With VC dealmaking down, startup buyers are filling the gap

They captured almost a third of global M&A deals, worth a record $42.5B.

In a market where VC funding is increasingly scarce for everyone except the top performers, more startups are turning to their peers to survive and scale.

According to PitchBook data, VC M&A dealmaking where startups themselves were the buyers surged this year, reaching 686 deals worth a record $42.5 billion. This represents increases of 5% and 34% respectively from 2024.

Startups have claimed almost a third of all VC M&A deal count, with their share of value climbing to 24.4%, the highest in the past decade.

While funding totals have recovered this year, up 35% from 2024, VCs are spending selectively. Capital is becoming increasingly concentrated in fewer startups, as evidenced by the fact that the deal count currently trails last year’s by 15%.

Consolidation is becoming an increasingly appealing option for startups struggling to secure their next raise, particularly as the liquidity market remains constrained. Combining two companies in the same market can often produce a stronger entity with a broader customer base and a deeper product, both of which offer a more compelling narrative for investors.

VCs, who are struggling to secure commitments for their next funds, are incentivized to push portfolio companies to pursue acquisitions of their peers.

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The rapidly increasing competition in the AI space has also driven more acqui-hires, where a startup is bought primarily to capture its employees rather than its products or customers. As VCs pile more cash into AI, larger startups have a growing war chest to snap up competitors or adjacent players.

OpenAI‘s $6.5 billion acquisition of Jony Ive’s AI hardware startup io Products was the largest deal to close this year. The ChatGPT maker also bought product testing startup Statsig for $1.1 billion.

Other more established companies are acquiring startups to advance their technology, such as digital media business Napster‘s $500 million acquisition of agentic AI company Touchcast.