Tech Giants Accumulate Huge Startup Stakes, Even As M&A Appetite Wanes

Why acquire a startup when you can get a piece of it instead?

Increasingly, that鈥檚 the mindset of the world鈥檚 most valuable technology companies.

Over the past couple years, the top tech giants have made comparatively few big-ticket purchases of venture-backed companies. However, the Big Five 鈥斅�, , , and 鈥斅� have been actively and extravagantly investing in startups, particularly of the AI variety.

Those stakes are adding up. Last week, and Microsoft drove home the reality of just how valuable a startup investment can become.

Under an OpenAI unveiled last week, Microsoft holds 27% of OpenAI Group, its for-profit arm. That stake is worth around $135 billion, based on the generative AI unicorn鈥檚 recently reported .

Other big solo stakes

Microsoft鈥檚 OpenAI stake looks to be the most valuable private startup holding by one of the five largest technology companies. It鈥檚 also the most expensive investment, with Microsoft shelling out $10 billion in a , as well as backing follow-on rounds.

However, other tech giants have also poured billions into startup deals in the past couple years. These include both solo financings and investments made as part of broader syndicates.

Not surprisingly, the largest solo investments have mostly gone to generative AI leaders, topped by and OpenAI. These are both strategic and financial investments, as the tech giants jockey to maintain their market edge in the AI age.

Lead syndicate investments

More commonly, the Big Five invest as part of syndicates. They don鈥檛 always insist on leading rounds, but they often do.

Many of those deals turn out to be quite large. To illustrate, we used 附近上门 to put together a list of the largest financings of the last couple years with one of the tech giants as lead or co-lead investor.

In addition, the Big Five have also participated as non-lead investors in a number of giant rounds for companies including , , , , and .

You can make big returns doing this

Besides the strategic benefits the tech giants derive from these investments, they鈥檙e also generating enormous paper wealth.

Take Microsoft鈥檚 OpenAI stake. At $135 billion, it鈥檚 more than 6x larger than the purchase price of the largest completed private startup acquisition to date. (鈥檚 2014 purchase of ).

We don鈥檛 know the precise value of Amazon鈥檚 stake in Anthropic, but it鈥檚 also certain to be sizable. The e-commerce and cloud giant committed to invest $8 billion in the Gen AI company in 2023 and 2024.

With Anthropic鈥檚 valuation nearly tripling over a six-month period this year to hit $183 billion, Amazon鈥檚 stake has obviously appreciated. Ditto for Google, which also invested in the company at lower valuations.

Not just giant rounds

The Big Five aren鈥檛 just making huge AI investments. They鈥檙e also actively partaking in startup rounds at various sizes and stages.

Per 附近上门 data, so far this year, the group 1 has made at least 208 disclosed startup investments, with those rounds collectively valued at just over $70 billion. 2聽Annual deal count for the prior four years also held up at similar levels, as charted below.

Why invest in startups rather than acquire them? It鈥檚 probably not a money issue. Given that the five top tech companies have a combined market capitalization of over $18 trillion, they can afford to buy pretty much any startup they want.

More likely, tech giants see strategic advantages in owning stakes of the most promising upstarts in relevant sectors. And seeing how many of these companies have shot up in valuation, there are financial gains to be had too.

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