Over the last few days our reporters have broken news about two merger discussions that fizzled: Adobe, which was interested in buying video startup Synthesia, and SoftBank, which talked with humanoid robotics maker Agility about a takeover. In both cases, the startups ended up pursuing more venture capital funding at higher valuations. These are just the latest instances of aborted acquisition talks involving artificial intelligence startups that we’ve broken over the last two years, involving everyone from Cursor owner Anysphere and search engine Perplexity to enterprise search firm Glean. They, too, went on to raise capital at higher valuations when talks broke down. In some cases, the valuations kept surging in subsequent rounds.
Over the last few days our reporters have broken news about two merger discussions that fizzled: Adobe, which was interested in buying video startup Synthesia, and SoftBank, which talked with humanoid robotics maker Agility about a takeover. In both cases, the startups ended up pursuing more venture capital funding at higher valuations.
These are just the latest instances of aborted acquisition talks involving artificial intelligence startups that we’ve broken over the last two years, involving everyone from Cursor owner Anysphere and search engine Perplexity to enterprise search firm Glean. They, too, went on to raise capital at higher valuations when talks broke down. In some cases, the valuations kept surging in subsequent rounds.
What’s going on? In some sense, this is just the normal course of business. Proposed acquisitions, like any sales or funding deal, can break down for a variety of reasons, from management vision and personalities to the most common factor: price. Some deals, of course, are going through—notably ones aimed at recruiting founders and key staff, in reverse acqui-hires.
But it seems like we are hearing about failed courtships more often these days because of the way AI is supercharging anxiety among older tech companies, which want to make sure they don’t get left behind as “AI-native” startups launch rival products. And private investor demand to invest in these startups is giving startup founders confidence that they can build multibillion-dollar companies by themselves.
The founders and startup CEOs have good reason to bet they can hold out for higher valuations. In the past year, startups that walked away from acquisition discussions raised capital at a valuation of three or more times the sale price they had discussed with a buyer.
Anysphere, for instance, discussed a potential sale with OpenAI when it was valued at around $2.5 billion, and then it raised funding at a valuation of about $10 billion. Similarly, Perplexity leadership in 2023 spoke to companies about a sale price in the range of $150 million and $200 million, but it raised money at a $520 million valuation. (It was recently valued privately at $20 billion.)
One reason this happens is that interest by would-be acquirers shows interested investors there is a path to exit for their investments. The potential sale prices can act as a price floor for future funding rounds.
In the latest case, Synthesia is now in talks to raise more money at a $4 billion valuation, a roughly 33% increase from the sale price it discussed with Adobe, Katie and Steph reported.
You don’t have to look hard to find examples from the past startup boom period cycle (2020–21) when startup founders would have been wise to take the offers they got. For instance, Twitter was reportedly interested in buying audio app Clubhouse at $4 billion, whereas now that startup would be worth a small fraction of that.
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Reporters Cory Weinberg and Natasha Mascarenhas tell you what’s coming next, who’s winning—and who’s losing—in the high-stakes world of startup investing.
