9 ms·

The Acqui-hire Scourge

38 points by ahmadss 14y ago

ojbyrne 14y ago
I can't really get past characterizing pandodaily (and Sarah Lacey especially) as a thinly disguised mouthpiece for the Venture Capital industry. In this case, then, this can be summarized as "engineers are making too much money and have gotten too comfortable. And it's cutting into the (too much money, too comfortable) lifestyle that we, venture capitalists, enjoy.
- tptacek 14y ago
  That makes sense especially because the trend to acqui-hires is particularly insidious for investors, who essentially have to chalk those all up as failures (for many funds, simply breaking even on an investment can be, pro forma, a failure). The prospect of an acqui-hire obviously motivates entrepreneurs to tack towards offerings that will elicit acqui-hire interest. If you're an investor, you'd rather your portfolio companies swing for the fences and miss, rather than bunt.
  - arohner 14y ago
    > you'd rather your portfolio companies swing for the fences and miss, rather than bunt. That implies a correlation between what you're working on, and whether you'll get acquihired. From what I've seen, the aquihiring companies will offer on anyone who can get to 'hello world' of startups. > the trend to acqui-hires is particularly insidious for investors Obviously, if you already have investors and you take the acquihire, there should be a long conversation w/ the investors first. At this point in the company, the acquihire is a signal that the startup won't work, or new investors won't join. Also, "I need my investors to make 2-3x" is a perfectly valid negotiation strategy. For angels, that's a decent return. (Of course, matters are different for VC). But the bar for taking an acquihire after a series A is much much higher.
    - tptacek 14y ago
      I have seen the same thing: friends of mine at SFBA startups tell me they uniformly get offers from the earliest days of their companies. But I'm not sure what difference that makes. "Institutional" investors on the boards of unproven companies want those companies to take risks. Everybody's a risk taker in the first 6-9 months, when the runway seems 3 startups long. Nobody is taking those early offers. But later on, the acqui-hire market might make it easy for operators to subtly stop thinking so much about the risks investors want them to take, and more on optimizing their outcome over the next 4-6 months.
- diego 14y ago
  That's the reason I flagged this post. This is not hacker news or even journalism. It's just lobbying for an industry.
- michaelt 14y ago
  I did not get that impression. The article said said: The flywheel gains more steam, the more acqui-hires there are. [...] it sends the message to investors that there’s no risk in backing them. It doesn’t matter that investors rarely make anything from these deals, because frequently they don’t lose anything either, or they lose very little. Wouldn't a mouthpiece of the VC industry think it was good, not bad, that investors got their money back even after making bad investments?
aeurielesn 14y ago
I just want to say that I hate this acqui-hire term and the recent adoption I have seen of it.
arohner 14y ago
The talent market is going to stay frothy until engineer salaries adjust up to stable equilibrium. The market is doing the rational thing, when Acquihires are worth $1M/engineer with a 3-4 year lock-in, while 'normal' salary offers are $150k. If you're talented enough to make a startup that can get acquihired, you absolutely should do it. Best case is you build a profitable company, worst case is you get acquired. Acquihires are also not the worst thing ever from an employer perspective. Big companies can easily spend $10M on failed initiatives that go nowhere. It's much easier to buy a startup that proves it can execute.
thesausageking 14y ago
There is plenty of talent out there; companies just aren't willing to pay for it. When it's normal for developers to make $300k+ as bankers, hedge fund managers, and corporate attorneys do, then there's a talent shortage.
- potatolicious 14y ago
  Hedge fund managers routinely generate 8-figures in profits per year for their employers. Likewise, high-power attorneys can bill literally millions per year for their employers. There are members of our industry who do generate that kind of enormous value to their employers - I've met some of them - and they are all being paid in that ball park already (i.e., $300K+). Is there any real reason to believe that you should be paid as much as bankers and lawyers besides some thinly veiled form of contempt we tend to have for those jobs?
  - mgkimsal 14y ago
