2020 End-of-Year M&A Review | Tech M&A Deals, Startup Trends, Analysis

2020 has been a landmark year to watch for growth across sectors, with many companies inherently positioned to rally and thrive, and others barely able to get off the ground. This is especially the case when we look at technology M&A trends for the year.

You’re invited to download our exclusive end-of-year report, 2020 in Review: Tech Startup M&A Trends and Analysis, by clicking here.

The report contains lots of useful data and analysis that tracks M&A activity across tech verticals and across regions throughout 2020. Two key takeaways from the data emerge when looking looking at corporate venture investment and platform opportunities for the immediate post-COVID era and beyond:

  • A shift in VC funding towards late-stage startups, leaving a big gap in early-stage funding
  • The over-performance of platform business models and the PLAT ETF across verticals

A Shift In Funding Towards Later-Stage Startups, Opportunity for Incumbents in Early Stage

Venture capital activity in tech is alive and well, even against the backdrop of the pandemic’s uncertainties. But it’s a mixed picture. Total deal size and total funding have remained at healthy levels and have even seen growth, with a 30% increase in deal size occurring in 2020 compared to the same period in 2019. But the actual number of deals is in decline, at 25% fewer closed deals compared to the previous year.

Where has the money gone? VC firms hedged their bets this year, focusing on investing in later-stage (post-series B) ventures that show potential to thrive post-COVID. Valuations of those late-stage companies are also trending higher. Consequently, there’s been a shift away from first financings, leaving nascent startups to experience a serious capital crunch.

Venture Capital Raised by Investment Stage, 2019 vs 2020

“Capital Raised by Investment Stage”, pg, 15

The flight to certainty in VC financings toward later-stage is no surprise, especially given VC jitters about another dot-com bubble scenario where startups fail en masse. Later-stage startups that have attracted the majors deals this year have proven their growth potential, are leaders in industries marked by a spike in consumer demand (such as FoodTech, which saw $8.4 billion in raised funding by Q3 2020 compared to 2019’s $7 billion), and represent a safer bet for VCs waiting to see how the dust settles post-COVID.

This shift away from early-stage financing creates a major opportunity for incumbents to find deals with earlier-stage companies. Given the accelerated shift to digital that Covid has also brought, incumbents today have a generational opportunity to accelerate their digital initiatives by partnering with, investing in or acquiring startups. While the valuations on late-stage startups have only gotten richer, as you’ll see below, the gap in early stage financing means that incumbents can find a unique combination of accelerated growth and real value in pursuing deals with earlier-stage startups in the current environment.

Total Venture Capital Funding by year

“Total Venture Capital Funding”, pg. 5

VC startup deal valuations by year

“Deal Valuations”, pg. 6

Some key data points on this from our 2020 In Review report [LINK] include:

  • The amount of Early-Stage capital raised YTD fell 3.4%, while capital raised for Later-Stage (post-series B) investments grew by 3.3%.
  • Median post-money valuations (PoMV) are up almost 21% YTD over the same period in 2019.
  • In North America, where VC funding is still higher than in all other regions, total deal count trailed YTD by 18.9% from the same period in 2019, while capital raised was 9% higher — also pointing to larger investments per deal.
  • Asia saw the largest median PoMVs ($43 million), driven by more than 50 $1 billion-plus post-money venture rounds.

Also, while eCommerce saw less capital raised YTD and a continued decline in deal volume, Big Data and FoodTech are two sectors to watch. Big Data saw a 72.6% increase in median deal volume YTD. In FoodTech, median valuations increased by an impressive 156.3%, includingInstacart’s $17.7 billion and DoorDash’s $16 billion respective PoMVs.

VC startup deal valuation by industry for 2020

“Valuations by Industry”, pg. 11

On the other hand, with the decline of early stage financing, early-stage ventures saw an acceleration in a trend that’s been in progress for the past 5 years. It’s been a long time since we’ve seen a dominant new development platform that spurs on VC first financings à la iOS and Android (for at least the first half-decade after their release). And the early-stage venture capital famine was exacerbated by the coronavirus pandemic and the extra uncertainty that newer startups face in this kind of environment.

This year’s tech M&A trends suggest there’s substantial opportunity for corporate incumbents, who might be exploring how to buy a startup or invest in startups before IPO, to get in on promising early-stage ventures that carry a lower-than-usual risk given the decline in early-stage funding and valuations.

PLAT ETF, Tracking High-Growth Platform Businesses, Is Outperforming Key Tech Indices and ETFs


Throughout the year, the PLAT ETF (listed on the NYSE and recently rebranded as the WisdomTree Growth Leaders Fund) has been consistently outperforming the likes of the S&P 500 and Nasdaq 100, despite the effects of COVID-19 across industries. This success suggests platform business models are resilient compared to the broader market – including other tech businesses.

PLAT is performing better in 2020 than its major tech ETF peers. In Q4 2020, we’ve seen it open up a substantial lead over the Invesco QQQ ETF, as well as the iShares U.S. Technology ETF (IYW) and the SPY.

PLAT ETF vs ishares and IYW

“PLAT Performance”, pg. 19

The asset-light nature of platform businesses as well as their dominant market positions has made many of these companies particularly resilient during a downturn.

With natural advantages such as positive network effects, freedom from production burdens, and low marginal costs, top platforms are showing hardiness amid macroeconomic insults that have deeply hurt some leading traditional enterprises.

What do 2020’s Tech M&A Trends Mean for Corporate Venture Investment and Public Markets?

If this year has proved anything, it’s that being a tech company, or “tech-enabled,” hardly adds to survival odds under severe macroeconomic shocks. Business models and corporate innovation strategies matter.

Now that we’ve seen at least a few months of the impacts of the global pandemic on the tech M&A space, it’s clear that there’s still a major opportunity to invest in platform businesses, whether at the early stage or in public markets.

PLAT’s success demonstrated the resilience of platform business models during a major downturn. With the gap in early-stage financing, large enterprises have a chance to infuse their innovation efforts with talent and tech capabilities that can help them capture their own platform opportunities.

Download your copy of the 2020 in Review: Tech Startup M&A Trends and Analysis report.

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