Was Lina Khan to blame for the Tech M&A slowdown?

VCs' own greed and short-sightedness is the culprit.

Of the many tech-world critics of former Federal Trade Commission Chair Lina Khan and former Department of Justice Assistant Attorney General Jonathan Kanter, venture capitalists were among the loudest. Jason Calacanis, a co-host of the influential All-In Podcast, recently accused Khan of having “killed” VCs like himself by “banning” acquisitions, and thus shutting down a favored method of cashing in investments in startups. Many VCs backed Donald Trump during the election partially in hopes that a new antitrust regime would revive startup deal flow.

It’s true that tech M&A slowed over the last four years—but was antitrust enforcement truly to blame?

To answer that question, we’re bringing you a brief analysis from startup valuation expert Dan Gray, head of insights for start-up platform Equidam. His view is that the slowdown was not the result of mergers being blocked or deterred, but of unsound investing practices by VCs themselves. He says VCs inflated startup valuations, especially during the zero interest rate period, to the point where the startups simply weren’t attractive to corporate acquirers or public markets—especially after inflation brought the ZIRP period to an abrupt close.

We think Dan Gray is spot on. The “valuation overhang” is widely recognized within the VC industry. Global value of M&A fell 28% from December 2024 to January 2025. M&A suffered its worst January in a decade this year, with announced deals down by 30 percent compared to January, 2023. All of this is a clear indication that “The Wrath at Khan” is completely unjustified.

Without further ado, here’s Dan Gray:

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There's very little reason to think Lina Khan's tenure at the FTC had much to do with the M&A slowdown. Certianly it's ridiculous to say she "banned" M&A, despite Jason Calacanis’ recent claims. Khan was comissioner from June 2021, yet her anti-monopoly stance didn't really attract much attention until 2023. It also reflects on a tiny number of deals relative to overall M&A activity.

(e.g. 2023 was the second most active M&A year for SaaS since 2014, according to Software Equity Group.

For context, we can also look at Episode 64 of The All-In Podcast, which covered an interview with Khan in January 2022 (pre-crash) where the panelists have a fairly balanced view of her regime. Certainly not the hyperbole of today.

So, if not Khan, what caused the M&A slowdown?

The obvious candidate is the painful (and much discussed) pricing hangover from 2021, which is also to blame for the slowdown in IPOs.

Most companies produced in the tail end of that market had one thing in common: inflated valuations and terrible financial health.

VCs have the lazy habit of pricing to revenue, reflective of negligence in the market at that time. As a practice, it directly incentivises overcapitalisation, overspend on growth, no discipline on margins, little consideration for sustainable moats (capital became the most popular moat), zero sum predatory pricing, and everything from accounting trickery to outright fraud.

Corporate acquirers and public markets are rather different. They look at things like margins, EBITDA, free cash flow. Very few companies that came out of the venture capital pipeline in 2022 were appealing targets, and thus liquidity dried up (in addition to the general macro headwinds).

Khan is a convenient scapegoat for the lack of liquidity in VC, but venture capital's own greed and short-sightedness is clearly the main culprit.

Additionally, the only reason M&A is in focus is because VCs first torched the IPO market in 2021 by dumping their bags once they saw signs of returning interest rates. The performance of that generation of listed companies is shockingly bad, to this day.

Altogether, Khan was a pro-innovation and pro-small tech comissioner with a very positive legacy:

- Supportive of open-source AI

- Open standards / interoperability for cloud compute

- Pushed for 'right to repair', particularly in agriculture

- Led the way on banning non-compete clauses

- Created summits to engage w/ the tech community

As a part of that, she sought to block acquisitions that were viewed as monopolistic in the courts, which is central to the FTC comissioner's remit. Those cases were a small drop in the liquidity bucket, and have not stopped M&A still happening where buyers and sellers are actually aligned.

So many in VC seem to refuse to understand what a monopoly is, why they are bad for consumers and harmful to technological development.

Such a strangely myopic view from a group that claims to champion innovation... or maybe it just shows us who is in it for the fees.