
Ask HN: How much should a bootstrapped startup ask for an acquihire? - mymex1
I&#x27;ve seen numbers thrown around in the range of $750K -$1.5M per employee, but this seems to be for VC funded companies correct? If you are a bootstrapped start-up with very little debt, 2-3 co-founders, but with no revenue or customers yet, what should be the per employee price for an acquihire?
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chollida1
I'm going to disagree with the consensus here and say that the price per
employee is probably lower when its a bootstrapped company vs a vc funded
company, all other things being equal for two reasons:

1) With a VC you have someone in your corner with considerable connections and
pull( The VC), to advocate for you. As someone who has been on the acquiring
side of the table I think alot of people would be very surprised to see just
how many aquihires are either "favors" to the VC or deals that came about
because the VC is able to get ahold of the correct person at the acquiring
company to make the deal happen.

No VC, no favor.

2) VC funding is a signalling mechanism. Someone, who is presumably a good
judge of ideas and talent, has blessed you as worthy and therefore you've
passed this bar. The bootstrap company, has not had the blessing and therefor
is unproven. Think about it, who would you hire, someone you've never met
before or someone who has been vouched for by someone you respect and trust.

Again this is all other things being equal.

So if I'm the acquirer, my question to you is, why am I paying you a per
employee premium when I can wait two months for you to shut down and then
offer each employee on your team a job at a market salary. That seems to save
me a lot of money. Heck why not give each person at your company a blanket
offer of employment right now.

If you want to get paid, you need to give the acquirer a reason to pay a
premium to aquihrie you. Like others have said, the first, second and third
rule of negotiating is to always have a BATNA.

[https://en.wikipedia.org/wiki/Best_alternative_to_a_negotiat...](https://en.wikipedia.org/wiki/Best_alternative_to_a_negotiated_agreement)

~~~
jonnathanson
Especially true for a bootstrapped company with no customers and no revenue.
In fact, in this case I would actually wonder why the acquirer needs to do an
"acquihire" at all. Perhaps that term is being misused here?

An acquihire is generally a buyout of the team, not the technology, the
product, or its business prospects. As the team, I would think about how
uniquely skilled you are in the domain for which you're presumably being
acquihired. Think about your own BATNA, but also think about the acquirer's
BATNA. How many yous are out there? How crucial is your team to the acquirer's
business objectives? Do you have a sense for _specifically_ why they want you?
Is it to build out a new business practice or vertical strategy? A new
product? Are you better qualified to do that than the market at large? How
much better? How long would it take a deep-pocketed company to assemble a
comparable team?

Many (most?) acquihires are indeed VC-mediated. The rest are usually because a
team has managed to distinguish itself as a uniquely valuable and concentrated
source of talent or domain expertise, such that finding an alternative on the
open market, or building one internally, would take a lot of time, money, and
false starts. In that case the acquirer's corp dev team probably has a
specific calculus it uses to value acquired teams versus building new ones,
multiplied in some way by the business upside of the domain or skill in
question. If your team operates in a domain with major or mission-critical
upside to the acquirer, expect a more generous offer. If your team operates in
a nice-to-have, but supporting or uncritical domain for the acquirer, you have
less leverage.

~~~
dpatru
BATNA = Best Alternative To a Negotiated Agreement

~~~
jonnathanson
Yes, I'm aware. That was the spirit in which I used the acronym, i.e., the
would-be acquirer's BATNA is probably to build or hire a different team on the
open market, for X dollars over Y timeframe. Hence, you should attempt to
quantify their BATNA in dollar/effort terms to arrive at an understanding of
how much they'll value you. Apologies if that wasn't clear somehow.

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gamerDude
Don't negotiate against yourself.

This question is all about how valuable you are to that company. Does hiring
the team and getting the technology increase their profits by 10%, 100%,
1000%? How much value are you bringing to the new company?

And don't devalue yourself because you aren't VC funded. Don't negotiate
against yourself into saying a lower number. Find out how much you think your
worth and come with your thoughts to the table and negotiate with the
acquihiring company.

