8 ms·

What Everyone Should Know About How Talent is Bought and Sold

172 points by ca98am79 13y ago

ghc 13y ago
I've been a part of one of these suddent acqui-hires. It's not terribly fun if you're the guy building the critical software, not knowing if you'll have to kill your whole year's work the next day so you can switch from your comfy, cramped space to some cube-farm. And the lawyers...the whole process took two months, but it probably took 2 years off my life. And I didn't even get that much out of it besides a stable corporate salary. Would not recommend. If you're going to go corporate, go in facing foward, with eyes wide open. Don't back into it for what is essentially a hiring bonus and a bribe to throw away much of the work you spent the past x-months caring deeply about.
- wslh 13y ago
  I have a friend who was acqui-hired for his successful open source project. In the general sense it was positive because he was able to focus on the project and not in the money. I think the case of 100% open source projects without services attached is much different of companies who want an exit or growing. I can't imagine a dystopian future where a company like Google is being acquired by Yahoo.
- bane 13y ago
  It can also depend on the culture of the acquiring corp. I went through an acquisition and one of the bidding companies advertised themselves as a very process driven, standards focused corporate culture and had even instituted their own program management certification that all of the incoming managers would have to pass to stay on board. Needless to say this was an absolute anathema to any small startup who's spent the last few years doing anything to survive and get positioned for an acquisition. It drove away everybody else involved in the acquisition and even the investment banking firm we were using was turned off by the pitch. "But look at all these entrenched and inflexible processes that take all of the thinking and joy out of your work that we're offering you!" No thanks.
- gohrt 13y ago
  If you are going to work in the software industry, you are best suited if you get comfortable early with the idea of throwing away 6 months of work at a moments' notice.
  - officialjunk 13y ago
    yep. sigh...
yannk 13y ago
"And it’s not all about the money. “I worked on one acquisition where we had to fight over a startup bringing its pool table with them,” Brown recounts. “It was a big piece of their culture — all of their engineers would talk through their toughest problems over pool, apparently.” The corporate development team balked, and it ended up threatening the deal." corporate development can be tight ass sometimes. Can someone chime in on which acquisition this was?
the_watcher 13y ago
I thought this was really interesting. I haven't ever seen an examination of the acquihire that is this detailed. Most pieces deal with starting a company or path to IPO, or focus on the largest acquisitions out there.
walshemj 13y ago
Surprised that hold back is legal person A loses $ because B decides he wants to leave - this isn't Quatar you cant confiscate their pasports.
- larrys 13y ago
  It makes sense. You want to make sure that the person A has a vested interest in making sure that people will stick around. Certainly not to encourage them to leave (or assist them or make it easy for them to leave after getting the money). As a contract term it's legal just like if you are selling a ski resort you could say "if it doesn't snow 30 inches next season then we want ..." Making something a term doesn't imply that you have control over the even directly necessarily. For example let's hypothetically say that PG decides to sell HN. The terms might be that at least 70% of the top people who comment stick around for at least 6 months. So if PG had knowledge that those top people who comment would leave if he sold then he would have to factor that into the price he is being offered. And if he ran into them at a party he wouldn't be egging them on "oh now that I'm not affiliated I don't really care what you do".
  - walshemj 13y ago
    First HN commentators are not employees or workers in the legal sense. But the employee now works for the acquiring company B how is it legal that the stake holders in company A can be penalized after the fact for the acquired employee deciding that he doesn't like the new employer. And I thought TUPE was strange in the EU
    - ZoF 13y ago
      To be frank, I'm surprised that you find it surprising. Employees are assets.
      - walshemj 13y ago
        Oh I know that trust me I do but we dont in normal legal system punish people for the actions of others (not with standing conspiracy which is bloody hard to prove) This system lends it's self to blackmail "hey ex boss give me 50% of that hold back money you got from the acquisition or I will leave and f&*k you over". ps Yes I am aware of the "joint enterprise" issue in UK employment law where you can legally fire all of a group of employees if you can prove that one of them did something realy naughty.