    "Likewise, high-power attorneys can bill literally millions per year for their employers." How are these attorneys charging? Hourly, even $1000/hour would be $2-3million per year billing full time. Are there other sorts of things that are getting charged for (at a profit) beyond time?
    - Evbn 14y ago
      That's millions. Also, contingency fees in cases with cash settlements or judgements.
      - mgkimsal 14y ago
        well, yes, it's millions, but attorneys who bill $1000/hour are pretty (extremely?) rare. Most attorneys I know are $150-$400/hour, which even considering 'full time' billing and top end, is < $1 million. Contingency or percentage of settlements probably represent a larger portion of attorneys who are bringing in 'millions' for an employer.
    - 14y ago
dglassan 14y ago
What is with all this hate for acqui-hires lately? I was part of an acqui-hire, I've seen it from the other side. I worked my ass off with my fellow employees at a startup here in the valley. We never achieved the scale we needed to be successful in our industry, but we were acquired by the major player in that space. It's been an incredible journey and all of us have grown our skills and are moving our careers forward working with the new company. It's been the best thing that could have happened to my career and all I hear on HN, and now in the media, is people bitching and moaning that these people shouldn't be acqui-hired and that all these acquisitions are bogus? Give me a break. It's business. That's all it is. This is capitalism working. Companies investing in human talent hoping to produce long term revenue and results. We built something together at our startup. It didn't work out but our new company liked what we built enough to bring us in and solve the same problem with more resources. Downvote me, but I'm sick of hearing all this complaining about acquihires. Especially from journalists who's only job is to tell people their opinion...real tough work.
- potatolicious 14y ago
  > "Especially from journalists who's only job is to tell people their opinion...real tough work." I was with you until you decided that, in response to people trivializing your work and your contributions, you turn around and trivialize the work and contributions of an entire profession.
  - dglassan 14y ago
    You make a fair point. I guess I'm just a little bitter after reading that article. Over the years I've noticed that a lot of articles being written are just plain assumptions and opinions of the journalist, and not always accurate of what's going on from the inside. But that's just my experience reading articles written about the companies I work for.
- ghshephard 14y ago
  Interesting insight - but I'm not sure why you had to finish it by trivializing journalists - particularly Sarah Lacy, who's probably one of the hardest working journalists in the valley and has deeper insight into how the startup ecosystem works than 99.9% of the journalists out there.
potatolicious 14y ago
I really can't get behind the premise of the article, there are too many parts that simply do not connect. > "Allowing entrepreneurs — and their investors — to save face by saying they were “acquired” instead of failing is nice, but it’s a bit like the pre-schools where everyone wins a trophy for showing up." The notion that acquihires are failures is purely a moral one - last I checked pre-school trophies aren't worth several houses. I am fairly certain that acquihires who just took home $1-2M in comp will survive your browbeating about not swinging for the fences. > "Not enough people moving to the Valley or coming out of school want to work at companies other people are starting, because it’s so easy to start their own." No, no it isn't. We are now at the point where SF/SV companies are offering $100K to fresh undergrads. For all that the industry has done to lower the barrier to entry for entrepreneurship, it is anything but trivial. A fresh grad shouldering a moderately scary debt load is not going to trivially choose to found a startup over taking a highly-paid position and paring down the debt. How easy does the author think it is to live in SF/SV, work on a startup full-time, fresh out of college, loan payments due, with no income stream? Does she think everyone's a trust fund baby that can afford the $2K SF apartment and just spend all day drinking Blue Bottle while twirling their startup ideas in their heads, right out of school?
- chimi 14y ago
  To be fair, starting a company in your parents basement, relying on free food and expenses is a lot cheaper than moving to the valley, so don't neglect that path. A lot of startups look just like that.
- dannyr 14y ago
  Since the past year, I have heard of several "acquihires" that didn't involve money at all. The acquiring company shows power by claiming they acquired a startup while the other can claim they built a startup that got acquired.

