Dealmaking involving VC-backed startups jumped 26% year to year in Q1, but stayed pretty steady from the final quarter of 2024 even as many hoped for a significant increase.
Crunchbase data shows there were 550 M&A deals involving venture-backed startups in the first quarter of 2025. That number is well ahead of the 435 deals completed in Q1 last year, but actually a slight tick below the 563 deals done in Q4.
The numbers for dealmaking involving VC-backed U.S.-based startups followed a similar pattern, with 300 deals announced in Q1 this year — a 40% jump from last year, but basically on par with the 295 completed in Q4.
Attention-getters
While both numbers stayed pretty even with Q4 last year, perhaps the biggest difference was the headline-grabbing nature of some of the biggest deals.
The first quarter saw the largest acquisition of a private, venture-backed company ever, when Google parent Alphabet announced it will buy cloud security unicorn Wiz for a planned $32 billion. Just last summer, Alphabet was close to acquiring Wiz for approximately $23 billion, as first reported in The Wall Street Journal.
Two days after news of Wiz’s acquisition SoftBank announced it will acquire chip design company Ampere Computing in a $6.2 billion cash transaction.
Those two deals were the biggest globally and in the U.S. — and seem to foreshadow the onslaught of dealmaking many in the industry had hoped for in 2025.
Optimism lessens
The optimism around M&A dealmaking this year followed the regime change in the White House, with many industry insiders hopeful that the Federal Trade Commission and U.S. Department of Justice under the Trump administration would reduce regulatory hurdles.
But trade war fears, ensuing market volatility and even concerns about recession risk seem to have hampered some of that optimism.
“The pipeline suggests it could be a big year,” said Ryan Lund, co-head of U.S. technology and global software at investment bank Houlihan Lokey. “However, I expect modest growth. This feels more like 2018-19.”
Lund said he expects to see “incremental growth” in M&A dealmaking but the uncertainty in the market will likely hold back massive growth.
He added while deals are taking place, they are taking longer to consummate. Where once they could take three to six months, that timeline has stretched to six to eight.
For many VCs, DPI — distributed to paid-in capital, or the capital paid to funds’ LPs after exits by those funds’ portfolio companies — remains their top issue, but they see the current market as unlikely to provide a lot of it through M&A.
“M&A activity is more directly influenced by macroeconomic conditions … particularly when it comes to large, publicly traded strategic acquirers,” said Ofer Schreiber, senior partner and head of the Israel office for venture firm YL Ventures. “In the current environment — marked by market instability and shifting valuations — these players are becoming more cautious and less inclined to pursue acquisitions.”
However, the year is still young and market dynamics could change. The big question is: When?
“I remain optimistic about an increase in M&A and IPO deal flow,” said Umesh Padval — a managing director at Thomvest Ventures who specializes in cybersecurity, cloud and AI infrastructure. “However, we likely won’t see significant growth until market volatility subsides.
“As much as we’d like to predict the future, no one has a crystal ball, so for now, patience is key as the market finds its footing,” he added.
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