder.ai also joined The Crunchbase Unicorn Board in May 2024.

This is a weekly feature that runs down the week’s top 10 announced funding rounds in the U.S. Check out last week’s biggest funding rounds here.

After a few slow weeks, things picked up slightly concerning big funding deals. Most surprisingly is the fact the week was led by an autonomous driving startup — an industry left for dead by some. AI, biotech, space tech and cybersecurity also saw good-sized raises. Perhaps things are heating up as we head into summer.

1. Cruise, $850M, autonomous cars: In for a penny, in for a pound. That clearly seems to be how General Motors feels about Cruise. The auto giant agreed to pump another $850 million into the San Francisco-based startup. Cruise’s saga has been well documented. In 2021, Cruise snagged the largest round of any venture-backed U.S. startup when it upsized a round to $2.75 billion, valuing the company at  more than $30 billion. However, the tide started to turn in early 2022, when SoftBank did not release a promised $1.35 billion to Cruise as part of an agreed-upon deal when the autonomous carmaker completed a commercial deployment of vehicles. Instead, General Motors acquired SoftBank’s equity ownership stake in Cruise for $2.1 billion. Then, late last year, Cruise suspended its self-driving taxi program across the country after losing its permit to operate in San Francisco due to an incident with a pedestrian. That announcement came almost exactly a year after another autonomous vehicle startup — Ford Motor-backed Argo AI — shuttered after raising $3.6 billion in funding from investors such as Ford Motor, Volkswagen Group and Lyft. Cruise is now restarting its driving programs in Phoenix, Dallas and Houston. Clearly GM is betting — big — the autonomous driving and robotaxi market comes back.

2. AlphaSense, $650M, artificial intelligence: AI-driven market intelligence platform AlphaSense raised $650 million in funding co-led by Viking Global Investors and BDT & MSD Partners at a $4 billion valuation — a 75% increase from just nine months ago. As part of the deal, AlphaSense acquired expert research startup Tegus for $930 million. Last September, the company locked up a $150 million Series E led by Bond Capital at a $2.5 billion valuation — an increase of nearly 30% from its $100 million round at a $1.8 billion valuation in April last year. The New York-based startup’s market intelligence and search platform — powered by AI and natural language processing — helps clients form corporate and investment strategies. In total, the company has now raised $1.4 billion since its founding, per Crunchbase.

3. Santa Ana Bio, $125M, biotech: Biotech bounces back this week with a couple nine-figure rounds. First up is Alameda, California-based Santa Ana Bio, an immunology company developing therapies for patients with autoimmune and inflammatory diseases, which emerged from stealth with a $125 million Series B round led by GV. Founded in 2021, the company has raised $168 million, per Crunchbase.

4. Alzheon, $100M, biotech: Alzheon was the next biotech to raise big this week. The startup raised a $100 million Series E led by Alerce Medical Technology Partners. The Framingham, Massachusetts-based firm is developing medicines for Alzheimer’s disease and other neurodegenerative disorders. Founded in 2013, the company has raised $237 million, per Crunchbase.

5. Apex, $95M, space: Spacecraft manufacturing company Apex locked up a $95 million Series B led by XYZ Venture Capital and CRV to ramp up its production of satellite buses. The Los Angeles-based space tech startup is helping streamline the approach to satellites with the ability to mass produce spacecraft buses — the main body and structural component of satellites — to help growing demand from customers like the U.S. Department of Defense. The new cash will allow the company to increase production to meet customer demand — following the launch of Apex’s first bus in March. Funding to VC-backed space tech startups seems to be on the uptick this year, per Crunchbase data. Last year, space tech startups raised $5.8 billion. However, through less than half of this year, such startups have already seen $3.3 billion roll into their coffers. Founded in 2022, the company has raised $122 million, per Crunchbase.

6. Cyberhaven, $88M, cybersecurity: Cybersecurity funding has shown some life recently and this week showed more proof of that trend. San Jose, California-based Cyberhaven, a data detection and response platform, raised an $88 million Series C led by Adams Street Partners and Khosla Ventures. The round comes after a year in which the company saw a 200% growth in new bookings. Founded in 2016, the company has raised nearly $137 million, per Crunchbase.

