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Last year, it seemed everyone was buying everyone. Venture Capital hit an all-time high, public companies were spending big bucks on startups, and even the IPO market broke records. This year, things are very different, and there are many reasons why, from Ukraine to rampant inflation on a global scale to companies selling off underperforming stock.
This first quarter has seen a significant reduction in public companies buying startups. Public companies in the US had 99 acquisitions in Q1, while that number had been 150 in the same period just one year ago. The behavior, in turn, generates a fascinating situation at a startup level. The merger and acquisition (M&A) activity has grown, especially at an early stage level, from 118 deals in Q1 2021 to 124 in 2022.
Startups are riding last year's wave of high valuations and now have cash, which is a great thing. M&As are crucial for the startup world in 2022, as they add movement to it, but they can also be essential for a startup's success in the long run. So, while the public market grinds to a halt, the private sector still has some momentum.
The problem is that this too shall pass. Some are already raising caution flags. After all, the slowdown will come, and it's only a matter of when, though some say it's already here. If you ask me, I believe we're not there yet. Unfortunately, we're only just beginning to see the slowdown at the startup level, and it will get rougher, especially for a particular kind of startup.
Imagine startups that were part of the hype in 2021 and raised a decent amount in their Series A funding round, yet they failed to grow enough for a Series B. These startups end up in a grey area; they've shown they can raise money yet haven't fine-tuned their growth. If you think there aren't a lot of them, think again. This limbo, and a tighter market, will put these startups to the test. Yet, that's what I love about the startup world - it always finds a way to create a solution.
What if there's a different kind of investor? I found this article researching for this op-ed, and, I got to say, the idea is growing on me. After all, with so many startups getting stuck in that gray area, there's potential. Some might need only a few tweaks to make it over the hump and land that coveted Series B round. The challenge is convincing the rest of the world that, perhaps, it's time to take a different approach
Alyona Musko's boyfriend woke her up with four words. "The war has started." Later that same day, Musko was dashing towards the relative safety of the border with Poland. Along with her boyfriend, grandmother, and dog, she took clothes, food, and her laptop. Though the war would ravage Ukraine, Musko still needed to run her startup, Fuelfinance.
Her goal is to help entrepreneurs manage their finances. This way, they can focus on the daily challenges of running a startup. In addition, Fuelfinance provides back-office services such as accounting and cash-flow planning for hundreds of customers. So, despite a war going on, Musko's goal was to keep going for them.
The entire staff has worked tirelessly from bomb shelters and old factories scattered throughout Ukraine. They even managed to launch on Product Hunt. Everyone pitched in, commenting and promoting Fuelfinance, even with air sirens echoing in the background. Still, their hard work paid off, reaching the top of the list. It's only one of the many successes Musko wants for her startup. For the moment, not even war has slowed Fuelfinance down.
Threads of the Week:
The NYC Subway is the heart that beats beneath one of the busiest cities in the world and has done so for almost 120 years. It carries five million passengers per day with more than 1370 km of track and 472 stations. Plus, it’s the largest subway network in the Western world. And, at one point in history, it was pretty swanky.
Nowadays, it’s still essential, but it looks awful. How did things go so bad? It’s complicated.
Paying $90 million for a startup with ten employees and just $4 million in funding is a bold move. Still, that's what Brex paid for Pry, making this the company’s largest acquisition yet. Some big names are using the platform, but the reason for the purchase goes beyond Pry’s capabilities.
Pry helps founders integrate their company's bank accounts so they can track cash flow, burn rate, and runway. It's an ideal platform for larger companies, which helps Brex in its quest to expand beyond startups and small businesses.
The startup was born in 2019 when Andy Su, Tiffany Wong, Hayden Jensen, and Alex Sailer set out to do financial planning for startups. Pry went through the Y Combinator program and raised $4.2 million in August 2021, the only fundraising it has done. Even so, it stood out from the rest since it nabbed $90 million.
