I run a $4.2B 9-year-old company that’s acquired 3 startups. M&A makes increasing sense for companies like mine—not just the Fortune 500
For decades, mergers and acquisitions were seen as the domain of the world’s largest companies. Tech giants like Microsoft and Alphabet have long used deals as a strategic lever to expand their reach and capabilities. Nvidia, for instance, has completed six acquisitions since early 2024 alone. The logic is clear: These companies have the capital and infrastructure to navigate complex due diligence and integration processes, knowing that the gains—revenue acceleration, market share, new tech—can be significant.
For smaller organizations working on a different scale than the Fortune 500, it’s a very different reality. With smaller teams and leaner operations, most emerging companies are focused on scaling their core business, not scanning the market for acquisition targets. M&A is expensive, both financially and operationally. Without the financial cushion of a Fortune 500 balance sheet, it can feel like a risk that is not worth taking.
M&A strategy for smaller companies
But that perception is changing. Over the past year, my cybersecurity company Armis, founded in late 2015 and valued at $4.2 billion in our latest funding round, has acquired three startups for hundreds of millions of dollars. These acquisitions didn’t replace organic growth through R&D, but they became an integral part of our broader strategy, acting as a real force multiplier. Throughout these processes, we’ve learned that when done right, M&A can be transformative—even when you are at the startup stage.
Where large organizations can afford to “bet” on acquisitions—exploring unfamiliar markets or bolting on experimental technologies—we must be far more intentional. Every acquisition we pursue serves a specific purpose and has to be complementary to our offerings and benefit our customers. Customer demand is—and should always be—a catalyst in decision-making. In one recent deal, for instance, we saw growing interest in an on-premise option to complement our cloud-native platform. Rather than redirect internal resources to build something outside our core expertise, we acquired a company that already specialized in exactly what was needed. It wasn’t a pivot from our roadmap—it was a natural and efficient extension of it, driven directly by real-world feedback from the people who ultimately use our offerings.
Equally important is cultural alignment. For a deal to work, the teams involved need to see the opportunity not as an exit, but as a new chapter. It’s crucial to spend time understanding the DNA of a company before acquiring it. Smaller companies can’t afford the “rest and vest” mentality often seen when founders are acquired by much larger players. On both sides, this requires humility and commitment. It often means stepping into leadership roles that may not carry the same titles as before but come with real responsibility and impact in smaller organizations. This setup can also offer a key strength: You’re gaining someone who has already built and run a company, now focused on one specific area of the business, and who knows how to oversee things end-to-end. They know how to operate, make decisions, and execute efficiently. That kind of leadership raises the bar for the entire team.
The speed of startups
And then there’s the question of speed. Startups operate with urgency, and that needs to extend to M&A. We can’t afford year-long integration processes. When we decided to pursue acquisitions, we committed to a 90-day integration window—from decision to execution. That might sound too ambitious, and over the past year some analysts we came across have even questioned whether it’s realistic. But in practice, products have gone live, teams have been fully onboarded, and everything has been folded into our platform in just three months. That velocity is essential when you’re a smaller company acquiring a startup.
Of course, it’s not seamless. M&A comes with real costs, and the trade-offs are significant. Every deal requires time, energy, and focus—resources that inevitably get pulled from other parts of the business, especially when you’re a company of just a few hundred employees. Even when strategic alignment is strong, the timing isn’t always perfect. Integration brings friction. Roles may shift. In some cases, tough personnel decisions have to be made. At the end of the day, growth for its own sake is never the goal. Every move has to serve the larger vision. For us, that means approaching M&A with the same clarity, urgency, and intentionality we bring to supporting our customers and building products.
The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.
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Are Smaller Tech Ventures the Next Big Thing for PE Firms
Private equity firms are eyeing fast-growing small tech companies for big returns
Private equity (PE) firms are known for investing in companies, improving their value, and then selling them for a profit. In the past, most PE firms focused on large companies with high revenues and strong market positions. But in 2025, a clear shift is happening. More and more PE firms are turning their attention toward smaller technology ventures. This article explains why smaller tech firms are becoming attractive to PE investors, the latest trends and data, and what this means for the future of private equity.
The Growing Interest in Smaller Tech Companies
Smaller technology companies are getting noticed by PE firms because they offer many advantages in today’s market. These companies usually have valuations under $250 million, which makes them more affordable than large firms. They often work in fast-growing areas like artificial intelligence (AI), cloud computing, software as a service (SaaS), and cybersecurity.
For example, earlier this year, an Indian PE firm called Multiples Alternate Asset Management invested $200 million to take control of a mid-sized IT company called QBurst. Similar deals have been seen across the globe, with private equity funds buying into promising smaller tech firms that are flexible, innovative, and able to grow quickly.
