Accelerating AI: The Rising Trend of Mergers and Acquisitions in Startups
As firms race to keep pace with the rapid advancements in artificial intelligence (AI), many startups are strategically pursuing mergers, acquisitions, and acqui-hires to expedite their AI journey and delve into new sectors.
Mergers and Acquisitions Landscape
In recent years, several startups have made notable acquisitions to bolster their AI capabilities. Companies like Krutrim and Sarvam have actively pursued such strategies, with many others closely assessing potential deals, according to reports from ET.
Krutrim’s Strategic Acquisition
Ola’s AI subsidiary, Krutrim, made headlines in 2023 when it acquired Bodhi Computing, a semiconductor company. This strategic move marked Krutrim’s foray into the semiconductor industry.
Upcoming AI Chip Releases
Krutrim revealed plans to launch its AI chips, Bodhi 1 and Bodhi 2, in 2026 and 2028, respectively. This initiative is part of a broader effort to create a comprehensive AI stack, which includes silicon design and advanced AI chip development.
Statements from Krutrim
A spokesperson for Krutrim emphasized their commitment to innovation, stating, “We are building a full AI stack, including silicon design and advanced AI chips.” Engineers within the company are actively engaged in the development of Bodhi 1 and Bodhi 2.
Sarvam’s Recent Deals
In 2024, Sarvam expanded its portfolio by acquiring two startups: Samta Law, a player in the legal tech space, and Pipable AI, a firm specializing in agentic AI solutions. This marked a significant move towards enhancing their AI capabilities.
Launch of Legal Workbench
Following these acquisitions, Sarvam introduced Legal Workbench, an AI-driven platform designed for legal review and research—a key focus area for the company moving forward.
ChargeBee Joins the AI Acquisition Wave
In a similar vein, ChargeBee has recently acquired Trainn, an AI-powered customer training platform. This acquisition positions ChargeBee to enhance its offerings in the customer engagement domain.
Startup Founders on M&A Opportunities
Several startup founders have expressed openness towards acquiring additional AI-driven companies that align with their business models, highlighting a trend towards consolidation in the tech sector.
A Global Surge in AI M&A Activity
Looking ahead, the frequency of mergers and acquisitions in the AI sector is anticipated to rise, reflecting a broader global trend. AI’s critical role in the operational success of businesses is prompting increasing investment in this space.
Statistics on AI M&A Growth
A report from Aventis Advisors confirms this trend, revealing that global M&A deals related to AI surged from 17 in 2022 to 271 in 2023, with projections of 430 by 2025, reflecting a compound annual growth rate (CAGR) of 26%.
Factors Driving AI M&A
Several factors contribute to the uptick in mergers and acquisitions within the AI sector. A Bengaluru-based startup investor identified three key motivations for startups to pursue M&A:
- Accelerating their AI development journey
- Increasing their market share
- Acquiring new technological capabilities
Insights from Industry Experts
According to Vivek Khandelwal, cofounder and Chief Business Officer of CogniSwitch, many enterprises have intensified their AI proof of concept (PoC) initiatives over the past two years. However, he noted that many of these PoCs did not progress as expected, leaving some startups in precarious positions.
The Acqui-Hire Trend
Khandelwal explained that the current environment has made talented startups, especially those who are early adopters of generative AI, prime candidates for acqui-hires. These acquisitions provide an opportunity for larger firms to integrate this expertise into their existing operations.
Conclusion
The landscape of mergers and acquisitions in the AI sector is evolving rapidly, driven by the necessity for companies to enhance their technological capabilities and stay competitive. As startups like Krutrim and Sarvam illustrate, strategic acquisitions can pave the way for new innovations and market leadership in the growing field of artificial intelligence.
FAQs
1. What is the significance of mergers and acquisitions in AI startups?
Mergers and acquisitions help startups accelerate their AI development, increase market share, and enhance technological capabilities, allowing them to remain competitive in the rapidly changing AI landscape.
2. Which startups have recently made significant acquisitions?
Notable startups include Krutrim, which acquired Bodhi Computing in 2023, and Sarvam, which acquired Samta Law and Pipable AI in 2024.
3. How is AI influencing global M&A activities?
AI is becoming increasingly critical to business survival, leading to a significant increase in global M&A activities, with a reported rise from 17 deals in 2022 to 271 in 2023.
4. What does the term ‘acqui-hire’ mean?
An acqui-hire refers to a strategic acquisition where a company buys another primarily to acquire its talented workforce, as opposed to the company’s products or services.
5. What trends are expected in AI M&A in the coming years?
The trend of mergers and acquisitions in the AI sector is expected to continue to grow, with forecasts predicting a rise to 430 deals by 2025, driven by the demand for AI capabilities across industries.