7. InduPro, $85M, biotech: Seattle-based InduPro, developing therapeutics for the treatment of cancer and autoimmune diseases, closed an $85 million Series A co-led by The Column Group and Vida Ventures. Founded in 2022, this is the company’s first announced round, per Crunchbase.

8. (tied) Enveda Biosciences, $50M, biotech: Boulder, Colorado-based Enveda Biosciences, a biotechnology company using AI to engineer medicines from plants, announced a new $55 million round. No lead investor was announced, but Microsoft is a new investor in the company. Founded in 2019, Enveda says it has raised $230 million.

8. (tied) Canary Technologies, $50M, hospitality: San Francisco-based Canary Technologies, a management platform for hotels, closed a $50 million Series C led by Insight Partners. Founded in 2017, Canary has now raised nearly $100 million, per the company.

10. Posh AI, $45M, artificial intelligence: Boston-based Posh AI, a conversational AI platform for the banking industry, raised a $45 million round led by Curql. Founded in 2018, the company has raised nearly $73 million, per Crunchbase.

Big global deals

Another large AI round occurred in Europe.

• Paris-based Mistral AI finally secured its much talked about round that values the OpenAI and Anthropic competitor at $6 billion, per a report in the Financial Times. According to the report, Mistral AI raised $500 million in equity and $140 million in debt.

Methodology

We tracked the largest announced rounds in the Crunchbase database that were raised by U.S.-based companies for the seven-day period of June 8 to June 14. Although most announced rounds are represented in the database, there could be a small time lag as some rounds are reported late in the week.

Illustration: Dom Guzman

Rarely, however, does the top search result for their area of expertise link to the International Atomic Energy Agency.

In the area of radiopharmaceuticals, however, the agency turns out to be one of the more prolific publishers of reports and explainer pieces. Its involvement coincides with growing investment around these therapies, which use radioactive forms of chemical elements called radioisotopes to treat cancers and other medical conditions.

Last week, we saw both one of the larger funding rounds and one of the biggest M&A deal closings to date for the space.

On the funding front, Germany’s Isotope Technologies Munich closed on just over $200 million in an equity round led by Temasek Holdings.

Isotope Technologies said the money will go partly to prepare for a potential market launch of a treatment for a type of neuroendocrine tumor, which is currently in late-stage clinical trials. It  also plans to expand its manufacturing capabilities and pipeline of medical isotopes for cancer treatment.

On the M&A side, meanwhile, a subsidiary of AstraZeneca completed its purchase of Fusion Pharmaceuticals, a developer of oncology radiopharmaceuticals, for $2.1 billion plus up to $300 million in milestone payments. Hamilton, Ontario-based Fusion, founded in 2014, went public four years ago.

Growing pipeline of recently funded companies

Venture funding, meanwhile, continues to flow. Per Crunchbase data, at least 12 private companies focused on radiopharmaceuticals have raised venture or growth funding in the past two years. The companies in our sample set, posted below, have raised nearly $1.3 billion in funding to date.

It’s a relatively youthful list, with six of the companies on it founded less than four years ago. Across the whole list, meanwhile, a majority of funding also has come in the past couple of years.

A hot area for IPOs and acquisitions

Looking at valuations given to leading radiopharmaceuticals companies from public investors and large-cap acquirers, one can see why startup investors would be enthusiastic.

Fusion wasn’t the only multibillion-dollar radiopharmaceuticals M&A deal in recent months, nor was it even the largest. In February, Bristol-Myers Squibb completed its acquisition of Rayze Bio, a developer of radiopharmaceuticals for treating tumors, for $4.1 billion. San Diego-based Rayze had just gone public in September.

Of course, it’s not just the valuations that have attracted startup investors’ attention. We’re also seeing promising clinical trial results for treatments addressing some of humanity’s most intractable diseases.

Related Crunchbase Pro list:

• Radiopharmaceutical-Related Startups Funded In The Past Two Years

Illustration: Dom Guzman

For a case in point, look at last week: Software investor Hg announced it would pay over $3 billion to acquire auditing platform provider AuditBoard. Amid a slow period for big M&A transactions, the deal ranks as the largest purchase of a U.S. private, venture-backed company in 2024, per Crunchbase data.

If AuditBoard is a name you’ve never heard of, you’re not alone. While the Cerritos, California-based company has an enviable track record — profitable, with over $200 million in annual revenue —  it wasn’t a heavy venture fundraiser. In a decade of operations, it pulled in $43.6 million total, raising its last Battery Ventures-led round back in 2018.

