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.
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.
"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?
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.
> 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.
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.
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.
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.
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?
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).
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
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.
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.