Though these alarming headlines seem all too familiar today, each originally ran from 2007-2010: The Great Recession dramatically slowed venture capital fundraising for many companies, just as recessionary fears are curtailing venture markets today. According to PitchBook, VC investments were down 30% in Q2 2022 compared with 2021, and IPOs hit a 50-year low. While a few iconic brands including Uber, Airbnb, and Square emerged successfully from the last downturn, most venture-backed companies struggled during this period, and many ended up pursuing M&A strategies.
When deal-making slows, VC dollars typically favor the perceived market leader, starving other venture-backed businesses in the same space of capital. While some adapt and survive, others end up retreating and creating M&A opportunity down the line for those left standing. The process starts slowly, but as the chart below shows, venture-backed M&A plummeted during the recessionary period, when venture investing also slowed. During the early recovery, however, VC-backed M&A rebounded and skyrocketed: Annual deal values eclipsed $30 billion in 2010, holding steady before ballooning above $70 billion in 2014.