AuditBoard also managed to fly under the radar for the obvious reason that it’s an auditing and compliance software company. That’s not the kind of niche that produces household name brands.

VCs like auditing and compliance

But while it might not be a high-profile space, financial compliance- and auditing-focused startups have been pretty popular with venture investors. Their interest coincides with a mini-boom in funding to accounting-focused companies, several of which have raised large rounds this year.

For auditing and compliance in particular, some of the more recently and heavily funded names include:

• DataSnipper, based in Amsterdam, provides productivity tools for auditing and finance. It raised a $100 million Series B in February, led by Index Ventures.
• Supervizor, with offices in New York and Paris, markets a quality assurance platform for finance teams, which includes audit analytics tools. On Tuesday, the company announced it raised $22 million in a funding round led by Orange Ventures.
• FloQast, based in Sherman Oaks, California, counts a former auditor, Mike Whitmire, as co-founder and CEO. The 11-year-old company, which sells accounting and compliance workflow automation tools, has raised over $300 million to date, including a $100 million April Series E led by Iconiq Growth.
• Kintsugi AI said Wednesday it had raised a $6 million Series A led by Link Ventures. The San Francisco-based startup says its platform helps businesses simplify tax compliance using AI-powered automation.

Big money in tools to do dull jobs

In the wake of AuditBoard’s $3 billion exit, it’s timely to consider the year’s second-largest venture-backed M&A deal as well. OpenGov, a provider of software to streamline government operations, sold to existing stakeholder Cox Enterprises at a $1.8 billion valuation.

One commonality between both acquirees is they operate in industries — auditing and govtech — that don’t make for exciting conversation. Most people want to spend as little time and energy as possible doing things like verifying financial reports or dealing with the Department of Motor Vehicles.

It’s probably not a coincidence that companies offering ways to more easily and efficiently complete these kinds of dull and often complicated tasks are appealing to acquirers. There’s money to be made in software that does jobs we don’t want to do ourselves.

Public and private equity investors seem to agree. Intuit — the pioneer of tax and accounting software — is a roughly $170 billion public company today, trading near its all-time high.

On the M&A side, tax compliance software provider Avalara, one of the more recent generation of venture-backed companies in the space, sold to Vista Equity Partners for $8.4 billion in 2022. A few years earlier, it had carried out a successful IPO.

These might not be the buzziest companies or industries. But in a subdued environment for startup M&A, they’re more than pulling their weight.

See also:

• The Crunchbase Billion-Dollar Exits Tracker

Related reading:

• Accounting Startups Continue To Tally Up Funding

Illustration: Dom Guzman

As companies expand, they often face increased risks due to over-dependence on limited customers, geographic markets, supply chains and more.

Strategic diversification is not just a prudent choice; it’s a vital maneuver to safeguard your business from unpredictable setbacks.

With that in mind, here’s how to strategically mitigate risks associated with key areas of diversification.

Customer concentration

Over-reliance on a handful of customers can spell disaster if one decides to part ways. Diversifying your customer base helps stabilize revenue streams and reduce the volatility of your business performance.

Implementing a robust customer acquisition strategy that leads to customer diversification — where there is no small group of customers contributing to the majority of sales, and where your customer base is a healthy mix of market segments or industries — can cushion the company against the loss of a major client and market volatility.

I have seen companies lose significant M&A value due to customer churn as that one customer accounted for 50% of their revenue.

Expanding geographic reach

Concentrating on a single country or region increases vulnerability to local economic downturns, political unrest or regulatory changes. Companies should look to international markets for expansion — not just to increase their customer base but also to mitigate risks tied to any one locale.

This geographic diversification can be achieved through online platforms, setting up remote sales offices, or partnerships with international distributors.

Securing multiple supply chains

Sole reliance on one supplier for raw materials or key components can lead to significant operational disruptions if that supplier faces issues like price hikes, production halts or goes out of business.

To avoid this, companies should develop relationships with multiple suppliers across different regions. This approach not only helps in negotiating better terms but also ensures continuity of supply.

I have seen companies lose three or four quarters of revenue due to such issues. This can destroy a company. By the time you sort things out, even your loyal customer base may be long gone.

Considering ‘what if’

There are many diversification strategies to think about, including product or service diversification.

