It’s hard out there for a startup. We already saw the number of down rounds, where companies raised funding which values them lower than their previous funding, increase in 2015. They spiked to 11 percent in the third quarter, up from7 percent, for stage E or later.
Another number has also been creeping up: the number of down exits, or companies that sold for less money than they raised.
According to data compiled by CB Insights, there have been 214 such exits since 2010, and there have been at least 13 of them every year starting in 2012. They have also increased in each of the last two years, hitting a high of 18 in 2015, up from 16 in 2014.
The data singled out companies that raised at least $50 million in funding.
The most recent examples of this was Livescribe, a smartpen maker, which was acquired by Anoto GroupAB, a provider of digital writing and drawing solutions. Founded in 2007, Livescribe had raised $68 million in venture funding but was bought for $15 million,
Another recent examples include Rdio, a streaming music service, which sold several of its key assets to music discovery platform Pandora in November of 2015. Rdio had raised $125.7 million in funding from investors that included Atomico, Janus Friis, Mangrove Capital Partners and Skype. It sold to Pandora for $75 million in cash.
Other examples that CB Insights pointed out were Color Labs, a mobile photo app, which was acquired by Apple in 2012. It had raised $41 million in funding from Bain Capital Ventures, Sequoia Capital and Silicon Valley Bank. Apple was said to have paid a mere $7 million for it.
Another very recent transaction of this kind occured when Outerwall, the automated kiosk operator, acquired “certain assets and liabilities” from Gazelle.com, an online site that buys and sells pre-owned consumer electronics, in November.
The company had raised nearly $56 million from investors including Venrock Associates, RockPort Capital Partners and Physic Ventures. It sold for $18 million in cash.
In 2014, Cortina Systems,a semiconductor company, was acquired by Inphi. It had raised more than $215 million but was acquired for only $131 million.
M&A in 2015
2015 was a big year for mergers and acquisitions, as U.S. M&A volume topped $2 trillion for the first time, and M&A volume in the Asia-Pacific region crossed the $1 trillion threshold for the first time as well.
Global M&A volume hit $4.45 trillion, up nearly 4% from 2007′s record high.
Some of the biggest deals of the year in tech included EMC acquiring Virtustream for $1.2 billion; Adobe acquiring Fotolia for $800 million; Cisco acquiring Acano for $700 million; and Pandora acquiring TicketFly for $450 million.
