Joanna Glasner
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Huge companies in fast-changing, technology-intensive businesses buy startups. After all, they have the money and need fresh entrepreneurial talent to tap new markets and stay abreast of disruption.
That’s the collective wisdom about M&A in venture capital and startup circles. It’s also how the venture business survives. Though IPOs may get more attention, acquisitions account for the vast majority of startup exits and a majority of venture returns.
But what if the common wisdom isn’t true? What if companies could do perfectly well adjusting to changing conditions, beating competitors and sustaining enormous market capitalizations without buying scrappy startups?
To delve into that hypothesis, we used Crunchbase data to help assemble a list of the least acquisitive large-cap companies. The primary focus was technology companies, but we included other sectors because leaders in retail, consumer products, shipping and pretty much any other industry also invest heavily in tech.
The resultant list shows that many companies with reputations as innovators actually don’t do much M&A. Some did in the past, but have cut back or stopped in recent years. Others have never shown an appetite for acquisitions.
Here are some of the most recognizable names on our list of big companies least likely to buy your startup.
Netflix
Netflix seems like the kind of company that would do a lot of acquiring. It has a valuation around $60 billion, an innovative, risk-taking corporate culture and investors who are comfortable with the company trading at a high multiple relative to earnings. Yet, according to Crunchbase data, the Los Gatos, Calif.-based streaming video giant has never bought a startup (at least not a disclosed purchase).
While Netflix doesn’t buy startups, it does have a history of spending generously on content and licensing deals. Earlier this month, the company struck its first licensing deal in China with the streaming platform iQIYI. It’s also entered into licensing deals with a long list of Hollywood studios, including NBC Universal and others.
Nvidia
Shares of the graphics chipmaker have been on a tear for the past year, and the company’s market value recently surged past $60 billion.
Yet the Silicon Valley company has only made one acquisition in the past six years, after a prior pace of about a deal a year. The last time it made a disclosed acquisition was 2015, and that was a tiny deal, paying $3.75 million to acquire seed-funded cloud gaming startup TransGaming.
Between 2002 and 2011, Crunchbase shows Nvidia making about one acquisition a year, including some large deals. For its last big purchase, in 2011, the company bought Icera, a developer of mobile broadband modem technology, for $367 million.
It’s hard to make a case that not buying startups has been bad for Nvidia’s competitiveness. The company posted a 50 percent revenue surge for the second straight quarter in its last earnings report. Its net income for the past year totaled nearly $1.7 billion.
Texas Instruments
Texas Instruments is one of those companies that no one in Silicon Valley talks about. Perhaps that’s because it’s based in Dallas, has been around since the 1950s and has a brand famously associated with 1970s calculators. Nonetheless, Texas Instruments is a big player in the semiconductor space, with a valuation around $80 billion and profit of about $8 billion a year. It’s also not very acquisitive these days.
The last time Texas Instruments made a disclosed acquisition, according to Crunchbase data, was 2011, when it bought National Semiconductor for $6.5 billion. Maybe TI is still digesting that giant purchase. Before buying National Semiconductor, TI was reasonably acquisitive, buying about 10 companies from 2002 to 2011, including some venture-backed startups. But it hasn’t been back to the table in a long time.
Applied Materials
Applied Materials is another company that used to do acquisitions fairly often but hasn’t made a new one in years. Like Texas Instruments, Applied’s last big acquisition was enormous. The company paid $4.9 billion in 2011 for Varian Semiconductor, a developer of semiconductor processing equipment. For a company with a market capitalization north of $40 billion, Applied has never been particularly acquisitive. But six years is a long dry spell.
Although it hasn’t been buying startups, Applied Materials has been investing in them. Its corporate VC arm, Applied Ventures, has participated in at least 46 funding rounds since 2006, including several in the past year.
The Home Depot
We all know Home Depot sells flooring, drills and other tools; therefore, it isn’t expected to be snapping up quantum computing startups. But a lot of startup innovation happens in retail, as well, so one might expect a retailer valued at $180 billion to buy a few venture-backed companies to stay competitive.
That hasn’t been the case. According to Crunchbase, the last time Home Depot snagged a startup was five years ago. The hardware retail chain bought BlackLocus, an early-stage developer of pricing software that had previously raised a couple million dollars. The same year, it also bought Redbeacon, a site for getting price quotes and finding professionals to work on one’s home.
Other companies with massive valuations that aren’t much into buying startups these days include UPS, Procter & Gamble and Citigroup. All have the financial resources for more M&A, just not the appetite.
One conclusion to take away from track records of these non-acquisitive companies is that buying startups may be more a strategic preference than a necessity. It’s obvious many large-cap tech companies — Google, Microsoft, Oracle and Facebook, to name a few — have a history of both acquiring a lot of startups and sustaining massive valuations. But clearly, that’s not the only way to stay on top.
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