Following the Smart Money

Today’s tech M&A market is strong. One measure of this is the number of Venture Capital and Private Equity-backed exits of tech companies, which grew in the first three quarters of 2025 compared to the same period in the prior two years. Clearly, VCs and PE firms are taking advantage of the strong tech M&A market. If you are a tech company owner, it's important to understand what underlies this growing exit trend because it may have implications for your business. In short, if VC and PE investors ‒ often called the "smart money" ‒ are exiting their tech company investments for specific reasons, and one or more of those reasons characterize your company, perhaps you should consider exiting too.

So why is the smart money exiting? Here are a few reasons.

AI “dummies”

Artificial Intelligence (AI) has been a dominant theme in private capital investment over the last few years. VC and PE investors are prioritizing AI, aggressively adding companies with AI capabilities to their portfolios and dropping AI "dummies," that is, companies that have limited or no AI capabilities and no clear plans to develop them. Tech companies are finding it significantly harder to attract new funding from VCs and PE firms if they don't have the proper AI adoption strategy or AI-related performance trajectory. If your tech company is at risk of falling behind the AI curve, you might consider selling before you lose your competitive edge. Or you may face challenges with future exit opportunities because of the intense investor focus on AI as a key value driver.

Dead IPO market 

The tech Initial Public Offering (IPO) market has experienced a significant downturn since its peak in 2021. As part of that downturn, the number of PE and VC-backed IPOs has dropped sharply over the past few years. VC and PE investors have turned instead to M&A as a dominant exit route, as they look for liquidity in this dried up IPO market. Tech companies are also increasingly favoring M&A over IPOs as a way to raise significant capital, especially given the IPO market downturn. If you are considering an exit strategy that involves going public through an IPO, you might reconsider. M&A may be a better alternative in this market.

Bolt-on popularity

VCs and PE firms are increasingly focusing on bolt-on acquisitions, where platform companies, backed by VC or PE funds, consolidate a market by buying additional companies. Bolt-on acquisitions are popular with public investors and often more attractive than larger buyouts because they offer easier value creation through operational efficiency and market consolidation. In addition, the higher interest rates associated with larger acquisitions make them riskier and harder to finance, pushing investors towards smaller, more manageable bolt-ons. It's estimated that bolt-on acquisitions represent over two thirds of the tech M&A market. Across all industries bolt-on deal values rose 18% and deal volume rose 39% in the second quarter of 2025 compared to the same period in 2024 ‒ a significant increase. With tens of thousands of tech companies considered potential bolt-on targets, your company might be an attractive bolt-on acquisition for a VC or PE-backed company.

Divestments

The year 2025 saw a significant increase in divestments by PE firms, driven in part by a large backlog of aging portfolio companies and increased pressure from limited partners for liquidity. In the second quarter of 2025 alone, divestments represented more than 10% of M&A deals, 13% higher than the five year average. Another factor spurring divestments is the increase in PE exit value, primarily driven by sales to strategic corporate buyers, which were up over 100% in value in H1 2025 compared to H1 2024. Corporate acquirers are capitalizing on the supply of aging portfolio companies. Does your company have assets or business units that no longer align with your long-term strategy, or are underperforming and draining capital?  If so, you might consider divestment. It can be a way to streamline operations, enhance overall company value, as well as gain liquidity.

Startup exits

Startups, particularly those in the AI sector, are exiting at a greater rate than ever before. M&A as an exit strategy for startups has surged in 2025. One indicator is the rapid rise of startup exits as a percentage of total sellers, which increased from 28% in the third quarter of 2024 to 38% in the third quarter of 2025. In addition, the value of acquisitions for venture-backed companies increased by 155% in the first half of 2025 compared to 2024, providing liquidity for investors. Driving the exit boom are large corporations that are actively acquiring startups, especially AI companies, to secure cutting-edge technology. In addition, the barriers to entry, especially for AI companies, have been lowered. The necessary tools to build AI companies are widely available and that has led to an unprecedented number of AI company formations in 2025. As these companies reach a sellable position, which in many cases is significantly faster than previous generations of tech companies, they are opting to take cash off the table through M&A.

Contact Corum

The smart money is taking advantage of today's strong M&A market. Shouldn't you? There has never been a better time to sell. And if you are considering selling your tech company, contact Corum. At the very least, pursuing an M&A process with Corum will calibrate what your company is worth in today’s market. In addition, Corum's team of experienced CEOs who have run, sold, and bought companies will help you present your company in the best possible way to potential buyers, and put you in position for an optimal offer. You may be surprised how much your company is worth.