When Netflix announced this week that it had acquired Night School Studio, a Los Angeles-area narrative game developer, the deal stood out on a couple of fronts. First, it offers a hint of faster strategic changes for the streaming giant as it accelerates plans to expand into the gaming space. Second, as far as we’re concerned here, buying any company is an unusual step for Netflix, which has a famous and thin track record of mergers and responses.
In a survey of the least acquisitive giant tech companies a few years ago, Netflix ranked high. To date, the company has never bought a startup backed by venture capital, according to data from Crunchbase. In its 24-year history, it has made just three known purchases: children’s media brand StoryBots and comic book publisher Millarworld, and now, Night School.
Could Netflix be changing its attitude towards mergers and mergers and responses? It is remarkable that all of your purchases have been in approximately the last four years. And while the Los Gatos, California-based company hasn’t bought venture capital-funded startups, it does a lot of high-cost licensing deals, spending about $ 8 billion on content in the first half of 2021.
Plus, Netflix certainly has the wherewithal to make more purchases. It is currently valued at around $ 270 billion, with billions in cash on the balance sheet.
Other giant companies that don’t buy many startups
Beyond Netflix, several other ultra-high-valuation companies that weren’t into buying startups in our first survey have picked up the pace. Here’s a look at some of the names on our old list and add a few new ones from the ranks of the 30 most valuable American public companies.
Nvidia
While not a huge startup buyer on our first list, Nvidia has proven willing to spend massively on M&A. Last year, the graphics chip maker reached a deal to pay $ 40 billion for semiconductor industry heavyweight Arm Holdings, a deal that still faces regulatory hurdles.
Beyond the Arm tie-in, Nvidia has also been flexing its M&A muscle with some smaller purchases. Acquisitions since last year include DeepMap, an autonomous vehicle mapping upstart; Cumulus Networks, a network software developer; and SwiftStack, a private cloud storage provider. They are all backed by companies.
The moral: Nvidia is now a fairly active start-up buyer, a change of pace from a few years ago. It helps to have great equity. The shares have roughly quadrupled in the last year, bringing Nvidia’s market capitalization to more than $ 500 billion.
Tesla
It seems like Elon Musk can say (or tweet) whatever he wants, and Tesla shares keep climbing. The electric carmaker is currently valued at around $ 780 billion, with stock at more than 800 percent since early 2020.
But while Tesla could certainly afford to buy a lot of startups, historically it hasn’t been a great acquirer. The automaker has made nine acquisitions to date, according to data from Crunchbase (see list). Of those, only two were private companies backed by venture capital: battery technology company Springpower (acquired this year) and autonomous vehicle technology provider DeepScale (acquired in 2019).
The Home Depot
Valued at around $ 350 billion, The Home Depot’s market capitalization has been on a fairly steady upward trajectory for more than a decade, with shares currently at record levels. Ask any homeowner how much they’ve spent there in recent years on repairs and upgrades, and it’s not hard to see why.
But despite its high market capitalization and huge revenues, Home Depot hasn’t been a great startup acquirer. His last startup purchase was in 2019, for Askuity, a vendor analytics and retail vendor. Over the years, the retailer has been reasonably acquisitive, with 19 deals in the Crunchbase dataset. But of those, only a few are funded startups, none of which had disclosed deal prices.
Also, it is not that there are no companies to buy from. A Crunchbase analysis of the funding of startups focused on home services in the United States this summer found at least $ 1.4 billion invested during the previous year.