Why Are Smaller Tech Ventures So Attractive Now?
Several reasons explain why smaller tech ventures are catching the attention of private equity investors.
Agility and Innovation
Small tech companies can adjust to new trends and technologies faster than large companies. They can launch new products, enter new markets, or change business models with less effort. This is important at a time when technologies like AI, machine learning, and automation are reshaping industries at high speed.
Lower Valuation, Higher Growth Potential
Smaller tech firms are generally valued lower than big companies . This means PE firms can buy them at a reasonable price. Because these companies are young and growing, they also have the potential to deliver higher returns once they scale up.
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Opportunities for Add-On Acquisitions
Many smaller tech companies can be added to larger businesses that a PE firm already owns. This allows PE firms to create stronger, more complete businesses through integration.
Digital Transformation
As businesses worldwide speed up their digital transformation, demand for technology services is growing. This benefits smaller tech firms that provide software, automation tools, cybersecurity services, and cloud solutions.
Latest Data and Trends
Recent data shows that PE firms have shifted their strategies. In the first half of 2025, growth equity investments—which focus on investing in fast-growing companies—have increased by over 60% in value and volume compared to last year. These investments are mostly targeting mid-sized and small tech ventures.
At the same time, large buyouts have slowed down. Uncertainty in the global economy, trade tensions, and high borrowing costs have made big deals harder to complete. As a result, PE firms are sitting on about $1 trillion in unspent capital, according to recent reports. This has encouraged many firms to focus on smaller, more manageable deals where growth potential is high.
A notable example is Thoma Bravo, a well-known private equity firm that raised $34 billion this year. Part of this money is meant for investing in smaller software and technology companies. This shows strong confidence in the sector, despite global uncertainties.
Challenges That Come With Investing in Smaller Tech Ventures
Although investing in smaller tech firms has many benefits, there are also challenges to consider.
Exit Uncertainty
It can take longer for PE firms to sell smaller tech companies, especially if the market conditions are not right. Some firms may have to hold on to these investments for five to seven years or more before finding the right buyer or taking the company public.
Valuation Risks
Smaller companies can be more affected by changes in the economy or in their industries. If market conditions change suddenly, the value of these firms could drop quickly.
Operational Challenges
Scaling a small tech firm into a larger, more successful company is not easy. It requires strong management, skilled workers, and clear strategies. PE firms often need to provide operational support to help these firms grow in the right way.
Changes in PE Strategy
The growing interest in smaller tech ventures is also changing how PE firms operate.
Focus on Minority Stakes: Many PE firms are now happy to take smaller, non-controlling stakes in tech companies. This allows the original owners to continue managing the business while the PE firm provides funding and advice.
Specialized Funds: Some PE firms have launched funds that focus only on smaller tech firms. These funds are designed to find, invest in, and help grow mid-market technology businesses.
Strong Operational Teams: PE firms are building teams of experts who can guide small tech firms through the challenges of scaling up.
Interest in Emerging Markets: In countries like India, where many small tech firms are coming up, PE firms see a lot of opportunity. These markets offer growth potential that may not exist in more mature economies.
The Impact of the Global Economy
Several global factors are helping to push PE firms toward smaller tech investments.
Slowdown in Big Deals: With trade tensions, rising tariffs, and economic uncertainty, large deals have become more difficult and risky. Smaller tech firms are seen as safer bets that can deliver good returns without huge upfront costs.
AI and Cloud Boom: The rapid growth of AI, cloud services, and other digital tools has increased demand for the products and services provided by smaller tech companies.
Government Support: In some countries, government programs are helping smaller tech firms grow, especially those working in deep technology, cybersecurity, and digital infrastructure. This support creates even more opportunities for PE investors.
The Road Ahead
Experts believe that the interest in smaller tech ventures will continue to grow. Analysts predict that private equity activity in technology will rise over the next two years as the global economy stabilizes and digital transformation efforts expand.
Private equity firms that are able to identify high-potential small tech firms, provide them with the right kind of support, and manage their growth carefully are expected to see strong returns. However, they will need to be careful about choosing the right companies, offering operational guidance, and timing their exits well.
Smaller tech ventures are emerging as the next big thing for private equity firms. These companies offer faster growth, flexible business models, and opportunities to create value through integration and scaling. While risks such as exit uncertainty and operational challenges exist, the current market environment makes smaller tech an attractive sector for PE investors. As technology continues to reshape industries, private equity’s focus on smaller tech ventures is likely to play a major role in shaping the future of both sectors.
https://fortune.com/2025/06/05/acquiring-startups-strategy-for-smaller-companies/https://www.businesseconomy.com/business/are-smaller-tech-ventures-the-next-big-thing-for-pe-firms/
