i think it will become inevitable. as yc increases its number of investments, there will be more companies doing similar things and competing. i think the ethos of yc is to prefer a partnership (or downright acquisition) over competition, as most times, you have other competitors, and you can find ways to team up and take on the big guys. why not work with the same people who went through the same seed fund as you? the real question is: at what point is it acceptable to merge or get acquired?
paypal and x.com were a great example of what can happen through a merger. they could have spent their time killing each other, but they merged and set their focus on much bigger things: taking advantage of ebay's mismanagement and poor execution to deliver the world's leading online payment platform.
private acquisitions seem strange, but i have always believed that the real reason large companies cannot form from start-ups is because people may be too resistant to team up with their leading competitors to take on an even larger competitor. i wonder what would become of microsoft had they not teamed up with ibm, or apple.
From what I have read, I think the PayPal and X.com merger did more harm than good. There were a ton of ego clashes, technology preference differences (unix vs. .net), etc.
But merging with the right team will certainly help, and I am sure the 2 teams coming out of the same YC class probably know each others' capabilities fairly well.
They're not going to tell us, but it seems obvious to me that the bulk of the deal was in stock. Crunchbase has posterous's funding as YC's 15k + 725k in an uber-angel round which doesn't make a cash acquisition realistic.
I am the other Sachin Agarwal (at Dawdle.com), and I know nothing, but I will say this: I will bet you a beer that you're wrong.
As an acquiror, you want to do a deal as cheaply as possible. Given that Slinkset never really took off while Posterous has, a deal was probably done in the sub-six figures or perhaps none with just offers of employment. At this point, even though you lose the cash, it's cheaper to use $50K cash than $50K in stock given that you'd reasonably expect the stock to appreciate in value at this point. Acquisitions usually only happen in stock in either "pooling" transactions (i.e. Kayak/SideStep), where the acquiror cannot afford to pay cash (i.e. pick your keiretsu deal from the late 90s), or the seller values the stock more than cash (i.e. Twitter/Summize).
Why, yes, I am a former technology M&A investment banker.
It depends on how much you want them versus how much they want you. If you can't attract them with just cash, you're going to have to give stock. Considering the Slinkset guys are hungry entrepreneurs who'd probably want a stake, and an all-cash transaction in 6 figures wouldn't make them f@#$-you rich anyway, I'd guess this was a most- if not all-stock deal.
It also depends on what Posterous's cash situation is like; if much of the 750k is lying around idle, they'd want to spend it, else they'd rather avoid having to raise money again, which would result in giving up even more equity. Plus, all else being equal, I'd rather share equity with cofounders/employees than with investors.
I also know nothing of the deal, but think your frame of reference is off.
At this scale and early stage -- both companies appear to be pre-any-revenue -- both teams should be most interested in the promise of long-term equity appreciation. Posterous isn't rolling in cash, and rather than shuffling around any cash balances either company has, all cash should be going to a longer runway. A pure stock-and-job-offers deal seems most likely.
