

Winning A Bidding War With Facebook, Google Picks Up The Entire Milk Team - olivercameron
http://techcrunch.com/2012/03/15/winning-a-bidding-war-with-facebook-google-picks-up-the-entire-milk-team/

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jpdoctor
$2-4M/person, just for the people. Boy does this sound like the telecom
bubble, and the internet bubble before that.

The music is playing, find a chair.

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geuis
No. Suppose these 8 guys are paid $150k a year on average. Engineers, good
ones at least, bring in more than they cost. In some cases like Instagram and
Facebook, the ratio of users to engineers is in the millions. Google is
similar. When you also bring into account the caché of someone like Rose, the
lifetime earnings from that team probably well exceeds what was spent to
aquire them.

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sbov
All employees should bring in more than they cost. Even the fry guy at
McDonalds. Otherwise why would you employ them?

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rubyrescue
... in aggregate. there are lots of people in even small companies that work
for "cost centers"...

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onemoreact
Even "cost centers" are a net benefit, unless something is horribly broken.

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jtreminio
Forgive me for not knowing this, but when an acquisition like this happens
that is solely for the talent, do the developers themselves get any part of
those millions, or does it all simply go to the company owner?

If it does all go to the owner, what would stop the developers from banding
together and leaving all at once so they could pick up those millions
directly, instead?

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notbitter
Usually: millions to the investors and founders for their stock. Employee
stock will be worth little due to investor preferences. The acquirer will pay
hundreds of thousands to retain a few "key employees", and tens of thousands
to the ordinary developers (similar to what they'd get as a hiring bonus).
This is why it doesn't make sense to be a startup employee.

Your question about why developers can't capture more of their value is a good
one. Obviously acquirers would prefer not to pay $1M signing bonuses if they
can avoid it, but they also seem to be happier about paying off VCs than
engineers.

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Drbble
You seem to be assuming a gargantuan preference in this case. I thought just
1x to 2x was the max these days.

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beagle3
Let's look at the numbers:

Let's say investor puts $1M with x2 liquidation preferences into company
valued $3M pre-money (25% equity post money). Company then gets acquired for
$20M. Investor gets $2M+$4.5M=$6.5M, rest get $13.5 (of which a much larger
part usually goes to founders, and a small part to employees - e.g. $12M to 2
founders, $1.5M to 15 employees)

If they put $5M with x2 into company valued $5M pre-money, and company gets
aquired for $20M, investor gets $15M, rest get $5M. Employees will often get a
nice signing bonus from it, but the only one who can have a potentially life
changing event is the founder.

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bryanh
Clearly the team is awesome, so the question is: with a talent shortage
apparently driving the market crazy, are the premiums justified? Is it really
that bad out there?

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badclient
All we are missing is a league where these players can be drafted and traded.

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saryant
There's a weekend project for someone.

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vibrunazo
A fantasy startup game? :)

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badclient
Not startups, founders.

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saryant
Other than the data gathering/entry part it'd be a pretty fun project. Anyone
interested in working on it?

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bravura
Use crunchbase for the data.

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saryant
Of course! I was thinking LinkedIn but not all founders keep that updated or
even use it. Should've thought about Crunchbase sooner.

Other than the creepiness aspect it'd be kinda fun.

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cpeterso
This is a very interesting idea. I could imagine a website that purposely
copies CrunchBase's look and feel. Players create a startup company with a
roster of founders to fill the usual CxO roles. Players score points for every
venture round their company wins, acquisition, and (if you're lucky) IPO. :)

~~~
vibrunazo
I wanna play a patent troll and sue Microsoft for "a method a button to call a
function when clicked".

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j_s
I'd say the Milk Team won the bidding war!

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pja
The Milk shareholders won the bidding war. The Milk employees probably had
their share options converted to Google share options. Not necessarily a bad
deal, but hardly the payday that the buyout makes for the shareholders.

(Some companies have their share options vest immediately on a buyout to
protect people against these kind of shenanigans. Not that it helped with a
previous employer of mine since they ran out of money & when a buyer came
along they required all the employees to waive that clause in the contract if
we wanted the buyout to happen at all. Beggars can't be choosers and all
that...)

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hristov
I really don't get it. If the people are so valuable, why pay extra for the
company and the investors. Just offer all the employees $1 mill dollar hiring
bonuses, and if they gave up on Oink (as it seems they did) they will join
you.

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davidu
Very bad karma in a very tight-knit community that is dependent on investors.
Google has been said to do at least one M&A action per week. With that kind of
pace, you can't burn bridges.

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nostromo
I always wondered if Facebook would acquire Google Ventures companies. It
looks like the answer is yes.

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abraham
Not necessarily. Facebook may have just been driving up the price for Google.

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Drbble
Some would say Facebook won. I am convinced that Facebook has a quiet strategy
of driving up Google payroll costs.

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ojbyrne
So I don't see any confirmation anywhere. Techcrunch once told us that Digg
was being bought by Google, so I'm somewhat skeptical.

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chrishough
Is it just me or are things getting a little bubbly...burp burp.

