Owing to funding crunch, many startups are going to get swallowed by big fishes this year

The mergers and acquisitions in startups are going to shoot up in this financial year owing to funding crunch.

Many startups, especially tech-based firms, are going to merge with the sharks in the industry and the number is going to break all past records.

As per data tracker Venture Intelligence, the mergers and acquisitions in tech startups more than doubled to 146 transactions in the fiscal year ended March 31from 69 in 2014-15.

The merger and acquisitions are also going to rise as Indian startup giants such Flipkart and Snapdeal are seeking to make strategic purchases.
"We definitely expect to see more consolidation this year driven by a few factors-acquisitions that are complementary and synergistic; consolidation to take out competition; consolidation of cap tables; and acqui-hires," Aashish Bhinde, head of digital and technology at Avendus Capital, told ET.

The primary reason behind this is funding crunch. Many startups that started on vision are now aiming to be profit making firms.
“Overall, in terms of funding, it's going to get worse. Ventures that have raised series-A (funding) rounds are finding it difficult to raise follow-on rounds... There will be stress in terms of companies not having cash flows to sustain themselves,” Siddharth Parekh, senior partner at private equity firm Paragon Partners told ET.

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