38 points by ahmadss 14y ago

I can't really get past characterizing pandodaily (and Sarah Lacey especially) as a thinly disguised mouthpiece for the Venture Capital industry. In this case, then, this can be summarized as "engineers are making too much money and have gotten too comfortable. And it's cutting into the (too much money, too comfortable) lifestyle that we, venture capitalists, enjoy.

tptacek 14y ago
That makes sense especially because the trend to acqui-hires is particularly insidious for investors, who essentially have to chalk those all up as failures (for many funds, simply breaking even on an investment can be, pro forma, a failure). The prospect of an acqui-hire obviously motivates entrepreneurs to tack towards offerings that will elicit acqui-hire interest. If you're an investor, you'd rather your portfolio companies swing for the fences and miss, rather than bunt.
- arohner 14y ago
  > you'd rather your portfolio companies swing for the fences and miss, rather than bunt. That implies a correlation between what you're working on, and whether you'll get acquihired. From what I've seen, the aquihiring companies will offer on anyone who can get to 'hello world' of startups. > the trend to acqui-hires is particularly insidious for investors Obviously, if you already have investors and you take the acquihire, there should be a long conversation w/ the investors first. At this point in the company, the acquihire is a signal that the startup won't work, or new investors won't join. Also, "I need my investors to make 2-3x" is a perfectly valid negotiation strategy. For angels, that's a decent return. (Of course, matters are different for VC). But the bar for taking an acquihire after a series A is much much higher.
  - tptacek 14y ago
    I have seen the same thing: friends of mine at SFBA startups tell me they uniformly get offers from the earliest days of their companies. But I'm not sure what difference that makes. "Institutional" investors on the boards of unproven companies want those companies to take risks. Everybody's a risk taker in the first 6-9 months, when the runway seems 3 startups long. Nobody is taking those early offers. But later on, the acqui-hire market might make it easy for operators to subtly stop thinking so much about the risks investors want them to take, and more on optimizing their outcome over the next 4-6 months.
diego 14y ago
That's the reason I flagged this post. This is not hacker news or even journalism. It's just lobbying for an industry.
michaelt 14y ago
I did not get that impression. The article said said: The flywheel gains more steam, the more acqui-hires there are. [...] it sends the message to investors that there’s no risk in backing them. It doesn’t matter that investors rarely make anything from these deals, because frequently they don’t lose anything either, or they lose very little. Wouldn't a mouthpiece of the VC industry think it was good, not bad, that investors got their money back even after making bad investments?

aeurielesn 14y ago

I just want to say that I hate this acqui-hire term and the recent adoption I have seen of it.

arohner 14y ago

The talent market is going to stay frothy until engineer salaries adjust up to stable equilibrium. The market is doing the rational thing, when Acquihires are worth $1M/engineer with a 3-4 year lock-in, while 'normal' salary offers are $150k. If you're talented enough to make a startup that can get acquihired, you absolutely should do it. Best case is you build a profitable company, worst case is you get acquired. Acquihires are also not the worst thing ever from an employer perspective. Big companies can easily spend $10M on failed initiatives that go nowhere. It's much easier to buy a startup that proves it can execute.

thesausageking 14y ago

There is plenty of talent out there; companies just aren't willing to pay for it. When it's normal for developers to make $300k+ as bankers, hedge fund managers, and corporate attorneys do, then there's a talent shortage.