tom_b 13y ago
Are acqui-hire employees particularly rewarded in these situations? If you are identified as a critical or especially-sought-after employee at a company in this situation, what types of retention structures and contracts actually wind up happening? Just curious.
- deleted 13y ago
  [deleted]
ivv 13y ago
Is there an opportunity for a business that builds and cultivates small and focused product teams optimized specifically for acqui-hires by large companies hungry for talent? The product would really be the team itself and the front-facing stuff would be largely irrelevant?
- fleitz 13y ago
  Yes, if you can put together effective teams and pitch them to companies then you have a nice consulting/recruiting biz.
- gohrt 13y ago
  Maybe that's half of what VC is already.
icecreampain 13y ago
Just a heads up: was reading the article when all of a sudden some trojan took over the whole site. The background faded to black and something requesting information from me popped up. I closed the tab and put "firstround.com" on the company blacklist.
slyall 13y ago
Question for the Valley types: If I'm Facebook and I want to hire a talented team at a smaller company why would I go though the whole procedure of an acqui-hire? If I just want the 10 programmers why don't I offer them each a $500k signup bonus ( total $5m ) rather than pay $20m to some VCs and investors for a company and product I'm going to throw away?
- JonFish85 13y ago
  My guess (and it's just that: a guess) is that it has something to do with a non-compete clause with their current employer. If these programmers are working on a substantially similar product to one at your Facebook example company, there might be a lot of legal reasons not to leave the smaller company to go work at FB.
  - 001sky 13y ago
    There are limited situations where a reasonable non-compete agreement may be valid in California. If an owner is selling the goodwill in their business.[14] When there is a dissolution or disassociation of a partnership.[15] Where there is a dissolution of a limited liability company.[16]*
  - walshemj 13y ago
    Which is not enforceable for grunt engineers in virtually all cases. And if in the rare case it is enforceable (normally for very senior C level roles) you have to be paid for it! Hint Marissa didn't have any problem walking from Google to yahoo did she
    - gohrt 13y ago
      Non-competes are unenforcable. NDAs and theft-of-trade-secrets are enforceable.
      - walshemj 13y ago
        Courts in CA tend to side with the employee though.
justin66 13y ago
Lest any youngsters take seriously the value of shares a startup is offering you, take a look at how seriously the author takes it: > With retention structures and contracts, a buyer can make sure the money goes where they want it to go — to a promising junior engineer they want to keep on, for example, instead of the office manager who technically owned 20% of the company’s equity. "Technically owned." Yeah. Think about that. It's adorable that the author has that money going to a junior engineer rather than management in his example. Don't be sucked in.
- stephengillie 13y ago
  Like technically correct, "technically owned" is the best kind of ownership.
- walshemj 13y ago
  Yes explain to me this concept of "technical" ownership which you dont actually own something.
  - Retric 13y ago
    You own shares but the total number of shares is not fixed. Say you own 20,000 shares out of 100,000 shares and you own 20% of the company, they issue another 9,900,000 shares 10 min befores selling the company and you now own 0.2%.
    - pedalpete 13y ago
      There are dilution clauses in contracts that cover these things, but yes, you should be aware how your ownership stake is handled.
      - netcan 13y ago
        How many employees understand the dilution clauses for their share/options.
deleted 13y ago
[deleted]
michaelochurch 13y ago
"Talent" acquisition is a misconception. I find the term insulting, given that (in bubble times like this) people a lot less talented (and skilled, etc.) than me regularly get acqui-hired at $10+ million per head. Call it an HR acquisition. Calling it a talent acquisition is, in many of these cases, an insult to people who have the talent. Just why do these companies buy "talent" at a panic price? I have some theories that are partial explanations, but mostly it's tax. Also, it ends up in a different place on the balance sheet than a typical HR expenditure. It has little to do with the people being bought, and it offers a gigantic arbitrage for investors with the connections to make these deals happen.
- eru 13y ago
  Those people might be less skilled than you in, say, programming. That doesn't mean they are less skilled at making money.
  - michaelochurch 13y ago
    When you're born with the kind of connections that they (the founders, at least) have, making money is the default, not an artifact of skill.
justzisguyuknow 13y ago
God I hate that friggin popup asking me to subscribe!

