It is common in the enterprise capital industry for startups with similar businesses to shut large funding rounds at around the same time.
This yr it’s generative AI. A few years ago there have been a lot of niches where funding flowed, including areas like D2C, homebuying, and consumer fintech.
But hot sectors often don’t stay hot, especially in areas where the largest rounds occurred near the top of the market. Now, in areas where investment has shrunk, we’re seeing heavily funded startups merging with former rivals and others to remain competitive or simply stay afloat.
Startup Consolidation Sectors
To highlight this, we used Crunchbase data to discover startups that raised large sums in the past few years and have since sold to a different private company in the same or a similar industry. We then narrowed the list to sectors where enterprise capital funding has declined sharply.
With that in mind, here are some of the industries and corporations that made our list.
E-commerce aggregators
In 2020 and 2021, investors poured billions into e-commerce aggregators. Heavily funded corporations like Trasio, Perch AND Razor Group he used the money to purchase smaller brands and increase their sales Amazon and other retailers.
But funding in the space dried up as the market began to say no from 2022 onwards, with many publicly downsizing and staffing. Then got here a wave of consolidation.
Berlin-based aggregator SellerX was one of the first players to amass the Austin, Texas-based company Raise your brands a yr ago in an all-stock transaction at an undisclosed price.
Razor Group, one other Berlin-based aggregator, has also been on the acquisition bandwagon. The company has bought 4 e-commerce brand roll-up startups so far, including its March acquisition of Boston-based PerchAND SoftBank portfolio company that has raised over $900 million.
Razor previously acquired the Luxembourg-based company Factory 14 in April 2022, based in Mexico City I appreciate at the end of 2022 and based in Berlin Stryze Group in 2023.
Platforms for buying and investing in real estate
Real estate buying and investing platforms raised a lot of cash when mortgage rates were lower and home sales were faster than they are now. Venture capitalists have been moving away from this space in recent quarters, and we’ve seen some consolidation.
In May, Roof AND Figtwo heavily funded online platforms based in Oakland, California for investors in single-family rental properties, announced plans to merge. Roofstock previously raised over $360 million, while Mynd has attracted over $200 million.
A month later, a platform for buying and selling houses Flying houses announced that it had acquired the assets ZeroDownAND Sam Altman-a company-backed startup that offered renters the opportunity to build equity and ultimately purchase the home of their alternative.
Fintech and BNPL
A few years ago, fintech was the world’s largest sector for startup funding. Globally, fintech firms raked in more investment than any other in 2021, fueled by investor enthusiasm for buy-now-pay-later platforms, neobanks, and more.
Fast forward a few years and these spaces are now not hot. While adoption is growing in US and other markets, we do not see much enterprise funding anymore. Meanwhile, public BNPL corporations like Confirm AND Squarethe latter of which is the owner Supplement platforms, have risen from their lows but are still well below their one-time highs.
Against this background, we are observing a certain consolidation among startups at a later stage of development.
This spring in San Francisco Enableprovider of app-based money advances and bank cards, has acquired PetalNew York-based startup focused on providing loans to underserved groups for an undisclosed amount. Petal, founded in 2016, has previously raised greater than $250 million in equity funding and $680 million in debt funding.
Last summer in San Francisco Updateprovider of online banking and lending services, took over Pick upa Silicon Valley-based BNPL services provider that has previously raised over $140 million in equity capital and over $500 million in debt financing.
Logistics
Logistics was one of those startup sectors that peaked a bit later than others. In the first three quarters of 2022, investors poured greater than $7 billion into the industry, in keeping with a Crunchbase report from that point. The two most outstanding fundraisers during that point were Convoy AND Flexport.
But over the next yr, funding fell off significantly, and corporations saw a change in fortunes. Seattle-based trucking logistics startup Convoy, once a high-flying unicorn, announced it was closing down, citing a “massive recession in freight transportation.” Flexport acquired Convoy’s assets in late 2023.
Not just a downward trend
It’s vital to notice that mergers between competing, well-funded startups aren’t strictly a bearish phenomenon. When these sectors saw peak levels of investor interest, we also saw a lot of consolidation.
For example, SellerX also bought a German rival, KW-CommerceIn 2021, Roofstock made three acquisitions in 2021 and 2022, including The Great Jonesreal estate rental platform that has previously raised over $33 million.
But acquisitions in a down market, in fact, have a different flavor. Some of the corporations they acquired had closed or were on the verge of closing. For others, a difficult fundraising market made one other round of enterprise unpalatable.
Going forward, the hope is that consolidation will strengthen the position of those corporations and ensure they have fewer competitors to fret about.