

The Acqui-hire Scourge - ahmadss
http://pandodaily.com/2012/08/25/the-acqui-hire-scourge-whatever-happened-to-failure-in-silicon-valley/

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dglassan
What is with all this hate for acqui-hires lately? I was part of an acqui-
hire, I've seen it from the other side. I worked my ass off with my fellow
employees at a startup here in the valley. We never achieved the scale we
needed to be successful in our industry, but we were acquired by the major
player in that space.

It's been an incredible journey and all of us have grown our skills and are
moving our careers forward working with the new company. It's been the best
thing that could have happened to my career and all I hear on HN, and now in
the media, is people bitching and moaning that these people shouldn't be
acqui-hired and that all these acquisitions are bogus? Give me a break. It's
business. That's all it is. This is capitalism working. Companies investing in
human talent hoping to produce long term revenue and results. We built
something together at our startup. It didn't work out but our new company
liked what we built enough to bring us in and solve the same problem with more
resources.

Downvote me, but I'm sick of hearing all this complaining about acquihires.
Especially from journalists who's only job is to tell people their
opinion...real tough work.

~~~
jsnell
Individual cases might be largely benign, and definitely are to people who
would otherwise just have lost their jobs. The criticism is for the trend, and
what it implies.

It's bad for users/customers, who frequently lose access to products they had
been using as they get shut down or EOL'd as part of the acquihire.

It's bad for entrepreneurs trying to build a real business since customers
will have no reason to believe that this particular company isn't just being
built to flip.

It's bad for the world since it means that talented people have an incentive
to build a showcase rather than something truly useful.

I strongly believe that most acquihires are a bad deal for the buyer. Or at
least to the shareholders, though maybe maximizing shareholder value isn't the
main reason these deals get made. Even "proper" acquisitions are horrible
deals most of the time, and there the buyer is actually getting something
tangible rather than an ephemeral team. I do find it almost impossible to
believe that this is actually a cost-effective recruiting method. I'm sure
there are exceptions, however.

And while it's not possible to categorically say this is bad, I personally
find the inequality that results from acquihires a bit distasteful. Two people
can do the same work at the same company as well at grossly different
compensation levels due to one getting hired there, while the other got a
retention bonus as part of the acquihire. A justified reward for the extra
risk of joining a startup? Maybe, but it just doesn't feel like that to me.

~~~
snprbob86
> It's bad for users/customers, who frequently lose access to products they
> had been using as they get shut down or EOL'd as part of the acquihire.

Who can say how many of those products would have been shut down or EOL'd as
part of a bankruptcy?

> It's bad for entrepreneurs trying to build a real business

As someone who recently sold his company in an acquihire, I resent your
suggestion that I wasn't trying to build a real business.

> I strongly believe that most acquihires are a bad deal for the buyer.

My new boss & team seem to be ecstatic with the deal so far... maybe we're an
outliner?

> I do find it almost impossible to believe that this is actually a cost-
> effective recruiting method.

Do you have _any clue_ how much money the likes of the big tech companies
spend on recruiting? I get the sense that you have no clue. Most acquihires
are peanuts, compared to the aggregate cost of assembling a high caliber team
by other means.

I won't comment on the particulars of our deal, suffice to say that our
company's numbers were traveling "up and to the right" and that we had
investor interest. We drank a lot of beer and lost a lot of sleep, but
ultimately decided that the acquihire was the right move for everyone
involved.

Never forget, startups are a Repeated Game:
<http://en.wikipedia.org/wiki/Repeated_game>

~~~
jsnell
Yes, I can make a pretty educated guess about what a company like Google
spends on recruiting. But that recruiting machine is capable of finding and
hiring 5k top quality engineers in a year. It's not reasonable to compare the
cost of a single 20 person acquihire to that.

I'm sure that your team made what is the right choice for you
(congratulations!). But dglassan was asking about why there is hate for
acquihires. To understand it, you need to look at it from the point of view of
the other stakeholders, not from the point of view of those who benefitted
from it.

That said, I'm a bit puzzled by the sense of resentment, since by your own
description everything was going well for your company, and you decided to be
acquihired instead. On the surface it seems like you (plural) weren't all that
committed to the business after all.