172 points by ca98am79 13y ago

ghc 13y ago

I've been a part of one of these suddent acqui-hires. It's not terribly fun if you're the guy building the critical software, not knowing if you'll have to kill your whole year's work the next day so you can switch from your comfy, cramped space to some cube-farm. And the lawyers...the whole process took two months, but it probably took 2 years off my life. And I didn't even get that much out of it besides a stable corporate salary. Would not recommend. If you're going to go corporate, go in facing foward, with eyes wide open. Don't back into it for what is essentially a hiring bonus and a bribe to throw away much of the work you spent the past x-months caring deeply about.

wslh 13y ago
I have a friend who was acqui-hired for his successful open source project. In the general sense it was positive because he was able to focus on the project and not in the money. I think the case of 100% open source projects without services attached is much different of companies who want an exit or growing. I can't imagine a dystopian future where a company like Google is being acquired by Yahoo.
bane 13y ago
It can also depend on the culture of the acquiring corp. I went through an acquisition and one of the bidding companies advertised themselves as a very process driven, standards focused corporate culture and had even instituted their own program management certification that all of the incoming managers would have to pass to stay on board. Needless to say this was an absolute anathema to any small startup who's spent the last few years doing anything to survive and get positioned for an acquisition. It drove away everybody else involved in the acquisition and even the investment banking firm we were using was turned off by the pitch. "But look at all these entrenched and inflexible processes that take all of the thinking and joy out of your work that we're offering you!" No thanks.
gohrt 13y ago
If you are going to work in the software industry, you are best suited if you get comfortable early with the idea of throwing away 6 months of work at a moments' notice.
- officialjunk 13y ago
  yep. sigh...

yannk 13y ago

"And it’s not all about the money. “I worked on one acquisition where we had to fight over a startup bringing its pool table with them,” Brown recounts. “It was a big piece of their culture — all of their engineers would talk through their toughest problems over pool, apparently.” The corporate development team balked, and it ended up threatening the deal." corporate development can be tight ass sometimes. Can someone chime in on which acquisition this was?

the_watcher 13y ago

I thought this was really interesting. I haven't ever seen an examination of the acquihire that is this detailed. Most pieces deal with starting a company or path to IPO, or focus on the largest acquisitions out there.

walshemj 13y ago

Surprised that hold back is legal person A loses $ because B decides he wants to leave - this isn't Quatar you cant confiscate their pasports.

larrys 13y ago
It makes sense. You want to make sure that the person A has a vested interest in making sure that people will stick around. Certainly not to encourage them to leave (or assist them or make it easy for them to leave after getting the money). As a contract term it's legal just like if you are selling a ski resort you could say "if it doesn't snow 30 inches next season then we want ..." Making something a term doesn't imply that you have control over the even directly necessarily. For example let's hypothetically say that PG decides to sell HN. The terms might be that at least 70% of the top people who comment stick around for at least 6 months. So if PG had knowledge that those top people who comment would leave if he sold then he would have to factor that into the price he is being offered. And if he ran into them at a party he wouldn't be egging them on "oh now that I'm not affiliated I don't really care what you do".
- walshemj 13y ago
  First HN commentators are not employees or workers in the legal sense. But the employee now works for the acquiring company B how is it legal that the stake holders in company A can be penalized after the fact for the acquired employee deciding that he doesn't like the new employer. And I thought TUPE was strange in the EU
  - ZoF 13y ago
    To be frank, I'm surprised that you find it surprising. Employees are assets.
    - walshemj 13y ago
      Oh I know that trust me I do but we dont in normal legal system punish people for the actions of others (not with standing conspiracy which is bloody hard to prove) This system lends it's self to blackmail "hey ex boss give me 50% of that hold back money you got from the acquisition or I will leave and f&*k you over". ps Yes I am aware of the "joint enterprise" issue in UK employment law where you can legally fire all of a group of employees if you can prove that one of them did something realy naughty.