Every entrepreneur should take a step back and play a game of “what if.”

What if your biggest customer churns? What if your key supplier vanishes? What if there is a natural disaster or political unrest in your key geography? What if your key technology is now offered as a free feature by a major player?

If you work to mitigate these risks, you will cushion yourself from volatility and lay the foundation for sustained growth.

Itay Sagie, a strategic adviser to tech companies and investors, specializing in strategy, growth and M&A, a guest contributor to Crunchbase News, and a seasoned lecturer. You can connect with him on LinkedIn for further insights and discussions.

Illustration: Dom Guzman

The deal involves approximately $1 billion in cash and $540 million in CyberArk shares.

The price marks a 34% increase from Venafi’s valuation back in late 2020, when private equity giant Thoma Bravo made a growth investment valuing it at $1.15 billion.

Other investors in the Salt Lake City-based company include TCV and Foundation Capital.

The deal is the largest this year for a private cybersecurity company, per Crunchbase data.

The deal helps CyberArk — one of the most valuable cyber companies in the world — delve deeper into the growing area of machine identity security. Machine identity has become a hot topic in cyber as mobile and distributed workforces have led to a proliferation of machines on networks and a widening amount of endpoints.

CyberArk estimates the deal expands its total addressable market by nearly $10 billion.

More deal-making

It’s been a busy few weeks in the cyber sector for Thoma Bravo, which just bought Darktrace for a cool $5.32 billion in cash last month.

In general, investors are remaining bullish on deal-making for cyber startups. At the annual RSA Conference in San Francisco two weeks ago, many VCs and private equity investors said there has been significantly more “chatter” about potential deals.

One reason is that several large companies have socked away vast amounts of cash as M&A has slowed in recent quarters. Tech giants like Nvidia have watched their cash reserves balloon during that time.

Related Crunchbase Pro query:

• Global Venture-Backed Cybersecurity Acquisitions

Related reading:

• Cybersecurity Dealmaking Shows Signs Of Life
• Deal-Making Involving VC-Backed Startups Picks Up Slightly, But Still Slow
• ‘There’s A Lot Of Noise’ — VCs Trying To Find Clarity In Cluttered Cyber AI Landscape

That was the finding from an analysis of recent exits for American companies on the Crunchbase Unicorn Board. Over the past 12 months, just 15 private, venture-backed companies valued at $1 billion more have gone public or gotten acquired. 

Meanwhile, another 741 U.S.-based private, venture-backed companies remain in existence that met or exceeded the $1 billion threshold at their last reported valuation. If the exit tempo of the past 12 months stays the same, it would take just over 49 years to get through that backlog. 

Recent historical perspective

Luckily, one constant in the startup world is that nothing stays the same. And given that exit activity has been slower than usual this past year, it’s reasonable to expect it will pick up.

Still, it’d take some NASCAR-level acceleration to get through a backlog this big. Even in 2021, the peak year on record, a total of 86 known unicorns carried out exits, per Crunchbase data. And that was pretty unusual.

Typically, the annual crop of unicorn exits is far smaller. For the past five years, it’s averaged 38 per year. At that pace, it would still take nearly 20 years to get through the current unicorn supply. 

Not everyone exits

Of course, this is a theoretical exercise. No one expects every company once anointed with a coveted $1 billion-plus valuation will go on to exit. Some will fail, either shuttering and liquidating assets or filing for a bankruptcy reorganization.

In the past year, we’ve seen a number of private unicorns shut down or file for Chapter 11 bankruptcy. The list includes former high-flyers like trucking logistics startup Convoy, homebuilder Veev, and health benefits automation provider Olive AI.

Others could conceivably stay private indefinitely. SpaceX, the most valuable U.S. unicorn, has proven it’s possible to take this route and prosper. More broadly, a booming secondary market for shares in private companies has opened up a path to liquidity that doesn’t require a formal exit event.

Big exits make the difference

As for traditional exits, quality tends to matter more than quantity. 

Startup investment is a hits business, and just a handful of standout success stories provide a lion’s share of returns for VCs.

In this respect, the past year hasn’t been too bad. Although startup IPO valuations haven’t broken any records, we have seen some pretty large public offerings and strong aftermarket performance.

