Every few weeks there’s a press report of an acquisition of some startup or another along with a rumored acquisition price that’s quite low, sometimes less than the amount of venture capital invested in the company. Those deals usually, but not always, have equity grants to key founders and employees that are often a multiple of the acquision price. Example – a recent deal had a rumored acquisition price of around $2 million plus stock grants to a few key employees of $15 million.
They drove a dump truck full of money up to my house! I'm not made of stone!
- Krusty the Clown
I'm fascinated by the idea of acqui-hires for a few reasons. Professionally, if things change in the way that Mr. Arrington suggests, I may need to change the way that we model some exits in VCHub.com to include those stipulations, plus handle the option grants he talks about as part of the input of the exits. That would be wacky.
There's also the question about whether we'll ever become a target of acquisition, acqui-hire or more mundane, and what that would look like.
What this article got me thinking about, though, was the ways in which these kinds of acquisitions are changing the startup ecosystem. I was at a startup event where, after hearing a speaker talk about acqui-hires and how important building a top notch team is (even if you fail at what you're doing, you might be able to sell for the talent) one of the pitching companies switched tactics to talk about how awesome their team is, and how you should invest in them for their acqui-hire potential.
It fell flat at the event, and I think when someone is blatantly steering a company in that direction from the beginning it will fall flat as well. Just like interacting with a coworker who is obsessed with their career rather than the work they're doing, I would have a hard time believing that after they got to my company they'll stick around and do great work. Maybe they'll just try to flip another company as soon as they can, or maybe they'll focus on climbing the corporate ladder rather than producing great results.
In the end I think it comes down to people that are trying to game the system, whether it be corporate ladder climbers, scammers, entrepreneurs building a company for VC funding or a home run exit in an area they don't care about, or those who make decisions purely based on how it will help their resume... those people are just not fun and rewarding to interact with.