For start-up technology companies, securing venture capital is generally seen as a solid sign of a company's potential. It is a major step on the road towards the kind of expansion, market visibility and overall credibility that results in the company's eventual acquisition, ideally at a nice price for founders and investors.
So it will come as a surprise to followers of the sector to learn that three-quarters of private companies acquired in 2012 had no venture backing at all. That's right - an extraordinary 76 per cent of the 2,277 technology companies acquired last year had no institutional investors, according to a report from analyst CB Insights, which tracks such activity.
"While there were no boot-strapped or strictly angel-funded billion-dollar exits (of which there are few in any case), it is clear that there are a lot of tech companies being formed and sold who are able to sustain themselves on their profits, angel (friends and family) financing etc," the company notes.
It is hard to get any clear answer why, but it will be related to the fact that certain types of technology companies - internet-based and software firms, for example - generally take less money to get off the ground these days and can be funded and run at a leaner level.
A new report from the National Venture Capital Association (NVCA) in the US, which indicates that less money went to start-ups in 2012 than in the three previous years, could be seen to reinforce this notion.
VCs commenting on the study to the San Jose Mercury News noted that another reason could be less money overall in the pipeline, as the number of venture firms continues to decline. That trend, some commentators say, may result in there being only a few mega-firms before long. On the negative side, that could mean a handful of investors determining which areas of technology merit investment, according to their own interests (or prejudices).
The more positive view is that, since the dotcom era, there have been too many venture funds, and far too much competition for deals, resulting in many poor investments in companies that should never have got off the ground in the first place. Companies and entrepreneurs will both benefit, this argument goes, as there will be more focus by venture firms on making good investments and ensuring those they invest in, do well.
Undoubtedly, there is truth in that, but the sceptic in me recalls the same industry argued the contrary in times of plenty, that having lots of money available meant greater opportunity for more companies, a larger deal base and more opportunities for success.
It is more interesting to look at the numbers in the studies, which reveal an interesting landscape of deals. The CB Insights study gives only a partial glimpse as privately owned targets and acquirers do not need to disclose the selling price. But what was publicly disclosed - details for 331 companies - indicates those were worth $46.8 billion.
The majority - 80 per cent - sold for under $200 million, while over 50 per cent went for less than $50 million. Only eight were priced at a billion or more, a tiny number. Facebook and Google were most active on the acquisition front - at least of the companies disclosed - picking up 12 companies. Google and Cisco most frequently disclosed acquisitions.
California still rules when it comes to producing companies that go on to be acquired. In 2012, the state accounted for 455 of the total of 2,277 - more than the sum of the next five states combined. The next closest was New York (138), then Texas (91), just ahead of Massachusetts (87).
On the international side, Britain led with 156 companies acquired. Then comes Canada, with 100 (the report notes Canada has had "a lot of momentum of late"), India with 53, Germany with 52 and France with 35. Notably, China isn't even in the top five. The report says India's appearance in the tables this year indicates a growing, and increasingly established, entrepreneurial community.
If you are an entrepreneur looking to get venture funding, your best bet remains to start a software company. According to a study from the NCVA and Thomson Reuters, 182 US venture firms invested $20.6 billion last year. Reports from PricewaterhouseCoopers and Dow Jones VentureSource say most of that went to software, with PwC noting the amount going to software hasn't been so high since 2001.
