Key points:
- Start-ups that experienced high valuations in the last bull cycle are struggling to find buyers for acquisitions.
- Data from Dealogic shows a 19% decrease in the number of M&A transactions involving venture-backed start-ups.
In the current market, many start-ups are dependent on mergers or acquisitions as an exit strategy, particularly as there has been a decline in IPOs from the highs of 2021. However, seller expectations are remaining high, and start-up boards are reluctant to accept that they will not grow into the sky-high valuations of the past.
A drop in the valuation of vested employee stock in the secondary market has not yet convinced start-ups that their expectations for acquisition prices need to be adjusted. The boards of these start-ups need to come to terms with this reality before they can realistically attract potential buyers.
The article suggests that start-up boards need to go through the five stages of grief (denial, anger, bargaining, depression, and acceptance) in order to adjust their valuations and expectations. This cartoon highlights the challenges that start-ups are facing in the current market and the need for a realistic approach to acquisitions.
