AI’s dealmaking frenzy

Hi! Katie here. I’m enthusiastic to guide my archetypal type of VC Insider (taking turns alongside Ben!) This week, I’m digging into the bonzer surge in startup acquisitions and why the deals keep getting bigger.

I’ve been covering venture-backed deals for 13 years, and we’re in an M&A surroundings dissimilar I’ve always experienced.

We’re seeing several of the biggest deals on record, including SpaceX’s $60 milliard acquisition of Cursor. (OK, technically, the $250 milliard Elon-Elon SpaceX/xAI agreement was bigger.) And billion-dollar venture-backed acquisitions are at their highest flat since 2021, according to Crunchbase.

The twelvemonth kicked off alongside Capital One’s $5 billion-plus agreement for Brex, but the genuine frenzy began following SpaceX’s Cursor acquisition in June. Most of the act since has been in AI. We were archetypal to report that Hugging Face was attracting takeover interest, followed by our scoop on Nvidia’s acquisition talks. Nvidia has since accepted to buy the business for $12.9 billion. Stripe struck an $8 milliard agreement for OpenRouter, during AMD agreed to buy World Labs for $8.2 billion. And the deals keep coming. 

This week, there was a WSJ report that Amazon is in talks to buy Decart for $7 billion, during according to the FT, Nvidia is eyeing Reflection AI, which has been seeking a $25 milliard valuation. We additionally reported that Decagon hired a financial institution to examine M&A interest. And we scooped Salesforce’s $2 milliard agreement to buy Listen Labs, as fine as Google’s $1.5 milliard deal alongside Mechanize.

So what’s driving all this activity?

First, there is plainly a frenzy to get AI talent.  Some of these are akin elephantine acqui-hires, bringing in skilled AI teams that activity fine together. But they are additionally gaining advanced innovation that is improving at a fast clip. Missing out on new innovation can be a lot additional costly in the lengthy run than the acquisition cost of a deal. There are additionally a figure of trillion-dollar innovation companies now that can effortlessly oversee to create a multibillion-dollar purchase. 

Sometimes the market equal rewards strategic acquirers for making AI-related deals. If the inventory jumps on the agreement announcement, it reduces the cost, or sometimes makes the acquisitions “free.” SpaceX, for instance, surged 10% following its $60 milliard Cursor notice (although it was shortly following the IPO, so that power not have been the sole reason).

Regardless, AI acquisitions are making project capitalists a lot of prosperity correct now, equal if they missed out on IPO-bound behemoths akin Anthropic and OpenAI. Deedy Das, partner at Menlo Ventures, recently posted on X that “it is entirely imaginable to come back a multibillion dollar project prosperity alongside phenomenal IRR, equal if you aren’t in big AI! This is among the hottest liquidity markets ever.”

In an discussion at the 2026 M&A Summit in San Francisco this week, John Chambers shared alongside me that he made 180 acquisitions during CEO of Cisco, including the $3.2 milliard agreement for WebEx. He touted what he viewed as a 70% achievement rate, saying he desired it were lesser since it meant he hadn't taken adequate risk. Chambers stated in the conversation the finest acquisitions are so transformative that they offset failures, and predicted that the uptick in venture-backed M&A volition continue, alongside cybersecurity deals a particularly powerful point. 

What’s apparent is that the M&A industry now takes venture-backed deals a lot additional seriously. For many years, several in the industry scoffed that this genre of deals was too small. I regularly told bankers, lawyers, PR people, and chap journalists to keep an eye on VC since the cost of these deals would increase someday. 

How did I know? There was a important addition in chief stream in the startup ecosystem and ballooning valuations. Even if a small percent of today's 1900+ unicorns are appreciated correctly, that leads to a figure of ample liquidity events, including acquisitions. The economics of the startup ecosystem additionally diagram several of the finest and brightest employees, endowment that strategic acquirers power desire in-house. -Katie

The Buzz

Ben here. I was position at a blessed hr for Tinder and Wonder Ventures at a Venice Beach athletics way Tuesday midday whenever an enthusiastic twenty-something originator walked up and asked, “What are you building?” He seemed crestfallen whenever I told him I wasn’t construction anything.

After SF Tech Week final week, the act has shifted to LA for Tech Week. Many of the attendees, desperate to district any backing for their nascent idea, act both. 

The issue is that there are few VCs at these events, so founders (or mostly wannabe founders) end up pitching to all other. As others have suggested, founders would have much improved fortune finding VCs if they went to the South Park Blue Bottle in San Francisco on any day of the week. 

People affection to conversation concerning how many Tech Week events they got into or how many connections they made, but it's not apparent to what end.

I was additionally at SF Tech Week, anywhere there were nearly twice as many events, and the mood was additional specialized and serious. With the elimination of defence tech, LA’s tech environment has taken a noticeable stage rear since Andreessen Horowitz hosted its archetypal LA Tech Week current in 2022. AI is all the rage, and San Francisco is the undisputed epicenter of the AI revolution. 

Continuing the theme from final year, health is a big focus, alongside a regular 6 am lifting association and surf lessons in Manhattan Beach.

Elizabeth Holmes is back 

Back up North, the Valley is abuzz alongside excitement for You Can See Everything, Nathan Fielder’s fly-on-the-wall documentary concerning Elizabeth Holmes that opens Friday. VC firms are renting out theaters for the occasion. One Menlo Park firm, Felicis, is hosting a screening next week for tech reporters and PR people, which is a inquisitive choice stated that Theranos was likely the biggest dreary eye in Silicon Valley history.

"The collection conversation needed a site trip," the invitation reads. "Black turtlenecks optional, but encouraged. Leave your emergency scheme at home."

It would be akin Wall Street hedge finances hosting screenings of a documentary concerning Bernie Madoff. 

Around the Cap Table

• Unlike its 2010 predecessor, the Social Reckoning has been a flop at the box office. I think the movie is value observing for one environment alone, in which a monstrous Mark Zuckerberg, played by Jeremy Strong, sits robotically in his bulletproof glass-enclosed agency and rejects safety proposals since they would put a small dent in engagement.

  The movie additionally efficiently shows how difficult it is to cultivate a source. One small realistic part is that author and director Aaron Sorkin seems to relish the fact that the protagonist, Wall Street Journal newsman Jeff Horowitz, is bad alongside tech and barely knows how to use his GPS to discover the bureau. 

  In reality, fair since you’re a tech newsman does not average you are fine alongside tech. Most of what we study on is the money, deals, and people. I continually discover it comic whenever group ask me for tech support. After I saw the movie, I peruse Eli Tan’s outstanding New York Times narrative concerning how Zuckerberg rushed Muse to be released notwithstanding safety concerns. It was difficult not to see parallels. -Ben

• In another news, OpenAI stated that it found a hidden record device in its SF office, allegedly planted by an employee and Saudi national Abdulrahman Alfozan. The FBI is now investigating  Alfozan, who was additionally an capitalist at Middle East VC resolute Raed Ventures. 
• A16Z has laid off most of its in-house recruiting team, which helps portfolio companies bring in talent, per Axios. 

Please let us cognize what you think of the newsletter and dispatch alongside your tips. Email Ben or Katie anytime or communication them on Signal at benbergman.11 and kroof.26.

The VC Insider team

Ben Bergman, chief correspondent, in Los Angeles. Katie Roof, publishing company at large, in San Francisco. Pranav Dixit, elder innovation editor, in San Francisco. Leena Rao, administrator editor, in Los Angeles. Get in touch.

Email us at [email protected]