Startups Merge In Spaces Where Funding Has Fallen

It鈥檚 common in venture capital to see startups with similar businesses close big rounds around the same time.

This year, it鈥檚 generative AI. A couple years ago, there were many niches where funding flowed, including areas like D2C, homebuying, and consumer fintech.

But hot sectors often don鈥檛 stay that way, especially in areas where the biggest rounds occurred close to the market peak. Now, in spaces where investment has shriveled, we鈥檙e seeing heavily funded startups merging with former rivals and others in a bid to stay competitive or simply stay afloat.

Sectors for startup consolidation

To highlight, we used 附近上门 data to identify startups that raised large sums in the past few years and have since sold to another private company in the same or similar industry. We then narrowed the list to sectors where venture funding has plummeted.

With that in mind, here are some of the industries and companies that made our list.

E-commerce aggregators

In 2020 and 2021, investors poured billions into e-commerce aggregators. Heavily funded companies like , and used the money to buy up smaller brands and ramp up their sales on and other retailers.

But funding to the space dried up when the market took a downward turn beginning in 2022, with many publicly scaling back and cutting staff. Then came a wave of consolidation.

Berlin-based aggregator was an early mover, snapping up Austin, Texas-based a year ago in an all-stock deal at an undisclosed valuation.

Razor Group, another Berlin-based aggregator, has also been acquisitive. The company purchased four e-commerce brand roll-up startups to date, including a March acquisition of聽 Boston-based , a portfolio company that had raised over $900 million.

Razor previously acquired Luxembourg-based in April 2022, Mexico City-based in late 2022, and Berlin-based in 2023.

Real estate buying and investment platforms

Real estate buying and investment platforms raised heavy funding when mortgage rates were lower and the pace of home sales was brisker than is the case today. In more recent quarters, venture investors have shifted away from the space, and we鈥檝e seen some consolidation follow suit.

In May, and , two heavily funded, Oakland, California-based online platforms for investors in single-family rental properties, plans to merge. Roofstock had previously raised over $360 million, and Mynd has pulled in over $200 million.

A month later, home buying and selling platform announced it had acquired the assets of , a -backed startup that offered renters a path to build equity in and eventually purchase a home of their choice.

Fintech and BNPL

A few years ago, fintech was the biggest sector in the world for startup funding. Globally, companies in the space raked in more investment than any other in 2021, boosted by investor enthusiasm for buy now, pay later platforms, neobanks and others.

Fast-forward a few years, and these spaces are no longer red-hot. While adoption is growing in the and other markets, we鈥檙e no longer seeing hefty venture funding. Meanwhile public BNPL companies, such as and , the latter of which owns the platform, are up from their lows but still well below their one-time highs.

Against this backdrop, we鈥檙e seeing some consolidation among later-stage startups.

This spring, San Francisco-based , a provider of app-enabled cash advances and credit cards, acquired , a New York startup focused on extending credit to underserved groups, for an undisclosed sum. Petal, founded in 2016, had previously raised over $250 million in equity funding and $680 million in debt financing.

Last summer, San Francisco-based , a provider of online banking and loans, acquired , a Silicon Valley-based BNPL provider that had previously raised over $140 million in equity funding 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 put over $7 billion into the space, per 附近上门 reporting at the time. The two most prominent fundraisers of the period were and .

Over the next year, however, funding fell considerably, and companies saw their fortunes change. Seattle-based trucking logistics startup Convoy, once a high-flying unicorn, announced it was shutting down operations, citing a 鈥渕assive freight recession.鈥� Flexport acquired Convoy鈥檚 assets in late 2023.

Not just a down market phenomenon

It should be noted that mergers between rival well-funded startups isn鈥檛 specifically a down-market phenomenon. When these sectors were seeing peak levels of investor interest, we also saw a fair amount of consolidation.

SellerX, for instance, also purchased a German rival, , in 2021. Roofstock made three acquisitions in 2021 and 2022, including , a rental real estate operation platform that had previously raised over $33 million.

But acquisitions in a down market, of course, have a different flavor. Some acquirees had shuttered or were on the verge of doing so. For others, a difficult fundraising market made the option of another venture round a nonstarter.

Going forward, the hope is that consolidation will put these companies in a stronger position to grow, with fewer competitors to worry about.

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