
Ask HN: How do aquihires work? - brazzy
As I understand it, an "aquihire" is an acquisition of a startup by a large company where the acquirer is not interested in the startup's product, technology or userbase, but only in its employees, who will presumably be shifted to work on the acquirer's own projects while the startup's work is abandoned.<p>The impression I get from HN is that this is fairly common and explained as such employees being very valuable since they have proven the ability to create something.<p>But what is the advantage of a (presumably rather costly - or does it happen only to failed startups with low valuations?) acquihire over simply "poaching" those employees?<p>After all, the employees could leave the acquirer ASAP (especially if there is resentment over the product they had worked on being abandoned), and the founders and early employees (who have proven their ability the most) get a lot of money via their shares, which enables them to go off and do what what they've always dreamed of rather than work for $BIGCORP.<p>Doesn't sound like a good investment to me - so what am I missing?
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far33d
Teams have value greater than the sum of their parts. It is highly unlikely
that $BIGCORP would be able to poach 100% of the team, or even 100% of the key
players outside of an acquisition offer, and to do so could be much more
expensive.

In successful acquihires, the acquired teams stay together and work on a new
but related project with the additional resources and weight of the big
company behind them. When it works, it is much better than just putting random
people together since building effective teams is hard and takes time.

Also, keep in mind that acquihires often give the majority of value to the
employees in new, unvested stock options vs. cash or vested stock.

~~~
philwelch
It's also important to point out that by "team", what's often meant is
"founders". Mere employees usually have to interview for their own jobs and
are often cut at the acquihire stage.

~~~
brazzy
But aren't the founders the _least_ likely to be happy and productive in a
bigcorp setting?

~~~
philwelch
A couple million dollars can't quite buy happiness, but they can buy
acquiescence quite easily.

------
webwright
Poaching doesn't work when the people you're trying to hire fall out of bed
and land in 10 job offers. These people aren't job hunting.

Acqui-hires generally have a tension where the founders/investors want money
for stock, but the acquirer doesn't really value the stock very highly. If it
were up to them, they'd want to dissolve the company and hire the team with
big signing bonuses and retention packages.

Practically speaking, what generally happens is that the team gets a "back-
loaded" deal where they get a combination of signing bonuses, stock payout,
and annual retention packages that start small but get larger every year. So
if you quit in the first year, you pretty much get nothing other than a few
stock dollars.

------
zbruhnke
Speaking from an Entrepreneurial perspective an "Acquihire" is what our
investors like to call a "Soft Landing" AKA we ran out or are running out of
money with little to no traction.

Typically an Acquihire is not much more than a way to give your investors back
something so you will not give yourself a black eye in the investment
community and you'll have the opportunity to raise money again in the future.

In many cases Acquihires are set up by current investors who know you're
struggling and looking for a way out. As investors in you they would much
rather see something like this than "we're shutting down our product and
parting ways" that does no good for anyone.

So while its not always a good investment some acquihires really are, even
though the CEO or CTO may leave fairly quickly from a high profile acquihire
chances are some members of the team (key members) will stick around for their
earn out, enjoy the froyo and build some kickass new products for the company
which has given them new found stability.

From an investor perspective Acquihires are just the polite thing to do, One
could call it Failing gracefully

------
koopajah
_"After all, the employees could leave the acquirer ASAP"_

I'm guessing that most acquihires deal have a clause preventing you from
leaving the company ASAP. Or at least an incentive to make you stay with the
company (shares, yearly bonus, etc.). I don't think google will buy a company
XM$ and see them leave right after.

Another point is that the acquiring is not "hostile". This is a deal between
the startup/team being acquired and the large company so they weighed their
options and chose to accept the offer - i.e. they want to work for the big
company or are interested in the project they are being offered.

There is a lot of threads here on HN describing that talent is hard to find in
technology and it's understandable to acquire a team that already work well
together and produced something concrete.

One last thing was a comment by pg here :
<http://news.ycombinator.com/item?id=4366621> saying that _"The article
doesn't mention one of the most important reasons companies do HR
acquisitions: competition forces them to. If company A offers to acquire a
startup and company B merely offers to hire the founders, all other things
being equal the founders will take company A's offer."_

~~~
brazzy
The acquirer could have the same contract clauses and incentives when directly
poaching employees. More actually, since they don't have to give any money to
VCs.

