4 ms·

What's Really Going on With Color: A Small Apple Talent Acquisition

42 points by ashishgandhi 14y ago

waterlesscloud 14y ago
They're paying millions to hire some people, but aren't getting any of the IP? Isn't that unusual? Maybe I just don't understand how these things work.
- georgespencer 14y ago
  In this kind of deal, the reality is that Apple are getting some seriously valuable IP. They're hiring a team of software engineers who have been working together for a while in an area which is clearly of interest to Apple (I'm betting they're going to be working on Facetime). They've been working with live video extensively. They know the lay of the land. It's very valuable. And if you want to acquire this many engineers from a company simultaneously you're probably fighting against a huge amount of non-competes, so approaching the company and negotiating directly for the hires is the best way to avoid getting slapped with a lawsuit.
  - 001sky 14y ago
    To paraphrase, they are getting the intellectual/s without the property.[1] =D __________ [1] What is interesting, though, is that they may have legal reasons for this. Any extant creditors, for example. We may see a second stage disposition of the IP. Transfer of people for $$ != transfer of legal-owned Gaap assets, when it comes to fraudulent transfer. Relevant > http://en.wikipedia.org/wiki/Fraudulent_conveyance http://en.wikipedia.org/wiki/Fraudulent_conveyance
    - deleted 14y ago
      [deleted]
- akavi 14y ago
  The IP (may be | is) worthless. The people, on the other hand, still have the potential to be very valuable (Remember, the reason that Color was able to raise so much money was because the team of founders has an impressive record of success.).
smacktoward 14y ago
How do you "acqui-hire" a bunch of people from a company without buying the company itself? Isn't that just, you know, hiring?
- smackfu 14y ago
  Well, they're essentially buying the employees from the company, which is different than normal hiring.
  - smacktoward 14y ago
    But why would you want/need to do that? I'm not an expert on labor law, but AFAIK the company doesn't have any legal ownership claim to the employees or their services; employment in the US is at-will (http://en.wikipedia.org/wiki/At-will_employment http://en.wikipedia.org/wiki/At-will_employment), so if Apple and a Color employee come to an agreement that the Color employee will go to Apple, Color doesn't have much say in the matter. There's no Reserve Clause (http://en.wikipedia.org/wiki/Reserve_clause http://en.wikipedia.org/wiki/Reserve_clause) in tech. Maybe the employees signed a non-compete agreement, and what Apple is buying from Color is a waiver on those agreements? Non-competes don't have a great record of standing up in court, but OTOH $2 million split 20 ways isn't that much money per person either; might be considered cheaper than the risk of a legal challenge. I dunno. The reporting on this story could definitely do with some additional detail, but given how rapidly the story's been changing we may just have to wait an hour or two for that detail to be uncovered :D
    - ghshephard 14y ago
      The acquihire is traditionally done by converting unvested options from one company to the next, quite often with a 15-20% retention bonus for employees that stick around for 12 months. The employees, of course, are free to walk away from those unvested options and retention bonus, should they chose to do so.
    - ksherlock 14y ago
      Employee non-compete agreements aren't enforceable in California.
zoowar 14y ago
The real talent would have left long ago.
- pacaro 14y ago
  Having been involved in an informal[1] acquihire a long time ago, I both agree and disagree with this. Engineering talent isn't always correlated with great organizational awareness, so while some of the better people will have moved on by the time it gets to this stage, there will still be strong engineers left. That being said by this stage it is unlikely to be a team on top of its game, and if the stories about an increasingly poisonous work environment are to be believed, Apple is going to have to do a winnowing process, and keeping the "team" together may well be counter productive. [1] Informal acquihire in the sense that our CEO got wind of a company closing down its remote sub (remote to them, local to us) and made a blanket offer to the team
mlinsey 14y ago
It's possible that both this report and the "double digit millions" report are true. $2M divided among 20 engineers isn't enough to convince each engineer to stick around at Apple for a few years vs. look for another job immediately. Usually in this case, there are separate retention bonuses for each employee that the acquiring company wants to ensure they keep. Sometimes these retention bonuses are included in the reported price of an acquisition to make everyone feel better, but the investors don't see any of that. So it's possible that from the investors' perspectives, it's a trivial $2M deal, but from Apple and the acquired employees' perspective, it's significantly bigger. I have no information about Color so I'm not saying that necessarily happened, just that it's a way of reconciling all the conflicting stories. The submitted story on its own doesn't quite add up either ($2M for 20 employees is too low).
- cube13 14y ago
  Well, considering Color's history, the promise of a steady paycheck for a few years might be enough for that team right now. And the $2 million could be signing bonuses for the engineers, which would be a decent chunk of one-time money.
ssebro 14y ago
This is a really interesting idea. If developers can be sold as a group, why aren't we seeing group recruiting websites, where you can buy a team?
mitchellwfox 14y ago
It's reassuring to hear that what has often been cited as a case-study in over-ambitious fundraising and over-enthusiastic investment did, in fact, turn out to be a sobering lesson for entrepreneurs. The tales of double-digit million dollar exit were frankly baffling and would have painted a very different picture of the current acquisition market.

