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What Is the Average Startup Acquisition Costs?

Startup acquisition costs can vary widely depending on several factors, including the industry, the startup's stage of development, and the specific terms of the acquisition. However, it is important to understand the average costs associated with startup acquisitions to better prepare for the process.

Average and Median Acquisition Costs

According to a report by CB Insights, the average acquisition cost for a startup in the United States was approximately $118 million in 2020. This figure includes both cash and stock deals. The report also notes that the median acquisition price for startups in 2020 was $53 million.

Stage of the Startup

It is worth noting that the acquisition cost can be significantly higher for startups that have reached later stages of development. For example, the acquisition of Instagram by Facebook in 2012 was a staggering $1 billion, even though the company had yet to generate any revenue.

Industry of the Startup

Another factor that can affect acquisition costs is the industry in which the startup operates. Some industries, such as technology and healthcare, tend to have higher acquisition costs due to the potential for growth and the value of intellectual property. In contrast, industries such as retail and consumer products tend to have lower acquisition costs.

Terms of the Acquisition

The terms of the acquisition can also impact the overall cost. For example, if the acquiring company offers a higher valuation, the acquisition cost will be higher. Additionally, if the acquisition includes earn-outs or other contingencies, the overall cost may be higher as well.

Hire a Startup Advisor

It is important for startups to have a realistic understanding of acquisition costs when considering potential acquisitions or exit strategies. By understanding industry standards and specific factors that can impact acquisition costs, startups can make informed decisions and negotiate better deals.

Upthriving is a fully integrated startup growth service for entrepreneurs that have built a product with market fit. More than a startup advisory service, we execute projects that maximize revenue for your business while you focus on building the product.

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