tom_b 13y ago

Are acqui-hire employees particularly rewarded in these situations? If you are identified as a critical or especially-sought-after employee at a company in this situation, what types of retention structures and contracts actually wind up happening? Just curious.

deleted 13y ago
[deleted]

ivv 13y ago

Is there an opportunity for a business that builds and cultivates small and focused product teams optimized specifically for acqui-hires by large companies hungry for talent? The product would really be the team itself and the front-facing stuff would be largely irrelevant?

fleitz 13y ago
Yes, if you can put together effective teams and pitch them to companies then you have a nice consulting/recruiting biz.
gohrt 13y ago
Maybe that's half of what VC is already.

icecreampain 13y ago

Just a heads up: was reading the article when all of a sudden some trojan took over the whole site. The background faded to black and something requesting information from me popped up. I closed the tab and put "firstround.com" on the company blacklist.

slyall 13y ago

Question for the Valley types: If I'm Facebook and I want to hire a talented team at a smaller company why would I go though the whole procedure of an acqui-hire? If I just want the 10 programmers why don't I offer them each a $500k signup bonus ( total $5m ) rather than pay $20m to some VCs and investors for a company and product I'm going to throw away?

JonFish85 13y ago
My guess (and it's just that: a guess) is that it has something to do with a non-compete clause with their current employer. If these programmers are working on a substantially similar product to one at your Facebook example company, there might be a lot of legal reasons not to leave the smaller company to go work at FB.
- 001sky 13y ago
  There are limited situations where a reasonable non-compete agreement may be valid in California. If an owner is selling the goodwill in their business.[14] When there is a dissolution or disassociation of a partnership.[15] Where there is a dissolution of a limited liability company.[16]*
- walshemj 13y ago
  Which is not enforceable for grunt engineers in virtually all cases. And if in the rare case it is enforceable (normally for very senior C level roles) you have to be paid for it! Hint Marissa didn't have any problem walking from Google to yahoo did she
  - gohrt 13y ago
    Non-competes are unenforcable. NDAs and theft-of-trade-secrets are enforceable.
    - walshemj 13y ago
      Courts in CA tend to side with the employee though.

justin66 13y ago

Lest any youngsters take seriously the value of shares a startup is offering you, take a look at how seriously the author takes it: > With retention structures and contracts, a buyer can make sure the money goes where they want it to go — to a promising junior engineer they want to keep on, for example, instead of the office manager who technically owned 20% of the company’s equity. "Technically owned." Yeah. Think about that. It's adorable that the author has that money going to a junior engineer rather than management in his example. Don't be sucked in.

stephengillie 13y ago
Like technically correct, "technically owned" is the best kind of ownership.
walshemj 13y ago
Yes explain to me this concept of "technical" ownership which you dont actually own something.
- Retric 13y ago
  You own shares but the total number of shares is not fixed. Say you own 20,000 shares out of 100,000 shares and you own 20% of the company, they issue another 9,900,000 shares 10 min befores selling the company and you now own 0.2%.
  - pedalpete 13y ago
    There are dilution clauses in contracts that cover these things, but yes, you should be aware how your ownership stake is handled.
    - netcan 13y ago
      How many employees understand the dilution clauses for their share/options.

deleted 13y ago

[deleted]

michaelochurch 13y ago

"Talent" acquisition is a misconception. I find the term insulting, given that (in bubble times like this) people a lot less talented (and skilled, etc.) than me regularly get acqui-hired at $10+ million per head. Call it an HR acquisition. Calling it a talent acquisition is, in many of these cases, an insult to people who have the talent. Just why do these companies buy "talent" at a panic price? I have some theories that are partial explanations, but mostly it's tax. Also, it ends up in a different place on the balance sheet than a typical HR expenditure. It has little to do with the people being bought, and it offers a gigantic arbitrage for investors with the connections to make these deals happen.

eru 13y ago
Those people might be less skilled than you in, say, programming. That doesn't mean they are less skilled at making money.
- michaelochurch 13y ago
  When you're born with the kind of connections that they (the founders, at least) have, making money is the default, not an artifact of skill.

justzisguyuknow 13y ago

God I hate that friggin popup asking me to subscribe!