Good day. The M&A market for startups is at a standstill. Buyers are less interested in acquisitions given the high cost of capital and general market uncertainty. Even after a process begins, it’s more likely to fall apart midway.

“The deal closing is less certain than a year ago,” said Larry Naughton, member and co-chair of the international practice at Mintz Levin Cohn Ferris Glovsky and Popeo PC, speaking of startup M&A.

In the quarter that ended Dec. 31, the exit value of startup acquisitions in the U.S. dropped to just $800 million, a tiny fraction of the $27.5 billion in deal value in the same period in 2021, according to the PitchBook-NVCA Venture Monitor. That’s the lowest value in at least a decade. At 146, the quarterly total of M&A transactions was also below the level of any other quarter since at least 2012, per the data.

One reason deals fall apart is that the offer price is often already lower than sellers were hoping for. “They are not excited about it” to begin with, Mr. Naughton said.

During due diligence, issues can arise that pull the price down even more. In cases where the buyer is a public company, its share price could decline midprocess, resulting in offers that may include shares that look unattractive, causing some sellers to end negotiations, he said.

Similarly, Mr. Naughton said, sellers are more likely to give up when faced with a complex government antitrust approval process to complete an acquisition.

“The sellers say: This price wasn’t as attractive as I thought and this whole process is getting harder. Let’s pull out of this,” Mr. Naughton said.

And now on to the news ...

DOJ sues Google. The Justice Department is seeking the breakup of Google’s business brokering digital advertising across much of the internet, a major expansion of the legal challenges the company faces to its business in the U.S. and abroad, The Wall Street Journal reports.

• A lawsuit filed Tuesday, the Justice Department’s second against the Alphabet Inc. unit following one filed in 2020, alleges that Google abuses its role as one of the largest brokers, suppliers and online auctioneers of ads placed on websites and mobile applications. The filing promises a protracted court battle with wide-ranging implications for the digital-advertising industry.
   
• Filed in federal court in Virginia, the case alleges that Google abuses monopoly power in the ad-tech industry, hurting web publishers and advertisers that try to use competing products.

Increased scrutiny from the Securities and Exchange Commission has derailed crypto companies’ efforts to go public this past year, as financial distress and failures spread across the volatile industry, WSJ reports.

• Crypto-focused companies including Bullish Global, Circle Internet Financial and eToro Group Ltd. have failed to secure the SEC approvals that are required of companies going public. The firms were seeking stock-exchange listings through mergers with special-purpose acquisition companies, an alternative path to going public that thrived in 2020 and 2021 before heightened regulatory checks and market turbulence ended the SPAC boom.

Cybersecurity company Snyk Ltd. announced on Tuesday a $25 million investment from enterprise software maker ServiceNow Inc., WSJ's CIO Journal reports. The Boston-based startup also announced an integration with ServiceNow that aims to provide cybersecurity and information-technology executives a view of potential security vulnerabilities originating from open-source code.

• The financing comes as cybersecurity startups have seen a contraction in late-stage funding. Snyk, which focuses on making it easier for software developers to build security into their cloud-based applications, last month announced a $196.5 million Series G investment led by the Qatar Investment Authority at a $7.4 billion valuation—about a 12% decrease from its prior funding in September 2021.

Corrections & Amplifications: The investment bank Union Square Advisors was incorrectly described as an investment firm in Monday’s newsletter intro.

Funds

Cowboy Ventures raised $140 million for its Cowboy Fund IV to continue making seed investments in U.S.-based startups across sectors including vertical SaaS, enterprise infrastructure, developer tools, big data, security, fintech, artificial intelligence-driven software, consumer and healthcare. The Palo Alto, Calif.-based firm also secured $120 million for its first Mustang Fund to back breakout portfolio companies.

People

European software investor Dawn Capital promoted Dan Chaplin to partner. He joined the firm in 2018 from J.P. Morgan.

Business insights provider BigPanda Inc. named Ed Tang to the post of chief financial officer. He was previously CFO at Pindrop. BigPanda is backed by Insight Partners, Sequoia Capital, Mayfield, Battery Ventures and Glynn Capital.

Online homebuilding startup Welcome Homes named Sara Anissipour as chief revenue officer and Ivi Ahuja as head of strategic partnerships. Ms. Anissipour was previously at Pacaso. Mr. Ahuja was most recently at Realtor.com. Earlier this month, New York-based Welcome Homes said it secured more than $29 million in Series A funding led by Era Ventures.

Exits

Strava Inc., a subscription-based fitness app, acquired outdoor adventure app Fatmap for an undisclosed amount. In 2020, Strava said it raised a $110 million Series F round from investors including Sequoia Capital, TCV and Jackson Square Ventures. Venture firms 83North, P101 and Capnamic list Fatmap in their portfolios.