~~~
fleitz
Fully agree, the bootstrap / vc funding metric is commoditization.

People pay a lot more for 'ancient grains' than 'hard winter red'.

~~~
jtfairbank
Can you explain your metaphor in the second sentence?

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ChuckMcM
Its still 750K - 1.5M per employee, its not like engineers are less valuable
if they are bootstrapped. But a better question is given the businesses
involved what values change. Does the acquiring company become more valuable?
Is there less competition? Is there intellectual property involved? Customer
contacts?

A much better way to start this process is to do a fund raising exercise. How
much would you expect the company to be pre-money and post-money, and why? If
you have been unsuccessful raising money it is possible your post money
valuation expectation is too high. At the end of the day though its value not
a 'rule of thumb' for these things.

People will use the 'rule of thumb' to cross check the value of their offer.
If they feel like they are only in it for the employees and offering more than
a 'typical' acquihire they will need to understand why that is. If less then
that is another data point.

~~~
lgsilver
Though I think this is a good response, the first part is not correct. The
point of an acqui-hire is to acquire talent at an amount that rewards the team
for their previous efforts. In a true acqui-hire the acquirer values the
product at $0.

No investor would accept less than their principle back, and so an venture-
funded acqui-hire is always going to take into account previous rounds of
investments.

All this said, a $10m acquisition of a vc-funded co with 10 employees will
probably include at least 25%-30% return to investors depending on preference,
or else they won't accept.

I would expect to see a 1/3 to 1/2 price discount on a bootstrapped startup,
or even more depending on how short a time you've been working on the product.

~~~
ChuckMcM
Lets take this apart shall we?

    
    
       > All this said, a $10m acquisition of a vc-funded co
       > with 10 employees will probably include at least
       > 25%-30% return to investors depending on preference,
       > or else they won't accept.
    
       > I would expect to see a 1/3 to 1/2 price discount 
       > on a bootstrapped startup, or even more depending 
       > on how short a time you've been working on the product.
    

My understanding here is that the _only_ difference in those two statements
(other than the price) is this _... or else they won 't accept._

If that is the case, then the assertion boils down to "VCs will hold out for
more money", and they get it, so where did the "extra" value come from? We
could speculate that BigCo is doing a 'favor' for the VC but really? And from
an economic standpoint BigCo is not looking at a material impact on their
books. My assertion is that the value proposition for BigCo is the same, VC or
not, so the price they are willing to pay "should be" the same. I get that
they may want to haggle more, but the acquisition target should understand the
game here. There are many BigCo's that are buying engineering teams.

~~~
lgsilver
You'll be hard-pressed to find an acquiring company that would be willing to
pay $1-1.5m / engineer for a bootstrapped co :). But sure.

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fearless
Most likely $0. If you don't have any traction or investors, what makes you an
attractive acquihire target? If it were so easy to throw together a few
friends and make a million dollars via acquihire everyone would be doing it
instead of applying for a job.

Acquihire is 30% about getting a team with proven ability to execute and 70%
about paying back investors as a favor or a down payment on maintaining a good
relationship with them. If your dream is really to get acquihired your best
bet is to pull together enough traction to raise seed funding and then invest
that money in hiring the best engineers possible before shopping it around to
get acquired.

~~~
gamerDude
They might have a great technological solution or expertise that the
acquihiring company needs. Thus they might be paying for the technology
instead of spending time and resources trying to develop it themselves.

~~~
gojomo
That's not quite an "acqui-hire", though, that's a technology purchase.

"Acqui-hire" has a strong implication of, "we don't need your technology, and
will likely discard/discontinue your product... but we want your engineers, as
a cohesive team with relevant domain experience."

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fleitz
More than they're willing to pay.

This is far more about negotiation than market rates. Who cares how much VC
funded companies get, start by asking for 3 to 5 times what they are getting.

Flip the conversation, being bootstrapped, and having a dedicated team means
you have no pressure to leave, so they must entice you with more money because
you have no market forces acting against you.