One of the leading lights of the past year is Astera Labs, a developer of connectivity technology that went public in March and had a recent market cap around $11 billion. Other standouts include Reddit ($8.9 billion market cap), Instacart ($8.8 billion market cap), Klaviyo ($6.5 billion market cap) and Rubrik ($5.9 billion market cap).

Acquisitions, however, have not delivered big unicorn exits this past year. Even some of the pricier deals — like Atlassian’s purchase of collaboration tools provider Loom for $975 million — did not cross the $1 billion mark. Others, like e-commerce aggregator Perch and online learning platform Udacity, fetched prices believed to be far below their former unicorn valuations.

More IPOs, please

Going forward, realists don’t expect all or even most onetime unicorns to achieve an exit worthy of a 10-figure private valuation. Everyone knows startup values got bubbly a couple years ago, and have since come down for most sectors.

Still, it’d be nice — and arguably necessary — to see the pace of unicorn IPOs pick up. Public markets have proven receptive in recent months. And unicorn shareholders don’t have 49 years to wait.

Related Crunchbase Pro queries

• Exited US Unicorns
• US Unicorns

Related reading:

• The Crunchbase Unicorn Board
• The Crunchbase Billion-Dollar Exits Board
• Deal-Making Involving VC-Backed Startups Picks Up Slightly, But Still Slow
• Former Unicorns Are Bouncing Back From Bankruptcy

Illustration: Dom Guzman

However, it seemed like what most of the folks who invest big-money in those same cybersecurity startups really wanted was some quiet from all the noise that surrounds AI.

“There’s a lot of noise out there,” said one investor. “It’s getting harder and harder to cut through much of it.”

The general consensus among VCs at the conference was that while they are listening to a lot of pitches from startups that use AI or help secure its development — such as data protection, identity and third-party risk — many are taking their time to invest.

“It’s not that we aren’t listening,” said another VC. “We just haven’t pulled the trigger yet. We haven’t seen one that really moved us.”

Some investors seem hesitant to enter a market they don’t fully understand the size of yet and are skeptical of startups that claim they have an AI story when in reality they actually may or may not.

That said, funding numbers for AI-related cybersecurity startups actually seems to have made a comeback this year after a slight pullback in Q4. In the first quarter of the year, investors poured $263 million into such startups, compared to only $103 million in Q4 of last year, per Crunchbase data.

The biggest deal of Q1 was a $60 million Series E raise by New York-based BigID.

Already in the second quarter, investors have agreed to $410 million in deals with startups.

So, while many are preaching patience, it seems others are writing checks.

Other news and notes from RSA:

• The conference opened with news of cloud security startup Wiz locking up the biggest cybersecurity round of the year thus far  — a $1 billion round at a $12 billion valuation. The round caught some by surprise, but the general feeling was the overall funding levels in cyber were healthy and sustainable. While some downrounds and flatrounds still persist, there has been a noticeable uptick in both investors’ interest and actual money spent this year (which we have covered).
• One part of cybersecurity receiving interest are startups doing things around disinformation. Brands care about their reputation more than ever and a record 60-plus democratic countries are having national elections this year. “It’s on the top of everyone’s mind,” said an investor. Startups that can analyze texts, images and other data on multiple platforms such as the dark web and social media are something investors are looking at. Although, with some elections already behind us, one has to wonder if maybe this interest should have happened earlier.
• The other thing on the top of investors minds is the slow but strengthening M&A market. Deal-making for cyber startups and startups in general has slowly picked up and many expect that to continue as there has been significantly more “chatter” about potential deals. “I think you’ll see Q4 be really busy,” said one investor. “It’s not hard to look back and see when some of these companies last raised, so they may be looking for an exit. Expect PE to be involved.” Private equity already has been active this year. Late last month, Thoma Bravo — which had a nice shindig on top of the San Francisco MOMA during RSA — bought Darktrace for a cool $5.32 billion in cash.

Related Crunchbase Pro query

• Funding To VC-Backed AI Cybersecurity Startups

Related reading:

• Cloud Security Firm Wiz Raises $1B At $12B Valuation
• Cybersecurity Funding Shows Resilience In Q1

Illustration: Dom Guzman

There is good reason for some of that optimism — as valuations of venture-backed startups have slowly come down, the IPO market has reopened slightly, and strategic and private equity buyers are loaded with cash.

