Why More Startup Acquisitions Are Happening in 2025
Tighter funding and competitive pressure are pushing startups to acquire each other instead of building from scratch.
Startups Are Turning to M&A as Funding Stalls
Even with a small uptick in IPO activity, many startups are still struggling to raise capital or exit through traditional routes. At the same time, competition—especially in tech—is heating up. The result? More startups are buying other startups to stay ahead.
This rise in startup-to-startup acquisitions is driven by several factors. For many, it’s a faster and more affordable way to access new technology, customers, or talent than building it internally. For others, it’s a strategic move to survive in a more cautious investment environment.
Startup M&A Deals Are on the Rise
In the first half of 2025, 427 startup acquisition deals were reported worldwide—up 18% from the same period in 2024. That’s a strong signal that more startups are using mergers and acquisitions as a key growth strategy.
In comparison, over 1,000 startup-to-startup deals occurred in each of the full years 2021 and 2022. While the overall number may be slightly down, deal activity is clearly rebounding in 2025.
Early-Stage Startups Are Merging for Strength
Michael Mufson, managing partner at Mufson Howe Hunter, says many early-stage startups are joining forces because raising money has become much tougher.
With fewer liquidity events and more selective venture capital firms, startups are getting creative. Merging with another startup can strengthen their story, broaden their customer base, and even bring in missing skills—especially in areas like tech or product development.
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AI and Technical Talent Drive Deals
AI continues to play a major role in the startup M&A scene. Many startups that lack strong AI capabilities are choosing to acquire teams that specialize in it. This not only speeds up product development but can also improve the chances of attracting funding.
Itay Sagie, founder of Sagie Capital Advisors, says the lack of easy access to capital is a major reason small startups are exploring acquisitions. Even though global venture funding saw a small recovery in Q2, many early-stage companies still struggle to raise money.
Valuations are also becoming more reasonable. Startups that raised large rounds in 2021 are now using those funds to buy smaller, focused companies—especially those offering useful technology, solid user traction, or skilled talent.
Larger Startups Are Attractive Buyers
Startups with strong financials and sustainable growth are seen as more reliable buyers. They often use a mix of cash and equity to acquire other companies, especially if it helps them expand faster without burning more capital.
In 2025, some of the biggest startup acquisitions include:
- OpenAI bought device startup Io for $6.5 billion in May.
- Google licensed technology from coding tool Windsurf for $2.4 billion after a failed OpenAI acquisition attempt.
- Ripple acquired Hidden Road, a crypto payments startup, for $1.25 billion.
- Databricks announced plans to buy Neon, a data platform, for around $1 billion.
- Axonious bought Cynerio, a medical cybersecurity startup, for over $100 million.
- Clio, a Canadian legal tech company, said it will acquire vLex, a Spanish legal research platform, for $1 billion.
These deals often followed major funding rounds. For example, OpenAI secured a record-breaking $40 billion investment in April, and Databricks raised $10 billion in late 2024.
Asset Sales and Team Acquisitions on the Rise
Another trend is asset purchases combined with small team hires, also known as acquihires. Lindsey S. Mignano, co-founder of SSM Law, says this model is increasingly common among tech startups.
Typically, a larger startup buys the intellectual property of a smaller one and brings on a few key team members. This approach is often quicker and cheaper than building new tools internally or hiring from scratch.
In the startup space—especially within AI—acquiring teams also gives the buyer instant access to specialized tools, datasets, and models. That’s a major advantage in sectors like healthcare, law, and government, where sales cycles are long and technical needs are complex.
It’s a Good Time to Be a Startup Buyer
In today’s market, buyers have the upper hand. With more startups open to selling, lower valuations, and high competition in tech, acquiring another startup can be a smart move. Whether it’s to gain new capabilities, expand into new markets, or improve your product faster, M&A is becoming a core growth strategy for startups in 2025.