Marc Andreessen, cofounder of the high-profile venture capital firm Andreessen Horowitz, Facebook board member, and legendary tech investor, thinks that Microsoft’s $26 billion acquisition of LinkedIn is just the tip of the iceberg.
In fact, Andreessen says, he says that there are more merger and acquisition deals in the pipeline now than he’s seen in the last four years.
“Most [venture capitalists] would probably agree with that,” Andreessen says.
Overall, Andreessen says, the system works. Good companies are still finding funding, and even companies with good products or teams are getting acquired at high prices — like LinkedIn’s sale to Microsoft. It’s not that the money has vanished, it’s just that it’s going towards businesses that are working.
“I don’t know there’s anything that unusual about what’s going on right now,” Andreessen says.
In fact, as a corollary, Andreessen says that a lot of venture-backed companies that are hunkering down today are getting ready to go public, and “I do think there will be a lot more IPOs in ’17 and ’18.” To that end, Andreessen Horowitz has actually established a consultancy to counsel its investments on IPO readiness.
The reason for the sudden wave in acquisitions, Andreessen says, is that a lot of big companies spent the last 3 or 4 years “watching the drama” as startups rose, fell, and rose again. Rather than jump in, they wanted to see which way the market was turning.
“There were a lot of deals, a lot of acquisitions that should happen that just didn’t happen,” Andreessen says.
Now, especially with venture funding drying up amid a softening of the larger financial markets, those big companies are starting to swoop in and buy the best startups they can.
Importantly, that’s not just tech companies doing the buying: “Non-traditional buyers” like GM and retail brands like Bed Bath and Beyond are buying up startups now, too, Andreessen notes.
And the LinkedIn deal is a good thing for nascent startups because “it does eliminate a lot of guesswork as to what these companies are worth,” he says.
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