
Open Corp Dev: An Idea Too Bold For Facebook Or Dropbox - ivankirigin
http://blog.kirigin.com/open-corp-dev
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cliftonk
Am I the only person who thinks that being on the buying side of this is a
losing proposition?

How many of those people at $1mm per head will make it through your technical
interviews and fit in well enough with your culture? How long do they have to
work for you before they split?

It seems like you'd have to put together some pretty draconian terms attached
to a deal like this and I don't think that would be fair for anyone involved.

~~~
ivankirigin
These issues are present for every acquisition. Having a minimum price doesn't
make them go away. Often the price is much, much more.

I mentioned Instagram: $1B for 13 people and a product that makes no money
(yet). You don't think the most recent 1000 employees at Facebook are wishing
they joined a small startup instead?

Dealing with this is non-trivial, I'm not trying to dismiss it. I'm just
saying the idea and this problem aren't as causal as you're implying.

~~~
oh_sigh
Except that if those 1000 employees joined a small startup, odds are that 920
of them would not even make it to the stage of acqui-hire

~~~
ivankirigin
Yeah, I think often the best choice is to join the larger company. But we're
talking about perceptions, which are not the same as reality

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ryandrake
"People don’t start companies looking for an acquihire. An acquihire is a
failure case, and as a founder, you are motivated to avoid it. It is just so
much easier to take a job."

It might be easier to just "take a job" (debatable) but it is probably not as
lucrative. As an engineer, your choice is:

1\. Get aqua-hired for $1MM right away (well, maybe after a few years of
working in the start-up) plus whatever your new salary will be vs.

2\. Slowly earn that $1MM spread over the course of 10 years or so as a
regular employee.

I know which one I'd rather do.

Why not just skip all pretenses of "doing the startup" and "developing the
product" and go right for the aqui-hire. Get a well-gelled team together
(demonstrate the well-gelled-ness with a demo of some sort) and then shop the
whole team around to a big company looking to acquire talent. If they're
willing to pay $1MM a head for a team working on a start-up and then shut the
start-up's project down, why wouldn't they simply pay $1MM a head for the
team?

~~~
ivankirigin
Getting a team is hard! And if you've found one, you _are_ worth more than a
regular hide.

Demonstrating skill through building a product is also hard, and also helps
build value.

I think of the math like this: are the next 1000 engineers at Facebook worth
1% of their market cap? Yes, the math works.

~~~
PaulHoule
I think more fundamentally the prevalence of aqui-hires proves that software
management isn't working.

In the kind of world where the government can't get the federal Obamacare
exchange working, and people pretend that Waterfall is a competitor to Agile
while really, the most common alternative is no process at all. Most companies
are highly effective at demotivating software developers, and if you get hired
through the usual process you'll start out on the bottom of the pyramid and
behind the 8 ball.

If it costs them $1M+ to hire you there's just a chance they'll behave as if
your time is worthwhile.

~~~
ivankirigin
> If it costs them $1M+ to hire you there's just a chance they'll behave as if
> your time is worthwhile.

I like your last sentence.

There is another side here too: companies often overestimate their ability to
manage acquisitions. A price floor means that those more likely to be poor
integrations will be filtered out.

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notahacker
I seriously can't see any upside to the acquirer. I don't believe "corp dev"
teams' mission is to acquire "deal flow" by having _failing_ startups pitch
them as a source of million dollar engineers. Even if it was, I don't think
there are any failing startups too ignorant to talk to Facebook and Dropbox
without being incentivised by a marketing gimmick. Acquihires are not a
seller's market. Other potential acquisitions that consider themselves to have
a potentially viable business model, defensible IP or some strategic value
aren't going to be in the least bit interested in being acquired by you just
because you have a "minimum price", but they _might negotiate a lot harder
when you do bid for them_ because "1.5x the minimum" just doesn't sound as
attractive as 15 million dollars. And the VCs, who know that some of their
portfolio's founders will cash out at $1million-per-engineer and some will
earn nothing due to liquidation preferences, will just think you don't
understand.

The only behaviours I can see it encouraging are perverse ones, like failing
companies that have had enough introductory meetings to anticipate an aqui-
hire offer hiring a couple of extra engineers to bump the minimum sale price.

~~~
ivankirigin
> too ignorant to talk to Facebook and Dropbox

Many people I talk to have no idea how to start that conversation.

Another layer of your consideration for upside of the acquirer: what happens
if one company does this and another doesn't? It's a lot like the seed funding
changes that happened over the last few years, forcing later stage VCs to
change.

Also, more transparency isn't perverse. The basic action here is positive, and
you're talking about theoretical side effects. If your theories are right,
then pull back.

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lquist
As someone who is thinking about shopping his company around: YES YES YES

There is no transparency in this market, and advice is especially lacking for
those that have no VCs.

~~~
ivankirigin
VCs are actually really important players here. They are so well connected and
have worked on so many transactions, that they really help. I wonder how they
would fit into an open marketplace.

Another side is that talking to a VC about selling is a serious conversation.
It can affect things like likelihood of follow on funding, so opening one door
can close another.

~~~
rhizome
_They are so well connected_

That VCs are thought of as a group of people who are well-connected,
presumably to other well-connected people, does it make logical sense to think
of them as a cartel?

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qq66
No, because VCs don't team up with each other to try to restrict competition.
That's the definition of a cartel. In fact, they regularly compete with each
other by offering better deal terms (valuation, liquidation preference), or by
bringing more to the table (counsel, networks, services).

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gustaf
This is great. The current process of acqui-hires today is really broken and
manual. It has every sign of an "industry" where software haven't arrived yet.
Corp dev is often about connections and asking who is involved that know
someone at a potential acquirer. API's replaced business development at it's
core. I think corp dev should be next on the list

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danielbru
Exitround is a marketplace for startups to discreetly explore acquisition
opportunities. Having a private, anonymous marketplace is a huge opportunity
for both the startups, and the acquiring company.

~~~
ivankirigin
I hear they are looking to sell, j/k

I'm excited about Exitround!