Also, your team is there because they love you, not because your paying them,
again another reason for them to give you more money.

VC repayment is tangible, it's easy to figure out how much VCs need to be made
whole, loyalty and dedication are far more intangible and valuable.

If you negotiate like that you'll figure out pretty quickly whether they
really want your team or whether they are trying to fill 4 seats.

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JSeymourATL
A point on negotiation strategy-- find out what the other side wants, let them
make the first offer.

Recommend reading Roger Dawson > [http://www.summarist.net/book/secrets-of-
power-negotiating-1...](http://www.summarist.net/book/secrets-of-power-
negotiating-15th-anniversary-edition-inside-secrets-from-a-master-negotiator/)

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3pt14159
I've started and sold a bootstrapped company. My partner and I sold for $2m,
and I ultimately regretted it.

I would focus on how much money you make on deal close. You might think to
yourself, "Hey, I'm totally going to vest that 2 year period, why wouldn't I?"
But the post acquisition phase can be extremely depressing and stressful. I
developed bruxism and ended up leaving in less than a year. My health is more
important to me than my bank account balance, but it still stings only vesting
18% of a deal. If it weren't for the cash on close provision, we'd have made
much less.

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jonathanjaeger
If you have no investors to answer to and very little debt, then there is no
number. But here are some factors in play:

-Do you still believe in your idea to the extent you want to grind it out and see some serious upside?

-If there is serious upside potential and you want to bake that into the price to still see a nice reward then do that.

-If you're okay with not pushing through on this startup and realize it's not going to take off (or likelihood is low) AND you want to work for this company, be happy taking some lower multiple on your salary. $1MM per employee is probably a high amount if you have no revenue or customers or investors, but if you don't care about losing out on $200K, then shoot for the moon and negotiate as hard as you can.

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rgo
Do you know why they are acquihiring you?

Bootstrapped or not, VC funded or not, profitable or not, a company's value is
given by its potential. This potential will be measured (with different
metrics, some of them quite subjective) by both parties, then negotiated
hopefully to somewhere in between. In your case, you need to come up with your
number by best estimating what the value of your team will be once acquired
and assigned your new task.

Ie. you are making a cool AI board but you got no traction (hence no VC,
revenue or customers). Now Intel wants to acquihire you to make their next
generation of synaptic chips something cool. Just lately IBM closed a deal
valued at $100M with a Chinese manufacturer for their synaptic chips. Since
they are looking at an internal BP for the acquihire of a $100M potential, a
10x ROI puts you all at $10M. Now you have your own BP that you can use to
support your intended price for the deal.

Once you have that potential value, you will want to figure your opportunity
cost and BATNA by looking at the potential value of your product or company in
X reasonable years. This will be your leverage for negotiating.

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rralian
There really isn't a market price unless you have a couple of bidders
interested in you. That'll set a market price nice and quick. But without a
second bidder or at least the threat of one the fair price for them to pay is
the minimum it would take to stop you from just walking away and taking a
different job. Anyway, your range sounds about right if you have options on
the table.

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clscott
Enough to make it worth your while, what that means is entirely up to you.

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salsakran
Acquihires are bought not sold.

Your acquirer will have some sort of price formula they use for these things
and will have a price in mind usually. It's also hard to pin down exact
numbers as they vary wildly by who is doing the acquiring.

You should dig a little and see if they've acquired anyone of a similar size
and peg to that.

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jmathai
I see that number thrown around a lot as well. Unsure exactly what it means
and how accurate it is of most acquihires.

Does $1M include salary over X years? Is it just the retention? How much is
paid up front?

How mature is the product you've been working on? Is it something you've been
doing on the side with your co-founders? How much time has been put into what
you've done; both as a product and as a team.

You'll have to see what they're going to offer. I imagine you don't have much
leverage though so the final price will be in the ballpark of their offer.

My email is in my profile, feel free to ping me for personal experience with
this.

