Acqui-Hires: Established Companies Look to Start-Ups for Fresh Talent
By Karla Robinson
September 18, 2012
September 18, 2012
- Flailing tech start-ups typically have two options: watch money dwindle as they try to become the next big thing or close up shop and go to work for the big guys.
- “Acqui-hires” are now becoming common place in Silicon Valley where established technology companies are buying up small start-ups for around $3 million to $6 million to bring their software-engineering talent on board.
- “Now, with tech start-ups proliferating because of the relatively low cost of getting off the ground, desperation for software talent has moved even small and midsize tech companies to make acqui-hires,” the Wall Street Journal reports.
- The upside is increased salaries for these coveted engineers and a cohesive team for the big companies. But the downfalls can weigh pretty heavily.
- “Accepting an acqui-hire offer not only sidelines an entrepreneur’s dreams, but it typically results in negligible, or even zero, returns for the start-up’s investors,” the article explains. “Moreover, the products and services it took long days and nights to create either cease to exist or are folded into the acquirer’s portfolio. Any employees who aren’t software engineers may be left without jobs.”
- There are also certain catches, like requirements to stay on as an employee for a few years in order to retain offered stocks. “Other forms of compensation might be clawed back as well, and founders might be required to sign noncompete agreements prohibiting them from engaging in the same business for a specified period after leaving the acquirer,” the article states.
- But even with these setbacks, sometimes the competitive industry can prove even more tough on struggling start-ups. “This is often the alternative to liquidating and sending your résumé out,” says John Coyle, a law professor at the University of North Carolina.
No Comments Yet
You can be the first to comment!
Leave a comment
You must be logged in to post a comment.