But if the idea is actually to hire an entire proven team to work on an
internal project they are interested in, that does make a lot more sense.

~~~
koopajah
You cannot poach an entire team, or even half a team, easily. The point of the
acquihire for me is either to acquire specific members/leaders of a team (that
wouldn't be interested by just being poached anyway) or an entire
team/specific knowledge.

Sometimes a startup reach its peak and feels its the right moment to make a
change. An acquihire can also lead to that.

You can search about the Sparrow acquisition (a lot has been written here
about it). Another example that comes to mind for me is Google acquiring
Wildfire and the team reaction when they learnt it :
<http://www.youtube.com/watch?v=4ARPB7b0kIg>

~~~
dstorrs
Why the ShakyCam? It was so bad it made me dizzy.

------
georgemcbay
I was part of a pretty non-standard "soft landing" aquihire this year. The
company I was working for was out of money and couldn't find a serious
outright buyer for numerous reasons, but worked out a deal with another
company for that company to hire almost all of the previous company's
employees and take over the building lease so we could continue working in the
same building.

Virtually the whole company moved over -- a handful of people didn't get
offers at the new place because their jobs didn't really make sense given the
focus switch. However, everyone who was offered a job save for one moved over
to the new place. The first sign of bad things to come was that nobody was
offered a raise or any form of signing bonus, yet we still all accepted
because the team was really great and we enjoyed working together. The layer
of engineering management inserted above us turned out to be incredibly
horrible (the company came from a media background, not software), committing
to developing software for a lot of sketchy platforms (eg. Yahoo Widgets
running on Vizio TVs) but demanding full-featured rich AppleTV/GoogleTV-style
apps, making content deals that didn't mesh well with technology needs, badly
mismanaging the entire development process, putting people in positions based
on politics and nepotism, etc. Within ~5 months virtually the entire
engineering (development and IT) staff from the old company, including me, had
quit.

The story may yet have a happy ending, the CEO at the acquiring company (who
was almost as new as our acquisition was) has since been cleaning house and
trying to solve a lot of the problems that became glaringly obvious by all of
the quitting and I wish him well because the product they are trying to build
is a good one and I have friends who still work at the company.

tl;dr - this "aquihire" was terrible for me, but maybe indirectly helped the
acquiring company realize how terrible it was before it was too late to fix
it, so... partial success?

~~~
nw_dave
This seems to be a pretty common story around aqui-hires. I've heard of very
few instances where two separate companies can mesh successfully after an
acquisition. If nothing else, it makes me pay much closer attention to company
culture with potential new employers.

For better or worse, company culture will have probably the largest impact on
whether you enjoy your job - even more than tools/programming
languages/hardware/etc.

------
dglassan
I was part of an acquihire within the last year, so I'll try to explain a few
things. Some of these comments are accurate but I wanted to clear things up.

Not all acquihires are the same, so my experience is surely different from
others, but there could be a number of reasons why founders would decide to be
acquihired. Job security, higher pay, you get to solve the same problem you're
passionate about but on a much larger scale, you have more resources to do
what you need to do, you get to build a larger team than you would have been
able to previously, you get to work with some amazing people and learn from
them, you get an exit under your belt which looks good if you decide to do
another startup in the future.

As far as why a company would want to acquihire a team? The team dynamic is
more valuable than building a team from scratch. The team has proven they can
design, build, and deliver a product. I'm willing to bet that 100% of the
founders that get acquihired have domain knowledge of the product they work
on, and that can be valuable to a large company that is trying to build a new
business unit and may not know that industry as well. Corporations need to
move fast to please investors, so often times it's easier for them to acquire
a team that knows an industry rather than launch a new business unit and learn
as they go.

I've seen so many people on HN complain when a company gets acqihired...but I
bet that the majority of you would take the same deal given the opportunity.
Sure it can be seen as selfish, but sometimes you have to do what's best for
yourself, your career, and your family.

------
epi0Bauqu
<http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2040924>

~~~
brazzy
Very interesting paper, especially the way it presents this as a phenomenon
specific to Silicon Valley and shaped by social norms.

------
ironchef
The advantage for those employees being acquired is (typically) a liquidity
event for their current shares. Say Acme, Inc. buys Little Guys N Me for 10
mil....and you are an employee of Little Guys N Me to the tune of 1% (or
such). Depending on wording of your shares, this could mean a quick 100k..or
there could be another cliffing / vesting situation. Also there will often be
golden handcuffs put on (that are nicer than coming to the company
independently)...so more shares of Acme, Inc. than one would get
independently.

------
1qwqw
An "acquihire" says a lot about the founders of the company being acquired. It
usually means they're burnt out, or aren't convinced that what they've built
is a viable company. It's a "let's cut our losses" move.

That's not to say it isn't a good deal for the founders, but it's certainly
not a good deal for many other people. The mindset isn't "let's create 1,000
jobs where there weren't any before," it's "let's make enough money to feel
comfortable again."

