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Investors Don't Like Acqui-hires

16 points by transburgh 14y ago

Sambdala 14y ago
This is pretty obvious right? All of the comments on the pandodaily article revolved around the fact that VC doesn't get their homerun payday during an acqui-hire. It seems like the discussion around acqui-hires revolves around what the commenter's personal interests are for the most part. However, it makes sense that the acqui-hire would become more prevalent for a couple reasons. There are many more startups being created, both increasing the supply of startups to acqui-hire and decreasing the %age of startups that exit in a home run. Also, the market price for developers is going up, and seeing someone execute and deliver a product in a product vertical you want to execute in makes you worth a large multiple of an unknown and/or average developer.
benologist 14y ago
Investors who don't want their startups to accept an acqui-hire already have all the protection they need: make a better offer.
- tptacek 14y ago
  No. The logic employed here is the same logic that underpins liquidation preferences. If investors don't want to fund acqui-hire outcomes, they do in fact have more tools than a counteroffer. The best operators are always going to get the best terms, but an industry-wide concern over acqui-hires could easily manifest itself in poorer terms for everyone else.
  - benologist 14y ago
    Presumably these acquisitions happen most of the time because the startup failed, this is the situation I was alluding to where they can just double down if they think they / the startup can do better but otherwise nothing is going to make this look like they picked Instagram. If they're trying to protect against people who quit too easily or aim too low then they made the wrong bet, they're not going to avoid this if they predefine a price or terms where it's a very mediocre OK.
- 001sky 14y ago
  Well, one concern is moral hazard. why is co for sale? http://en.wikipedia.org/wiki/Moral_hazard http://en.wikipedia.org/wiki/Moral_hazard http://en.wikipedia.org/wiki/Hold-up_problem http://en.wikipedia.org/wiki/Hold-up_problem

16 points by transburgh 14y ago

This is pretty obvious right? All of the comments on the pandodaily article revolved around the fact that VC doesn't get their homerun payday during an acqui-hire. It seems like the discussion around acqui-hires revolves around what the commenter's personal interests are for the most part. However, it makes sense that the acqui-hire would become more prevalent for a couple reasons. There are many more startups being created, both increasing the supply of startups to acqui-hire and decreasing the %age of startups that exit in a home run. Also, the market price for developers is going up, and seeing someone execute and deliver a product in a product vertical you want to execute in makes you worth a large multiple of an unknown and/or average developer.

benologist 14y ago

Investors who don't want their startups to accept an acqui-hire already have all the protection they need: make a better offer.

tptacek 14y ago
No. The logic employed here is the same logic that underpins liquidation preferences. If investors don't want to fund acqui-hire outcomes, they do in fact have more tools than a counteroffer. The best operators are always going to get the best terms, but an industry-wide concern over acqui-hires could easily manifest itself in poorer terms for everyone else.
- benologist 14y ago
  Presumably these acquisitions happen most of the time because the startup failed, this is the situation I was alluding to where they can just double down if they think they / the startup can do better but otherwise nothing is going to make this look like they picked Instagram. If they're trying to protect against people who quit too easily or aim too low then they made the wrong bet, they're not going to avoid this if they predefine a price or terms where it's a very mediocre OK.
001sky 14y ago
Well, one concern is moral hazard. why is co for sale? http://en.wikipedia.org/wiki/Moral_hazard http://en.wikipedia.org/wiki/Moral_hazard http://en.wikipedia.org/wiki/Hold-up_problem http://en.wikipedia.org/wiki/Hold-up_problem