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ryandrake
If they're not buying any product or technology, I don't understand why a
company would pay more than zero. If it's common for companies to pay "$X
million per engineer" to simply acquire people, then from the employees' point
of view, why even job hunt the traditional way? Wouldn't it make more sense to
get a few engineering buddies together, form a 2-3 member LLC, and shop around
for an acqui-hire? You'd get jobs AND million-dollar "signing bonuss".

~~~
lessnonymous
In an aquihire, they typically ARE buying the product to get the talent
capable of building the product in question.

Let's say you've built some product capable of receiving millions of http
connections a minute from thousands of servers and then distributing those to
thousands of servers as they request a new batch. But you can't find a market.
However this is (was of course) a real-world problem for Twitter.

Suddenly you are a really attractive aquihire. Maybe they'll use your tech,
but more likely they value your problem solving experience in their specific
problem domain.

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sublime
As somebody who was in your shoes (bootstrapped, low revenue) and recently
acquihired I can tell you the only thing that drives your value is the
perceived (a) time to market acceleration and (b) team potential. Focus on
these during negotiation and come to grips that without revenue, customers, or
killer tech you are not going to see a huge exit. Our asset purchase +
employment contract value was ~$1MM.

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AndrewKemendo
If you don't have revenue or customers you shouldn't be looking for someone to
acquire you. Chances are, if you had a truly disruptive product and you were
in the industry/segment that the acquiring agency worked in they would come to
you - but if that was the case you wouldn't be asking the question here.

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jacquesm
Treat it like you would treat any other deal, you're selling the company.
Whether or not it is an acquihire is not up to you but to the acquirer so sell
it for what you think it is worth for them _if_ that price is higher than what
it is worth to you.

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far33d
I think you should think about it as a multiple of what you would expect per-
employee were the company to hire everyone off the street. So if you would get
10k options / employee off the street, what multiple of that is it worth to
get the full team.

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programminggeek
As much as you can get. Start high and negotiate sensibly. Don't overvalue
based on silly things like huge purchases that Facebook made, but don't be a
fool and lowball yourself because you're afraid to ask for a lot.

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mikeryan
How much has doing the startup cost you. If you're bootstrapped you've
probably both put personal funds in as well as a salary opportunity costs.

Thats your base.

Now you need to find a multiplier for the opportunity you're giving up. Have
fun with it. Say you'd think you could sell your company in 2 years for $20M.
Say there's a 10% chance of that happening. That $2M. Divide that by number of
founders/employees. There's your markup. Maybe you add some padding to leave
room for negotiation.

At the end of the day you need to also find some sort of bottom line. How much
are you willing to take to give up to take a normal job (noting you're
probably locked in for a year or two)? With my business it's enough to pay off
my house. Thats the least amount I'd take to sell my business (not a startup,
bootstrapped services)

~~~
biot

      > How much has doing the startup cost you. If you're
      > bootstrapped you've probably both put personal funds in as
      > well as a salary opportunity costs. Thats your base.
    

This is irrelevant. If you've blown $50M of your personal funds on a startup
with nothing to show for it why would it be up to the acquiring company to
have $50M as the floor price so that your losses are covered? If you bought a
used car, would the base price incude the cost of gas that the seller spent?

It boils down to some combination of three things: people acquisition costs,
domain expertise value, and technology worth. There's a fourth factor of
inherent value of the business itself (outside of technology and people), but
the OP stated they have neither revenue nor customers so that's likely a zero.
All these are values that the acquiring company can put a number on. Price
accordingly.

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randall
I know of a bootstrapped startup with 2 employees that was offered $4-5mm to
be acqu-hired. It really depends on who the acquirer is, and how much they
want you.

Just say the number you want, and see what happens.

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r0m4n0
I have a closely related dilemma more around the salary negotiations involved
in the acquihire... How much should the cofounders ask for?

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tomwalker
Is the correct answer not "the largest amount that the acquiring company will
pay"?

I think that this is a question that is impossible to answer.

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lightblade
I would say enough to buy a house, which is in the range of 750k-1.5m. This
range would go up as the housing price goes up.

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jlarocco
I don't think "acquihire" is the correct term. This seems like a company
hiring 3 guys...

