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I agree with the author, but I feel they should not be in this position to begin with. VCs can ensure their money back using paperwork. 500 Startups' seed spec

I agree with the author, but I feel they should not be in this position to begin with. VCs can ensure their money back using paperwork. 500 Startups' seed specifically says they can block any acquisition that lowballs 500. This is reasonable because they take the risk. I was hoping for an interesting article about acqui-hire trends and predictions, but instead I got a complaint about VCs not getting paid back. A reasonable perspective, but not particularly insightful.

ghshephard 12y ago
Except, in the case of an acquihire, there is no "acquisition", per se. If 500 startups were to block such a deal, then the founders/employees could simply fold up shop and go to work for the new company. What the investor is failing to recognize, is that in the case of an acqui-hire, the company has failed - it has zero value, and needs to be shut down gracefully. A good acqui-hire ensure that customers and vendors are paid up to date, and the employees are given a new place to work. This VC is confused as to the nature of an acquihire, and, furthermore, seems to be ignoring the fact that 99% of the return on their investments come from the two or three companies out of 100 that are very successful. The other 98 to 97 are just a cost of doing business, and worrying about getting back their "investment" on a company that has gone under is just a distraction from the real business of making sure that the two-three companies are very successful.
- polarix 12y ago
  It sounds like this is a side effect of the "at-will" employment model, then. Do any venture firms' threat models account for this by promoting contract employment all the way to the top?
- fragsworth 12y ago
  > worrying about getting back their "investment" on a company that has gone under is just a distraction from the real business of making sure that the two-three companies are very successful. That, and why are they hoping to extract value from the learning experience of the founders to begin with? People working at many different companies usually learn lots of things and can increase their value just as much as any startup founders. As an investor, can't you just ignore any hopes that you'll extract any value from an "acqui-hire" when you negotiate the valuation of the company?

ghshephard 12y ago

Except, in the case of an acquihire, there is no "acquisition", per se. If 500 startups were to block such a deal, then the founders/employees could simply fold up shop and go to work for the new company. What the investor is failing to recognize, is that in the case of an acqui-hire, the company has failed - it has zero value, and needs to be shut down gracefully. A good acqui-hire ensure that customers and vendors are paid up to date, and the employees are given a new place to work. This VC is confused as to the nature of an acquihire, and, furthermore, seems to be ignoring the fact that 99% of the return on their investments come from the two or three companies out of 100 that are very successful. The other 98 to 97 are just a cost of doing business, and worrying about getting back their "investment" on a company that has gone under is just a distraction from the real business of making sure that the two-three companies are very successful.

polarix 12y ago
It sounds like this is a side effect of the "at-will" employment model, then. Do any venture firms' threat models account for this by promoting contract employment all the way to the top?
fragsworth 12y ago
> worrying about getting back their "investment" on a company that has gone under is just a distraction from the real business of making sure that the two-three companies are very successful. That, and why are they hoping to extract value from the learning experience of the founders to begin with? People working at many different companies usually learn lots of things and can increase their value just as much as any startup founders. As an investor, can't you just ignore any hopes that you'll extract any value from an "acqui-hire" when you negotiate the valuation of the company?