For startups, raising more capital does not necessarily result in a larger exit or better multiple on capital invested. Raising less capital can actually result in better returns, according to a new report.
These are the key findings in Exitround’s new report on technology M&A transactions below $100 million dollars. This report details the private M&A transactions in this segment. Exitround's report is entitled, "Tech M&A Report From $0 - $100M: The Exit Curve" and it reveals a number of interesting and sometimes counterintuitive points: The best exits cluster at prices of $3-5 million and $10-$20 million, and those groups account for 17% and 11%, respectively of all exit activity under $100 million; Raising more capital does not necessarily result in a larger acquisition price; Given the volume of activity in the long-tail, early stage seed investors can produce strong returns on investment; Of all companies (not including shut-downs), median ROI to investors is 5x, average return is 13.6x; and there is a significant increase in value after a company grows past four years old. And, long-tail M&A is especially active due to two major trends: large cash-rich technology companies buying to fuel R&D efforts or expand into new markets; and large companies outside of the technology sector buying technology innovation in order to stay dominant today.