~~~
snprbob86
> I'm a bit puzzled by the sense of resentment, since by your own description
> everything was going well for your company, and you decided to be acquihired
> instead.

I said "up and to the right" and I said "investor interest". I didn't say
"hockey stick" or "feeding frenzy". Like I said, startups are a repeated game.
Sometimes, you weigh the options, and decide that it's better to take a small
win now to strengthen your position for the next iteration. The alternative is
to risk burning yourself to the ground and wind up with nothing left for the
next go.

> On the surface it seems like you (plural) weren't all that committed to the
> business after all.

I've seen a number of acquihires from close range and been through one myself.
It's an incredibly bittersweet experience. It's a stressful life event, that
is usually at the end of a stressful period of lackluster customer or investor
response, and after an intense period (read: years) of pouring your soul into
a business. At various points throughout the process, four out of the five of
us had severe stress-induced illnesses.

When the deal closed, we celebrated. We were more relieved than we were
excited. Note that lawyers suck most of the fun out of this celebration by
stretching the victory out over several weeks.

> you need to look at it from the point of view of the other stakeholders, not
> from the point of view of those who benefitted from it

When we announced the shutdown our product, the overwhelming number of
responses we got from users were disappointed, but congratulatory. Watching
the social media and blogger buzz was thrilling. However, we got our fair
share of _angry_ folks, including a number who wanted to make their hatred for
us and our new corporate overlords as public as within their power. We tried
to do the best we could by all of our users: super polished data export
feature, split-second response times on email tech support, phone calls to
coach people through the alternatives for their use cases, and ultimately sent
them some free stuff from the acquiring company. We deeply cared about the
other stakeholders who didn't benefit. Bittersweet doesn't even begin to cover
it.

Fast forward 30 and 60 days to the final data purges and other legal
bookkeeping. Some corporate lawyer sends you a cold email asking you to stick
another stake in the corpse of your baby. Then the next afternoon, you spot
somebody else categorically bashing talent acquisitions because they lack an
understanding of what it's really like.

You made some claims about it being bad for everyone. The goal of my post was
to point out that it's a far more complex and nuanced issue than you'd ever
understand if you've never been through one, or at least watched one from the
next pod of desks over in a coworker space.

------
ojbyrne
I can't really get past characterizing pandodaily (and Sarah Lacey especially)
as a thinly disguised mouthpiece for the Venture Capital industry. In this
case, then, this can be summarized as "engineers are making too much money and
have gotten too comfortable. And it's cutting into the (too much money, too
comfortable) lifestyle that we, venture capitalists, enjoy.

~~~
tptacek
That makes sense especially because the trend to acqui-hires is particularly
insidious for investors, who essentially have to chalk those all up as
failures (for many funds, simply breaking even on an investment can be, pro
forma, a failure). The prospect of an acqui-hire obviously motivates
entrepreneurs to tack towards offerings that will elicit acqui-hire interest.
If you're an investor, you'd rather your portfolio companies swing for the
fences and miss, rather than bunt.

~~~
arohner
> you'd rather your portfolio companies swing for the fences and miss, rather
> than bunt.

That implies a correlation between what you're working on, and whether you'll
get acquihired. From what I've seen, the aquihiring companies will offer on
anyone who can get to 'hello world' of startups.

> the trend to acqui-hires is particularly insidious for investors

Obviously, if you already have investors and you take the acquihire, there
should be a long conversation w/ the investors first. At this point in the
company, the acquihire is a signal that the startup won't work, or new
investors won't join.

