The buyer nobody’s pricing yet: why early-stage deals turn on an exit no one can see

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Buyers acquired US venture-backed companies 1,029 times in 2025, according to the Q4 2025 PitchBook-NVCA Venture Monitor. The same report counted 48 public listings that year, a category that includes traditional IPOs, direct listings, and SPAC mergers. Among venture-backed companies that reached an exit in 2025, a sale to another company was far more common than going public. Investment professional Michelle Luan argues that this pattern explains much of how seed-stage valuations are set.

The gap is smaller when measured by value. The report puts the exit value of the 48 listings at $116.7 billion, compared with $140.7 billion for the 1,029 acquisitions. Per deal, a listing was worth far more, but acquisitions happened far more often. PitchBook calculates listing value from each company’s pre-money valuation at its IPO price, and it counts acquisition value only where a price was disclosed, so the two totals don’t directly compare cash returned. The report also found that other venture-backed companies made 38.4% of those acquisitions. Its analysts link part of that rise to continued Federal Trade Commission limits on M&A by public corporations.

Luan argues that founders in a valuation meeting tend to price what they can see: the product, the traction, the round on the table. Meanwhile, she says, the investor across from them is also pricing an ending the founder rarely hears discussed. In a recent analysis, she describes a seed valuation as a discounted estimate of what a future buyer will eventually pay, made years before that buyer appears.

The buyer is a short list

In Luan’s view, the realistic buyer for most startups comes from a short, identifiable list. It includes strategic acquirers with a specific reason to want what the company does, larger players in the same category, and, increasingly, other funded companies buying their way into a market. The PitchBook-NVCA data on venture-backed acquirers supports that last point. She believes a founder can often sketch that list years in advance by looking at who has bought similar companies, what they paid, and whether they could buy again.

If no such buyer exists, Luan says, an investor backing the company is effectively underwriting an IPO. In 2025 that was the rarer outcome by a wide margin: 48 listings against 1,029 acquisitions, according to the same report. Luan doesn’t consider either bet wrong. Her concern is that founders rarely find out which bet they’re asking an investor to make.

What an acquirer is actually paying for

Luan’s view comes from the transaction side. She is based in London and says she has worked on capital raises and M&A transactions of roughly $500 million to $5 billion across the Americas and Europe. In her experience, acquirers rarely pay for a growth story on its own. She says they pay for something concrete: a capability they can’t build fast enough, a customer base that would take years to reach, a regulatory position or license that shortens their path into a market, a team they value the way they would value a hiring budget, or a competitive threat they would rather own than fight.

Each of these, she says, tends to bring a different price, diligence process, and negotiation. Luan suggests that a company pointing to several reasons a buyer might want it has often proven none of them. In her experience, the strongest pricing goes to companies a buyer can evaluate quickly, where the buyer can see exactly what it’s purchasing and how that fits its own numbers.

The math runs long before the exit

Luan argues that fund economics push the exit calculation into the earliest rounds. As she describes it, a venture fund needs its winners to return a multiple of the entire fund. Investors therefore work backward. They start from a plausible sale price, informed by what buyers have paid for comparable companies, then account for dilution from later rounds, and arrive at what they can pay today. If no believable buyer would pay enough to make that math work, she argues, the deal can stall before valuation comes up at all. The founder hears a pass and may assume the traction fell short.

Luan says the same dynamic can help explain why two companies with similar metrics receive very different term sheets. One may operate in a category where acquisitions happen often and at healthy prices. The other may sit where exits are rare, small, or dependent on an IPO window that may not open. On paper the two companies look alike. In Luan’s analysis, investors expect different endings for them, and the term sheets reflect those expectations.

Luan’s advice to founders

Luan doesn’t argue that founders should build companies purely for a sale. Her advice is narrower: know the answer to the question an investor has likely already asked. She recommends identifying the three or so most plausible acquirers and researching, from public sources, what similar companies sold for. In her view, those comparable prices give founders a realistic reference point for any valuation conversation that follows.

She also recommends building toward what those buyers value, which in her view means a clean regulatory position, governance that holds up under scrutiny, and clear ownership on the cap table. In her experience, an acquirer’s diligence is often harsher than an investor’s, because the check is larger and no future round remains to fix problems found late.

Her final point concerns alignment. As Luan puts it, venture investors ultimately need an exit to return capital to their own backers. She says that if a founder is building toward a fifteen-year outcome while the fund needs a return within seven, the mismatch tends to surface at the worst moment: when a real acquisition offer arrives.

Luan has said her next piece will examine how founders can research prospective buyers directly and judge whether an investor can hold a stake long enough for that buyer to act.

About Michelle Luan

Michelle Luan is a London-based investment professional and Senior Executive, specialising in risk evaluation across technology-enabled businesses. She works with founders to refine strategy, prepare for fundraising, and de-risk their path to capital. She has executed large capital raises and M&A investment transactions (c. $500m-$5bn) for technology-enabled businesses across the Americas and Europe.