5 ms·
An explanation of how this deal probably works: Color had 41M in funding, of which $25M are left. That money goes back to investors. Apple threw in maybe $5M.
by diego 14y ago
An explanation of how this deal probably works:
Color had 41M in funding, of which $25M are left. That money goes back to investors. Apple threw in maybe $5M. That also goes to investors.
Apple interviews each employee and decides who stays and who goes. The value for Apple is that a team that works together well is more than the sum of the parts, but only if they keep the people who would fit well within Apple.
The people who stay usually receive a retention package which could be a mix of restricted stock units and cash, vests over three or four years, and is determined by:
- the experience and seniority of each person.
- the perceived value of each person to Apple.
Apple tries to gauge what it would take for the core of the team to stay long enough. Someone may need 500k over four years in addition to salary, someone else may need 2M. It's impossible to say what is being offered to each developer unless you're an insider.
For that reason nobody can know what the deal really costs to Apple, but it's definitely more than what investors get. Otherwise, the really valuable people would not go to Apple just for a paycheck.
Source: I've been involved in deals of this sort since the late 90s, mostly on the side of the acquirer.
- alooPotato 14y agoWhy does Apple even have to pay the $5M to Color and its investors. Why not just offer the employees the package and ask them to quit Color?
- diego 14y agoI can only speculate, but these things can get messy. Investors could find a way to sue Apple. 5M is peanuts to Apple compared to the value at stake. If they bother with the acquisition (which takes lawyers, due diligence, lots of boilerplate work), they might as well make sure nobody involved feels shafted.
- HNSucksAss 14y agoAlso: Find out who specializes in shitty, undiscoverable, clumsy UI. They will definitely fit in somewhere at Apple, probably on iTunes.
- cube13 14y agoOr Apple just went to the team directly and hired them, and the $2-$5 mil are signing bonuses. This isn't an aquihire situation, this is just Apple hiring a bunch of people. It's unlikely Color has any real leverage in this case.
- diego 14y agoDoubt it. Why would Apple want to alienate Sequoia of all venture funds? It's more likely that Sequoia called Apple and they worked out a soft landing for some people.
- cube13 14y agoWhy would Apple feel that it's necessary to keep the investors happy? It's not Apple's fault that Color's board is unable/unwilling to attempt to keep their employees. California's an at-will employment state, remember. Non-compete clauses have also been ruled unenforceable, so that doesn't apply either. Seriously, this is such a small amount of money for an entire team that I sincerely doubt that anyone on Color's board was involved. If Sequoia was involved at all, I would expect to see a lot more money changing hands(probably somewhere to the tune of $50 million to cover the investors), and the IP moved to Apple. None of that is happening, so it makes more sense that the board and the investors were not involved in the deal at all.
- diego 14y agoYour comment suggests that you are not very familiar with the nuances of Merger and Acquisition processes. As someone who has been involved in a significant number of M/A deals in different capacities, I can tell you that your speculation is uninformed. I won't comment further.
- jusben1369 14y agoI think you're essentially saying Apple pays $5 million or so to have the first right to go through the 20 person development team? From there they can make any type of offer to anyone they like or not?
- allsystemsgo 14y agoJeez. How do I become the guy that requires 2M to stick around? Are these often irreplaceable programmers or are they typically product management types?
- digeridoo 14y agoBe 20 guys?
- erichocean 14y agoI don't think it's that they're "irreplaceable", in the sense that they could never be replaced. It's more of a time-to-market thing. I've spent years working on distributed systems and sync algorithms, so when the time came to improve our setup to a Google Spanner-like system, it was fairly easy for me to make the changes. From that perspective, my ability to do that right now makes me pretty much irreplaceable at my company. But I certainly am replaceable, in the sense that any other competent programmer who'd spent as much time as me could presumably be doing what I'm doing. It's just hard to find them. :)
- 001sky 14y agoThis is a very analysis. short-term mission critical. and long-term. &etc. well said.
- kami8845 14y agoThank you for sharing your knowledge