The death of Amazon’s iRobot deal has knock-down effects, as the unicorn corporate exit appears to be defunct
When Amazon called off its acquisition of iRobot on Monday, the impact was immediate: The Roomba maker’s longtime cofounder and CEO stepped aside and hundreds of staffers were laid off.
But, coming on the heels of Adobe's abandoned $20 billion Figma buyout last year in the face of regulatory pushback, a longer-term and more unsettling air is sending shudders through the startup world and raising anxiety about the exit environment for a certain class of company.
In this antitrust-fueled climate change, being a unicorn isn’t easy.
"If you're under a billion dollars, you're actually looking a lot better right now than if you're a unicorn trying to make an exit,” said Cathay Innovation partner Simon Wu.
The glorious corporate exit for a mature startup is looking increasingly difficult, drawing attention to another tricky option—IPOs, which companies will be under even more pressure to undertake due to regulatory standstills, said Bhaskar Chakravorti, Tufts’ Dean of Global Business.
It isn’t just unicorns that are affected by these stumped deals, which “send waves through the ecosystem around questioning what exit paths can exist,” said Pari Passu Venture Partners managing partner Julia Krieger. Losing M&A as a viable exit for late-stage startups of all kinds could cause “substantial damage to the venture ecosystem,” said angel investor Adam Nash, an early Figma backer and current CEO-cofounder of Daffy.
Some have even harsher words. NVCA president and CEO Bobby Franklin told Term Sheet via email that FTC Chair Lina Khan’s charge has left “startups that could have secured a profitable exit to wither on the vine…threatening the crown jewel of the American economy.”
Thomvest Ventures managing director Don Butler tells Term Sheet via email that the exit “chill” might last through 2024 as companies put off “these larger types of transactions until the election.”
But it’s also important to not take this too far—there are things about this fallout that, frankly, have a whole lot to do with iRobot itself. The deal was initially announced in August 2022, and the price last year dropped from the initial $1.7 billion. At the time, the explanation was tied to debt that iRobot was taking on. For Paolo Pirjanian, the former iRobot CTO who is now the founder of robotics startup Embodied, the trouble at his former company is really a sign of floundering innovation efforts.
“iRobot has been losing market share, it’s a falling knife,” he said. “I can imagine if I was sitting in Amazon's shoes, I’d say this deal isn’t worth it to me anymore."
For my part, I’ve begun imagining private markets right now as a bathtub, with water sitting in it yet to be drained. I ran the image by Mark Patricof, founder of athlete-focused investment firm Patricof Co, who digs it.
"You're going to need to see some rationalization around exits. If you can't move the water down the drain, maybe you can pick it up and put it in another bathtub. It's the only way to prevent the water from getting dirtier and staler than it is."
Today…The Federal Reserve today is holding its first rate meeting of 2024. The bank has previously signaled that rate cuts are on the table this year. Every Fed day could be a big day.
And last call…Term Sheet is partnering with Semaphore again for its 16th annual confidence survey of private equity, venture capital, hedge fund, and other professionals–and today’s the last day to participate! It's anonymous and should take you 3–4 minutes. You can take the survey here. Have a look at last year’s results here, here, and here.
See you tomorrow,
Allie Garfinkle
Twitter: @agarfinks
Email: alexandra.garfinkle@fortune.com
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Update, Jan. 31, 2024: An earlier version of this article stated Patricof Co is a bank. This has been updated to reflect that it is a firm.
Joe Abrams curated the deals section of today's newsletter.
This story was originally featured on Fortune.com