Also, "I need my investors to make 2-3x" is a perfectly valid negotiation
strategy. For angels, that's a decent return. (Of course, matters are
different for VC). But the bar for taking an acquihire after a series A is
much much higher.

~~~
tptacek
I have seen the same thing: friends of mine at SFBA startups tell me they
uniformly get offers from the earliest days of their companies. But I'm not
sure what difference that makes.

"Institutional" investors on the boards of unproven companies want those
companies to take risks. Everybody's a risk taker in the first 6-9 months,
when the runway seems 3 startups long. Nobody is taking those early offers.
But later on, the acqui-hire market might make it easy for operators to subtly
stop thinking so much about the risks investors want them to take, and more on
optimizing their outcome over the next 4-6 months.

------
arohner
The talent market is going to stay frothy until engineer salaries adjust up to
stable equilibrium. The market is doing the rational thing, when Acquihires
are worth $1M/engineer with a 3-4 year lock-in, while 'normal' salary offers
are $150k. If you're talented enough to make a startup that can get
acquihired, you absolutely should do it. Best case is you build a profitable
company, worst case is you get acquired.

Acquihires are also not the worst thing ever from an employer perspective. Big
companies can easily spend $10M on failed initiatives that go nowhere. It's
much easier to buy a startup that proves it can execute.

------
potatolicious
I really can't get behind the premise of the article, there are too many parts
that simply do not connect.

> _"Allowing entrepreneurs — and their investors — to save face by saying they
> were “acquired” instead of failing is nice, but it’s a bit like the pre-
> schools where everyone wins a trophy for showing up."_

The notion that acquihires are failures is purely a moral one - last I checked
pre-school trophies aren't worth several houses. I am fairly certain that
acquihires who just took home $1-2M in comp will survive your browbeating
about not swinging for the fences.

> _"Not enough people moving to the Valley or coming out of school want to
> work at companies other people are starting, because it’s so easy to start
> their own."_

No, no it isn't. We are now at the point where SF/SV companies are offering
$100K to fresh undergrads. For all that the industry has done to lower the
barrier to entry for entrepreneurship, it is anything but trivial. A fresh
grad shouldering a moderately scary debt load is _not_ going to trivially
choose to found a startup over taking a highly-paid position and paring down
the debt.

How easy does the author think it is to live in SF/SV, work on a startup full-
time, fresh out of college, loan payments due, with no income stream? Does she
think everyone's a trust fund baby that can afford the $2K SF apartment and
just spend all day drinking Blue Bottle while twirling their startup ideas in
their heads, right out of school?

~~~
chimi
To be fair, starting a company in your parents basement, relying on free food
and expenses is a lot cheaper than moving to the valley, so don't neglect that
path. A lot of startups look just like that.

------
thesausageking
There is plenty of talent out there; companies just aren't willing to pay for
it. When it's normal for developers to make $300k+ as bankers, hedge fund
managers, and corporate attorneys do, then there's a talent shortage.

~~~
potatolicious
Hedge fund managers routinely generate 8-figures in profits per year for their
employers. Likewise, high-power attorneys can bill literally _millions_ per
year for their employers.

There are members of our industry who _do_ generate that kind of enormous
value to their employers - I've met some of them - and they are all being paid
in that ball park _already_ (i.e., $300K+).

Is there any real reason to believe that you should be paid as much as bankers
and lawyers besides some thinly veiled form of contempt we tend to have for
those jobs?

~~~
mgkimsal
"Likewise, high-power attorneys can bill literally millions per year for their
employers."

How are these attorneys charging? Hourly, even $1000/hour would be $2-3million
per year billing full time. Are there other sorts of things that are getting
charged for (at a profit) beyond time?

~~~
Evbn
That's millions. Also, contingency fees in cases with cash settlements or
judgements.

~~~
mgkimsal
well, yes, it's millions, but attorneys who bill $1000/hour are pretty
(extremely?) rare. Most attorneys I know are $150-$400/hour, which even
considering 'full time' billing and top end, is < $1 million.

Contingency or percentage of settlements probably represent a larger portion
of attorneys who are bringing in 'millions' for an employer.

------
aeurielesn
I just want to say that I hate this _acqui-hire_ term and the recent adoption
I have seen of it.