42 points by ashishgandhi 14y ago

They're paying millions to hire some people, but aren't getting any of the IP? Isn't that unusual? Maybe I just don't understand how these things work.

georgespencer 14y ago
In this kind of deal, the reality is that Apple are getting some seriously valuable IP. They're hiring a team of software engineers who have been working together for a while in an area which is clearly of interest to Apple (I'm betting they're going to be working on Facetime). They've been working with live video extensively. They know the lay of the land. It's very valuable. And if you want to acquire this many engineers from a company simultaneously you're probably fighting against a huge amount of non-competes, so approaching the company and negotiating directly for the hires is the best way to avoid getting slapped with a lawsuit.
- 001sky 14y ago
  To paraphrase, they are getting the intellectual/s without the property.[1] =D __________ [1] What is interesting, though, is that they may have legal reasons for this. Any extant creditors, for example. We may see a second stage disposition of the IP. Transfer of people for $$ != transfer of legal-owned Gaap assets, when it comes to fraudulent transfer. Relevant > http://en.wikipedia.org/wiki/Fraudulent_conveyance http://en.wikipedia.org/wiki/Fraudulent_conveyance
  - deleted 14y ago
    [deleted]
akavi 14y ago
The IP (may be | is) worthless. The people, on the other hand, still have the potential to be very valuable (Remember, the reason that Color was able to raise so much money was because the team of founders has an impressive record of success.).

smacktoward 14y ago

How do you "acqui-hire" a bunch of people from a company without buying the company itself? Isn't that just, you know, hiring?

smackfu 14y ago
Well, they're essentially buying the employees from the company, which is different than normal hiring.
- smacktoward 14y ago
  But why would you want/need to do that? I'm not an expert on labor law, but AFAIK the company doesn't have any legal ownership claim to the employees or their services; employment in the US is at-will (http://en.wikipedia.org/wiki/At-will_employment http://en.wikipedia.org/wiki/At-will_employment), so if Apple and a Color employee come to an agreement that the Color employee will go to Apple, Color doesn't have much say in the matter. There's no Reserve Clause (http://en.wikipedia.org/wiki/Reserve_clause http://en.wikipedia.org/wiki/Reserve_clause) in tech. Maybe the employees signed a non-compete agreement, and what Apple is buying from Color is a waiver on those agreements? Non-competes don't have a great record of standing up in court, but OTOH $2 million split 20 ways isn't that much money per person either; might be considered cheaper than the risk of a legal challenge. I dunno. The reporting on this story could definitely do with some additional detail, but given how rapidly the story's been changing we may just have to wait an hour or two for that detail to be uncovered :D
  - ghshephard 14y ago
    The acquihire is traditionally done by converting unvested options from one company to the next, quite often with a 15-20% retention bonus for employees that stick around for 12 months. The employees, of course, are free to walk away from those unvested options and retention bonus, should they chose to do so.
  - ksherlock 14y ago
    Employee non-compete agreements aren't enforceable in California.

zoowar 14y ago

The real talent would have left long ago.

pacaro 14y ago
Having been involved in an informal[1] acquihire a long time ago, I both agree and disagree with this. Engineering talent isn't always correlated with great organizational awareness, so while some of the better people will have moved on by the time it gets to this stage, there will still be strong engineers left. That being said by this stage it is unlikely to be a team on top of its game, and if the stories about an increasingly poisonous work environment are to be believed, Apple is going to have to do a winnowing process, and keeping the "team" together may well be counter productive. [1] Informal acquihire in the sense that our CEO got wind of a company closing down its remote sub (remote to them, local to us) and made a blanket offer to the team

mlinsey 14y ago

It's possible that both this report and the "double digit millions" report are true. $2M divided among 20 engineers isn't enough to convince each engineer to stick around at Apple for a few years vs. look for another job immediately. Usually in this case, there are separate retention bonuses for each employee that the acquiring company wants to ensure they keep. Sometimes these retention bonuses are included in the reported price of an acquisition to make everyone feel better, but the investors don't see any of that. So it's possible that from the investors' perspectives, it's a trivial $2M deal, but from Apple and the acquired employees' perspective, it's significantly bigger. I have no information about Color so I'm not saying that necessarily happened, just that it's a way of reconciling all the conflicting stories. The submitted story on its own doesn't quite add up either ($2M for 20 employees is too low).

cube13 14y ago
Well, considering Color's history, the promise of a steady paycheck for a few years might be enough for that team right now. And the $2 million could be signing bonuses for the engineers, which would be a decent chunk of one-time money.

ssebro 14y ago

This is a really interesting idea. If developers can be sold as a group, why aren't we seeing group recruiting websites, where you can buy a team?

mitchellwfox 14y ago

It's reassuring to hear that what has often been cited as a case-study in over-ambitious fundraising and over-enthusiastic investment did, in fact, turn out to be a sobering lesson for entrepreneurs. The tales of double-digit million dollar exit were frankly baffling and would have painted a very different picture of the current acquisition market.