potatolicious 14y ago
Hedge fund managers routinely generate 8-figures in profits per year for their employers. Likewise, high-power attorneys can bill literally millions per year for their employers. There are members of our industry who do generate that kind of enormous value to their employers - I've met some of them - and they are all being paid in that ball park already (i.e., $300K+). Is there any real reason to believe that you should be paid as much as bankers and lawyers besides some thinly veiled form of contempt we tend to have for those jobs?
- mgkimsal 14y ago
  "Likewise, high-power attorneys can bill literally millions per year for their employers." How are these attorneys charging? Hourly, even $1000/hour would be $2-3million per year billing full time. Are there other sorts of things that are getting charged for (at a profit) beyond time?
  - Evbn 14y ago
    That's millions. Also, contingency fees in cases with cash settlements or judgements.
    - mgkimsal 14y ago
      well, yes, it's millions, but attorneys who bill $1000/hour are pretty (extremely?) rare. Most attorneys I know are $150-$400/hour, which even considering 'full time' billing and top end, is < $1 million. Contingency or percentage of settlements probably represent a larger portion of attorneys who are bringing in 'millions' for an employer.
  - 14y ago

dglassan 14y ago

What is with all this hate for acqui-hires lately? I was part of an acqui-hire, I've seen it from the other side. I worked my ass off with my fellow employees at a startup here in the valley. We never achieved the scale we needed to be successful in our industry, but we were acquired by the major player in that space. It's been an incredible journey and all of us have grown our skills and are moving our careers forward working with the new company. It's been the best thing that could have happened to my career and all I hear on HN, and now in the media, is people bitching and moaning that these people shouldn't be acqui-hired and that all these acquisitions are bogus? Give me a break. It's business. That's all it is. This is capitalism working. Companies investing in human talent hoping to produce long term revenue and results. We built something together at our startup. It didn't work out but our new company liked what we built enough to bring us in and solve the same problem with more resources. Downvote me, but I'm sick of hearing all this complaining about acquihires. Especially from journalists who's only job is to tell people their opinion...real tough work.

potatolicious 14y ago
> "Especially from journalists who's only job is to tell people their opinion...real tough work." I was with you until you decided that, in response to people trivializing your work and your contributions, you turn around and trivialize the work and contributions of an entire profession.
- dglassan 14y ago
  You make a fair point. I guess I'm just a little bitter after reading that article. Over the years I've noticed that a lot of articles being written are just plain assumptions and opinions of the journalist, and not always accurate of what's going on from the inside. But that's just my experience reading articles written about the companies I work for.
ghshephard 14y ago
Interesting insight - but I'm not sure why you had to finish it by trivializing journalists - particularly Sarah Lacy, who's probably one of the hardest working journalists in the valley and has deeper insight into how the startup ecosystem works than 99.9% of the journalists out there.

potatolicious 14y ago

I really can't get behind the premise of the article, there are too many parts that simply do not connect. > "Allowing entrepreneurs — and their investors — to save face by saying they were “acquired” instead of failing is nice, but it’s a bit like the pre-schools where everyone wins a trophy for showing up." The notion that acquihires are failures is purely a moral one - last I checked pre-school trophies aren't worth several houses. I am fairly certain that acquihires who just took home $1-2M in comp will survive your browbeating about not swinging for the fences. > "Not enough people moving to the Valley or coming out of school want to work at companies other people are starting, because it’s so easy to start their own." No, no it isn't. We are now at the point where SF/SV companies are offering $100K to fresh undergrads. For all that the industry has done to lower the barrier to entry for entrepreneurship, it is anything but trivial. A fresh grad shouldering a moderately scary debt load is not going to trivially choose to found a startup over taking a highly-paid position and paring down the debt. How easy does the author think it is to live in SF/SV, work on a startup full-time, fresh out of college, loan payments due, with no income stream? Does she think everyone's a trust fund baby that can afford the $2K SF apartment and just spend all day drinking Blue Bottle while twirling their startup ideas in their heads, right out of school?

chimi 14y ago
To be fair, starting a company in your parents basement, relying on free food and expenses is a lot cheaper than moving to the valley, so don't neglect that path. A lot of startups look just like that.
dannyr 14y ago
Since the past year, I have heard of several "acquihires" that didn't involve money at all. The acquiring company shows power by claiming they acquired a startup while the other can claim they built a startup that got acquired.