Hi! Katie here. I’m excited to lead my first edition of VC Insider (taking turns with Ben!) This week, I’m digging into the extraordinary boom in startup acquisitions and why the deals keep getting bigger.
I’ve been covering venture-backed deals for 13 years, and we’re in an M&A environment unlike I’ve ever experienced.
We’re seeing some of the biggest deals on record, including SpaceX’s $60 billion acquisition of Cursor. (OK, technically, the $250 billion Elon-Elon SpaceX/xAI deal was bigger.) And billion-dollar venture-backed acquisitions are at their highest level since 2021, according to Crunchbase.
The year kicked off with Capital One’s $5 billion-plus deal for Brex, but the real frenzy began after SpaceX’s Cursor acquisition in June. Most of the action since has been in AI. We were first to report that Hugging Face was attracting takeover interest, followed by our scoop on Nvidia’s acquisition talks. Nvidia has since agreed to buy the company for $12.9 billion. Stripe struck an $8 billion deal for OpenRouter, while AMD agreed to buy World Labs for $8.2 billion. And the deals keep coming.
This week, there was a WSJ report that Amazon is in talks to buy Decart for $7 billion, while according to the FT, Nvidia is eyeing Reflection AI, which has been seeking a $25 billion valuation. We also reported that Decagon hired a bank to explore M&A interest. And we scooped Salesforce’s $2 billion deal to buy Listen Labs, as well as Google’s $1.5 billion deal with Mechanize.
So what’s driving all this activity?
First, there is clearly a frenzy to acquire AI talent. Some of these are like giant acqui-hires, bringing in skilled AI teams that work well together. But they are also gaining advanced technology that is improving at a rapid clip. Missing out on new technology can be a lot more costly in the long run than the purchase price of a deal. There are also a number of trillion-dollar technology companies now that can easily afford to make a multibillion-dollar purchase.
Sometimes the market even rewards strategic acquirers for making AI-related deals. If the stock jumps on the deal announcement, it reduces the cost, or sometimes makes the acquisitions “free.” SpaceX, for instance, surged 10% after its $60 billion Cursor announcement (although it was shortly after the IPO, so that might not have been the sole reason).
Regardless, AI acquisitions are making venture capitalists a lot of money right now, even if they missed out on IPO-bound behemoths like Anthropic and OpenAI. Deedy Das, partner at Menlo Ventures, recently posted on X that “it is absolutely possible to return a multibillion dollar venture fund with phenomenal IRR, even if you aren’t in big AI! This is one of the hottest liquidity markets ever.”
In an interview at the 2026 M&A Summit in San Francisco this week, John Chambers shared with me that he made 180 acquisitions while CEO of Cisco, including the $3.2 billion deal for WebEx. He touted what he viewed as a 70% success rate, saying he wished it were lower because it meant he hadn’t taken enough risk. Chambers said in the conversation the best acquisitions are so transformative that they offset failures, and predicted that the uptick in venture-backed M&A will continue, with cybersecurity deals a particularly strong point.
What’s clear is that the M&A industry now takes venture-backed deals a lot more seriously. For many years, some in the industry scoffed that this genre of deals was too small. I regularly told bankers, lawyers, PR people, and fellow journalists to keep an eye on VC because the price of these deals would rise someday.
How did I know? There was a significant increase in capital flow in the startup ecosystem and ballooning valuations. Even if a small percentage of today’s 1900+ unicorns are valued correctly, that leads to a number of large liquidity events, including acquisitions. The economics of the startup ecosystem also attract some of the best and brightest employees, talent that strategic acquirers might want in-house. –Katie
The Buzz
Ben here. I was standing at a happy hour for Tinder and Wonder Ventures at a Venice Beach golf course Tuesday afternoon when an eager twenty-something founder walked up and asked, “What are you building?” He seemed crestfallen when I told him I wasn’t building anything.
After SF Tech Week last week, the action has shifted to LA for Tech Week. Many of the attendees, desperate to land any funding for their nascent idea, attend both.
The problem is that there are few VCs at these events, so founders (or mostly wannabe founders) end up pitching to each other. As others have suggested, founders would have much better luck finding VCs if they went to the South Park Blue Bottle in San Francisco on any day of the week.
People love to talk about how many Tech Week events they got into or how many connections they made, but it’s not clear to what end.
I was also at SF Tech Week, where there were almost twice as many events, and the mood was more technical and serious. With the exception of defense tech, LA’s tech scene has taken a noticeable step back since Andreessen Horowitz hosted its first LA Tech Week here in 2022. AI is all the rage, and San Francisco is the undisputed epicenter of the AI revolution.
Continuing the theme from last year, wellness is a big focus, with a daily 6 am lifting club and surf lessons in Manhattan Beach.
Elizabeth Holmes is back
Back up North, the Valley is abuzz with excitement for You Can See Everything, Nathan Fielder’s fly-on-the-wall documentary about Elizabeth Holmes that opens Friday. VC firms are renting out theaters for the occasion. One Menlo Park firm, Felicis, is hosting a screening next week for tech reporters and PR people, which is a curious choice given that Theranos was probably the biggest black eye in Silicon Valley history.
“The group chat needed a field trip,” the invitation reads. “Black turtlenecks optional, but encouraged. Leave your crisis plan at home.”
It would be like Wall Street hedge funds hosting screenings of a documentary about Bernie Madoff.
Around the Cap Table
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Unlike its 2010 predecessor, the Social Reckoning has been a flop at the box office. I think the movie is worth watching for one scene alone, in which a monstrous Mark Zuckerberg, played by Jeremy Strong, sits robotically in his bulletproof glass-enclosed office and rejects safety proposals because they would put a small dent in engagement.
The movie also effectively shows how hard it is to cultivate a source. One less realistic part is that writer and director Aaron Sorkin seems to relish the fact that the protagonist, Wall Street Journal reporter Jeff Horowitz, is bad with tech and barely knows how to use his GPS to find the bureau.
In reality, just because you’re a tech reporter does not mean you are good with tech. Most of what we report on is the money, deals, and people. I always find it funny when people ask me for tech support. After I saw the movie, I read Eli Tan’s excellent New York Times story about how Zuckerberg rushed Muse to be released despite safety concerns. It was hard not to see parallels. –Ben
- In other news, OpenAI said that it found a hidden recording device in its SF office, allegedly planted by an employee and Saudi national Abdulrahman Alfozan. The FBI is now investigating Alfozan, who was also an investor at Middle East VC firm Raed Ventures.
- A16Z has laid off most of its in-house recruiting team, which helps portfolio companies bring in talent, per Axios.
Please let us know what you think of the newsletter and send along your tips. Email Ben or Katie anytime or contact them on Signal at benbergman.11 and kroof.26.
The VC Insider team
Ben Bergman, chief correspondent, in Los Angeles. Katie Roof, editor at large, in San Francisco. Pranav Dixit, senior technology editor, in San Francisco. Leena Rao, executive editor, in Los Angeles. Get in touch.
Email us at [email protected]
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