What Affects Startup Acquisition in Emerging Economy? Evidence from India

Acquisitions of startup concern investors, cofounders, consumers, and competition watchdogs. With the rapid emergence of the startup ecosystem in India, the phenomenon of startup acquisitions has become noteworthy. In this article, startup exit through acquisition is examined using startup-specific data relating to funding, funding rounds, cofounders, brand name length, and gender of the cofounder. Startup exit is modelled through choice models on a sample of 903 startups. Cox proportional hazard regression was used for the robustness check. The results suggest that venture capital funding increases the probability of acquisition. However, the number of funding rounds reduced the likelihood of acquisition significantly indicating that repeat funding has a positive impact on new venture continuity. There is a trade-off between the quantity and consistency of venture capital funding in affecting the likelihood of acquisition. The number of cofounders is associated with higher acquisition likelihood, and the brand name length had a negative impact on the probability of acquisition. Furthermore, there is a lower acquisition likelihood if the startup had a female cofounder. The findings bear implications for the quality of fundraising, startup team formation, branding, and women entrepreneurship. JEL Codes: G24, G34