3 ms·

Forgive me for not knowing this, but when an acquisition like this happens that is solely for the talent, do the developers themselves get any part of those mil

Forgive me for not knowing this, but when an acquisition like this happens that is solely for the talent, do the developers themselves get any part of those millions, or does it all simply go to the company owner? If it does all go to the owner, what would stop the developers from banding together and leaving all at once so they could pick up those millions directly, instead?

runevault 15y ago
In a small venture backed company like that, i would assume the developers had shares in the company, and therefor would get some of the money.
Ryan_Shmotkin 15y ago
It many cases the developers share (if not enough) are supplemented by a large additional bonus with a long vesting schedule. "Golden handcuffs"
brown9-2 15y ago
The acquiring company has to give the employees incentives to stay. Otherwise they are under no obligation (barring a contract with the first company) to stay.
notbitter 15y ago
Usually: millions to the investors and founders for their stock. Employee stock will be worth little due to investor preferences. The acquirer will pay hundreds of thousands to retain a few "key employees", and tens of thousands to the ordinary developers (similar to what they'd get as a hiring bonus). This is why it doesn't make sense to be a startup employee. Your question about why developers can't capture more of their value is a good one. Obviously acquirers would prefer not to pay $1M signing bonuses if they can avoid it, but they also seem to be happier about paying off VCs than engineers.
- Drbble 15y ago
  You seem to be assuming a gargantuan preference in this case. I thought just 1x to 2x was the max these days.
  - heretohelp 15y ago
    He's right about it being historically the case that being a startup employee is a bad gig. I honestly think the value proposition for startup employees has to come down to risk appetite, the quality of the team you're working with, and getting to work on interesting problems. Any kind of pure economic calculus that properly accounts for risk is going to favor established companies if you're good at the career game.
  - beagle3 15y ago
    Let's look at the numbers: Let's say investor puts $1M with x2 liquidation preferences into company valued $3M pre-money (25% equity post money). Company then gets acquired for $20M. Investor gets $2M+$4.5M=$6.5M, rest get $13.5 (of which a much larger part usually goes to founders, and a small part to employees - e.g. $12M to 2 founders, $1.5M to 15 employees) If they put $5M with x2 into company valued $5M pre-money, and company gets aquired for $20M, investor gets $15M, rest get $5M. Employees will often get a nice signing bonus from it, but the only one who can have a potentially life changing event is the founder.

runevault 15y ago

In a small venture backed company like that, i would assume the developers had shares in the company, and therefor would get some of the money.

Ryan_Shmotkin 15y ago

It many cases the developers share (if not enough) are supplemented by a large additional bonus with a long vesting schedule. "Golden handcuffs"

brown9-2 15y ago

The acquiring company has to give the employees incentives to stay. Otherwise they are under no obligation (barring a contract with the first company) to stay.

notbitter 15y ago

Usually: millions to the investors and founders for their stock. Employee stock will be worth little due to investor preferences. The acquirer will pay hundreds of thousands to retain a few "key employees", and tens of thousands to the ordinary developers (similar to what they'd get as a hiring bonus). This is why it doesn't make sense to be a startup employee. Your question about why developers can't capture more of their value is a good one. Obviously acquirers would prefer not to pay $1M signing bonuses if they can avoid it, but they also seem to be happier about paying off VCs than engineers.

Drbble 15y ago
You seem to be assuming a gargantuan preference in this case. I thought just 1x to 2x was the max these days.
- heretohelp 15y ago
  He's right about it being historically the case that being a startup employee is a bad gig. I honestly think the value proposition for startup employees has to come down to risk appetite, the quality of the team you're working with, and getting to work on interesting problems. Any kind of pure economic calculus that properly accounts for risk is going to favor established companies if you're good at the career game.
- beagle3 15y ago
  Let's look at the numbers: Let's say investor puts $1M with x2 liquidation preferences into company valued $3M pre-money (25% equity post money). Company then gets acquired for $20M. Investor gets $2M+$4.5M=$6.5M, rest get $13.5 (of which a much larger part usually goes to founders, and a small part to employees - e.g. $12M to 2 founders, $1.5M to 15 employees) If they put $5M with x2 into company valued $5M pre-money, and company gets aquired for $20M, investor gets $15M, rest get $5M. Employees will often get a nice signing bonus from it, but the only one who can have a potentially life changing event is the founder.