However, the first quarter saw only a slight uptick with 413 deals being completed through March, Crunchbase data shows. That is a 20% increase from Q4 2023 — which saw only 344 deals consummated — but that quarter was also the slowest in years when it came to VC-backed companies being bought. 

In fact, the deal total for Q1 is still a notch below Q3 2023’s 421 deals — which had been the slowest in years before Q4.

The quarter also didn’t see any deal of more than $1.8 billion, as the top deals included:

• Cox Enterprises bought govtech startup OpenGov in a $1.8 billion deal in February.
• In March, private equity firm Francisco Partners agreed to acquire Jama Software, a management and traceability services provider, for $1.2 billion.
• Also in March, Novo Nordisk agreed to buy Cardior Pharmaceuticals for approximately $1.1 billion.

The fourth quarter last year saw three deals of $2 billion or more involving VC-backed companies, including Roche agreeing to buy obesity drug developer Carmot Therapeutics for $2.7 billion.

Market stays sluggish

Despite the optimism from those in the deal-making field, it likely was unreasonable to expect VC-backed deals to make huge strides in Q1.

Most in venture will tell anyone that while valuations have come down, those for high-quality companies — which are the ones other companies actually want to buy — remain high, even if off their peak.

Many buyers likely think the market still hasn’t hit bottom quite yet and are waiting on the sidelines to see if prices come down further.

Regulatory complications

Concerns about the antitrust regulatory process also remain. Deals are taking significantly longer than past cycles, if they are approved at all, bankers and lawyers in the space say. Delays in consummating deals cost companies money, upping the value of deals and dissuading suitors from looking for deals.

Most famously, regulatory issues nixed the proposed $20 billion acquisition of Figma by Adobe late last year.

Just this week, Altruist founder Jason Wenk said an M&A exit for his wealth management startup — which just raised a $169 million Series E led by Iconiq Growth that values the company at more than $1.5 billion — was not in the cards because few buyers could afford the company and those that could would likely face antitrust scrutiny. 

Looking ahead

However, not all news is bad for the M&A market.

Just last month, Microsoft-backed data security firm Rubrik joined an array of startups testing the IPO waters and many insiders are “cautiously optimistic” the market for new public companies will be rejuvenated as the year wears on. 

An active IPO market also helps M&A deal-making, as it helps set market price and gives companies optionality, as most will run a dual-track process — looking at both an IPO and sale — as they aim to give investors liquidity.

Cash-flush buyers

There is also what could be a strategic aspect to the M&A market.

Nvidia made headlines just last month when it bought two young AI-related startups. The chip giant announced it had bought Run:Ai for a reported $700 million. It was also reported that it bought Deci AI. Both startups help companies develop lower-cost AI models.

Many in the M&A ecosystem believe strategics will use some of the dry powder they have on their balance sheets to broker deals for VC-backed startups, especially for those in the AI or adjacent spaces. 

For instance, Nvidia has seen its cash and short-term investments basically double to $26 billion in the past four quarters. Companies such as Cisco and Apple also have seen their cash and short-term investments increase in that time — although Apple’s recent struggles and share buyback plan may hinder any big deals.

While Microsoft’s cash and short-term investments on its balance sheet decreased last year through buybacks and deals closing, the cloud giant, which has made no secret of its AI desires, still has $80 billion. Search giant Google, meanwhile, has $108 billion.

Private equity also has substantial dry powder, as evidenced by Thoma Bravo’s deal a couple of weeks ago to buy cybersecurity firm Darktrace for a cool $5.32 billion in cash.

Of course, things can still go awry for the M&A market. Inflation has ticked back up, making money — including that on the balance sheet — more valuable, and some tech stocks have seen rocky weeks. If that continues, it can make any M&A deal involving shares tricky. A company will not want to use what it sees as discounted shares in a deal.

Nevertheless, many startup investors are looking for liquidity after a slow few years, and both strategics and private equity seem ready to add to their portfolios, so perhaps Q1’s uptick in deal-making is just the start.

Related Crunchbase Pro list:

• Global Venture-Backed M&A

Related reading:

• Eye On AI: After Q4 Slowdown, AI-Related M&A Picked Back Up In Q1
• Insight Partners’ Hinkle: M&A Is The Key To Unlocking Startup Liquidity This Year 
• AI Venture Funding May Be Hot, But M&A Remains Slow

Illustration: Dom Guzman