Venture capital has fueled some pretty important tech companies in recent years — from WhatsApp (backed by Sequoia) to Zulily (backed by Maveron and others).

Top markets for tech exits in 2013

But interestingly enough, it may not be quite as important as you think. According to research released this week by CB Insights, 66 percent of tech companies that sold in 2013 never took any institutional money, meaning venture capital or private equity.

Those stats come as the tech M&A and IPO market heated up last year, especially in the second half of the year as activity surged 46 percent for private tech mergers and acquisitions and 63 percent for IPOs. In total, there were 534 M&A deals and 23 IPOs in the fourth quarter alone.

Another interesting tidbit from the report: Massive deals like Facebook’s $19 billion acquisition of WhatsApp or the Zulily IPO are rare, with just one percent of exits coming in at more than $1 billion. (Zulily, as we reported earlier this week, continues to rip up Wall Street after a strong earnings report. It now has a market value of more than $6 billion).

In fact, 45 percent of exits occur for less than $50 million, and about three quarters come in at less than $200 million.

Of those companies that did raise money, 46 percent of acquisition transactions occurred with those companies that raised less than $10 million. Twenty nine companies that were acquired or went public raised more than $100 million prior to exit.

Here’s a look at the transaction trends over the past few months, showing how the IPO market heated up in the latter half of the year. Zulily raised about $145 million in its November IPO.

techmandaby month

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  • http://www.puzzazz.com/ Roy Leban

    Interesting info, but one sentence jumped out “Another interesting tidbit from the report: Massive deals like Facebook’s $19 billion acquisition of WhatsApp or the Zulily IPO are rare, with just one percent of exits coming in at more than $1 billion.”

    The interesting thing to me here is that it is so high, not that it is so low. I would have figured billion-dollar deals were <0.01%. 1% is a huge percentage!

    • johnhcook

      Good point Roy…

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  • http://www.techmansworld.com/ Michael Hazell

    I hate Venture Capitalists.

    Actually, I hate anyone who invests in a company but then gets a share of the profits. :)

    • http://www.joshuamaher.com/ Joshua Maher

      Wait – who gets a share of the profits without investing?

    • Azalik

      :) = ‘sarcasm’

  • http://www.joshuamaher.com/ Joshua Maher

    I think the important thing here is that non-institutional investors can change the game for many companies – yet as an industry a lot of focus is placed on institutional dollars that push valuations higher. The study highlights angel backed & bootstrapped startups compose so much more of the economic growth.

    The real question is… how do we train people to be better angel investors or bootsrappers?

  • http://blog.CascadeSoft.net @CascadeRam

    I’d be interested in looking at their definition of “exit”.
    For instance, do they include companies that sold for less than $1M ?
    Do they include venture-funded companies that were sold at a loss ?

    The number will be more interesting if they exclude all unsuccessful exits (i.e. exits where investors lose money)

    • http://www.4044walnut.com Anand Sanwal

      Good questions and great feedback. To clarify, it’s any type of exit as long as the exiting company was (1) tech and (2) private.

      That said, the < $1M exits and smaller ones generally don't disclose valuations so it's hard to know the distribution at the low end.

      With regards to what is included, we're including the good & bad outcomes — IPO and big M&A through to talent acquisitions and asset sales.

      Generally, the tech exit narrative is prone to a lot of survivorship bias so self-selecting good outcomes only tends to paint a rosier picture of the environment than the reality.

      That said, this is good feedback, as there is value in distinguishing so I think we'll add something like this in the future. If we did top acquirers for instance looking only at good outcomes, Yahoo would not be at the top of the list as they're clearly the kings of acqui-hiring.

      More on acqui-hiring #s/data here if interested – http://www.cbinsights.com/blog/trends/tech-acquihire-report

      Thanks again for reading. Hope that helps.


      • http://blog.CascadeSoft.net @CascadeRam

        Thanks Anand, this was very helpful

    • Azalik

      Do they include companies that ‘folded’.

  • Max Maxwell

    At least site the source or give credit to CB Insights who put the data and charts together

    • rayburt456
    • http://www.cbinsights.com/ Anand Sanwal

      Thanks for the love and getting our back Max :) John and the Geekwire team are always good to us on linking so probably just an oversight or technical snafu.

  • Amir Homayoun Rafizadeh

    Interesting, and if these companies did not take any institutional money, once can include a few things:
    1) They solved a complex and in-demand customer problem
    2) As a result, they self funded their growth and grew so fast that they did not need outside money
    3) Put together some talented folks in their bench and behind their management.

    Great job.

    More companies should be taking note.

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