Software delivery platform Harness purchased engineering insights provider Propelo Inc. for an undisclosed sum. Last April, Harness said it landed $175 million in equity and $55 million in debt, valuing the company at $3.7 billion. The Series D investors included Norwest Venture Partners, Menlo Ventures, IVP, Unusual Ventures, Citi Ventures, Battery Ventures, GV and others. Propelo counted Decibel Partners, Fika Ventures, Eniac Ventures and Fathom Capital as backers.

Autonomous excavator technology provider Built Robotics acquired Y Combinator-backed Roin Technologies, which makes an automated concrete power trowel. Terms weren’t disclosed. Built Robotics is backed by Tiger Global Management, New Enterprise Associates, Founders Fund, Fifth Wall and Building Ventures.

PayEm Inc., a spend and procurement management startup with offices in San Francisco and Tel Aviv, raised $220 million in equity and credit financing from Viola Credit, Collaborative Fund and others

QuickNode, a Miami-based development platform for Web3 builders, closed a $60 million Series B round, valuing the company at $800 million. Led by 10T Holdings, the investment included participation from Tiger Global Management, Seven Seven Six, Protocol Labs and QED Investors. Dan Tapiero, managing partner and chief executive of 10T Holdings, will join the company’s board.

Cygnvs Inc., a Los Altos, Calif.-based cyber crisis preparedness and response management provider, emerged from stealth with $55 million in Series A funding. Andreessen Horowitz led the round, which included participation from Stone Point Ventures and EOS Venture Partners.

Crux, a San Francisco-based data automation platform, added $50 million in new funding led by Two Sigma and Goldman Sachs Asset Management.

Forward Networks Inc., a Santa Clara, Calif.-based startup that creates an accurate software copy of networks, secured $50 million in Series D financing led by MSD Partners. New investors Section 32 and Omega Venture Partners also contributed to the round, along with existing backers Goldman Sachs Asset Management, Threshold Ventures, A. Capital Ventures and Andreessen Horowitz. Victor Hwang, managing director and co-head of MSD Growth, will join the Forward Networks board.

Scythe Robotics, a Longmont, Colo.-based developer of autonomous equipment for the commercial landscape industry, snagged $42 million in Series B funding led by Energy Impact Partners. Additional new investors ArcTern Ventures, Alumni Ventures and Amazon’s Alexa Fund also contributed to the round, alongside previous backers True Ventures, Inspired Capital and others. The investment round will help Scythe Robotics meet demand for its electric zero-emissions mower.

Komprise, a provider of unstructured data management and mobility software, landed $37 million in growth capital from Canaan Partners, Celesta Capital, Multiplier Capital and TopTier Capital Partners. The company has offices in Campbell, Calif., and India.

DevZero, a Seattle-based startup whose technology enables software developers to code in the cloud, grabbed $21 million in Series A funding. Led by Anthos Capital, the round saw additional participation from Fika Ventures, Foundation Capital and Madrona Venture Group. Foundation Capital led the company’s previously unannounced $5 million seed round.

Strata Identity Inc., a Boulder, Colo.-based provider of identity orchestration for hybrid and multi-cloud environments, closed a $26 million Series B round. Telstra Ventures led the investment, with General Partner Marcus Bartram joining the company’s board. Menlo Ventures, Forgepoint Capital and Innovating Capital also invested in the round.

Memfault Inc., an Internet-of-Things reliability platform, raised $24 million in Series B funding. Lead investor Stripes was joined by Partech Partners, Uncork Capital and 5G Open Innovation Lab in the round. Stripes Partner Saagar Kulkarni will join the board.

Vartana Inc., a San Francisco-based sales closing and technology financing platform, nabbed $12 million in Series A funding. Mayfield led the round, which included participation from Xerox Ventures, Flex Capital and Audacious Ventures. Patrick Salyer, partner at Mayfield, will join the board.

• Microsoft earnings fell last quarter amid economic concerns
   
• NYSE glitch causes erroneous prices in hundreds of stocks
   
• Investors await tech earnings in next test for markets
   
• Companies tap tech behind ChatGPT to make customer-service chatbots smarter
   
• Crypto exchange Kraken names new compliance chief after months of searching
   
• How TikTok could become a U.S. company [WSJ Video]
   

• The rise of Esther Crawford in Elon Musk’s ‘hardcore’ Twitter (FT)
   
• Creators report extremely low earnings from TikTok’s ad revenue sharing initiative (Fortune)

This newsletter was compiled by Yuliya Chernova and Zachary Cole.

WSJ Pro Venture Capital is a premium service of The Wall Street Journal. We cover venture capital and the global startup ecosystem. Share your tips, comments and questions: vcnews@wsj.com

The Team: Matthew Strozier, Yuliya Chernova, Brian Gormley, Angus Loten, and Marc Vartabedian.