That said, they can't just leave their acquirer immediately. Typically there's
a time _and_ performance-based earn out applied to the terms, so they need to
stay (and perform well) at the acquiring company for a set amount of time.
Usually two to four years.

------
scott_meade
Is there anything to the strategy in aquihires of terminating a competitor? If
you hire employees away, the competing company might still exist. By doing an
aquihire get the option to remove a competitor from the landscape as well.
See: Sparrow?

~~~
Evbn
In what sense is Sparrow competition? Seems more like a great add on to
accelerate Google iOS client development.

------
sunkencity
I think it's because most startup founders are not very interested in getting
hired. Hard to poach people who doesn't want to let down their team, and maybe
the team is what you want anyway. Also easier to have a lock-in for a couple
of years if it's tied to purchase of a company rather than just hiring
somebody.

In straight consultant companies this happens a lot. Only way to grow is to
hire more consultants, and it's easier to get more people by aquiring whole
companies and lock in the consultants for a couple of years. Good deal for
everybody if you don't work yourself to death before cashing out.

------
buntar
Why so strict with the definition of the term 'aquihire'?

What I see in tech startups: Little companies acting as labs for the big
companies. In big companies, it's often difficult to develop something
breaking new. There is so much infrastructure, culture and history around,
that it gets increasingly difficult to think outside the box and to keep up
with the latest trends. This were startups step in. With the startup, they
often acquire a very specialized piece of technology and know-how. Then comes
step two: Looking for ways to integrate the new toys into the productline.

------
anovikov
The people who are being acquired are usually tied to the acquirer via 'golden
handcuffs', so they can't leave. Why just not lure these employees by giving
them better offers? Probably because everyone knows that the acquihires are
common so it's stupid to leave the startup 'for free' instead of waiting it to
be acquired, and get some cash. If the new employer will give a signing bonus
big enough to each of them it won't be much cheaper than acquihire, but he
will get individual guys, not some company with established leadership,
structure and culture.

------
rcamera
Acquihires doesn't have necessarily the sole purpose of hiring new employees.
Take a look at Facebook buying Face.com, Face did create a technology that was
interesting for Facebook, it wasn't just the employees in which Facebook had
an interest on. The tech now belongs to them, and they can use it to improve
their own, or even replace it. Better than that, the original Face team can
now work with the Facebook's team that was working on face recognition
software, cooking up new and better ways of doing that. Of course there are
risks here of the teams not meshing together well, but this is all analyzed
and decided upon before the acquihire.

Other than that, acquihired employees aren't necessarily interested in being
hired the other way. When inside a company, you have to climb the hierarchy
ladder, you won't be hired after college to just be the leader of a big team,
or the CEO of the company. For the people not interested in climbing the
ladder, building a startup and being acquihired is a very good way of hacking
the ladder and landing right on top, or close to it. I recommend pg's essay on
this ( <http://www.paulgraham.com/hiring.html> ) This, together with the fact
you have already mentioned that these acquihired employees have proven the
ability to create something, reduce the employer's risk on selecting the wrong
person to do the job, making acquihiring a good investment opportunity.

~~~
robfitz
This isn't accurate. An "acquihire" is, by definition, purely about the
people.

Face.com was an acquisition, not an acquihire (or talent acquisition).

As for retaining the acquired folks, you usually pay out their earning over 4
years rather than all at once. So if an acquired founder leaves after a year,
the acquiring company keeps 3/4 of what they ought to have paid to that
person.

~~~
rcamera
Disagreeing on a definition without giving better arguments than just stating
I am wrong, then adding a comment on how companies retain the acqhired
employees (which had already been discussed in other comments in the thread)
is a very poor comment.

Replace the Face example by the Sparrow example, being acqhired by Google.
Acquisitions are about profits, Google's acqhiring certainly wasn't for
Sparrow's profits, they bought them for both the team AND the technology they
developed. They made Google's product better, and Google wanted to use both of
these things to make their product even better.

~~~
joshu
He was pretty specific about the way in which you are incorrect.

Acqhires are acquisitions where the primary interest is the team, not the IP
or product.

~~~
rcamera
My first reply never said it wasn't primarily about the team.

------
EwanToo
Judging by the results of most aquihires that I've heard about, they simply
don't work.

It's almost certainly a nice tax result for the acquirer, making the
acquisition cheaper than hiring the individuals with large cash signing on
bonuses.

Can anyone actually point to some successful acquihires?

~~~
debacle
Honestly, I can't think of many high-profile acquisitions that were acquihires
outside of possibly the gaming industry.

------
davidw
> so what am I missing

A bit of bubbly froth?

It doesn't seem like a great deal to me either, but I suppose it's difficult
to tell either way without a concrete way to measure and judge.

