In Silicon Valley, Buying Companies for Their Engineers
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Re: In Silicon Valley, Buying Companies for Their Engineers
#2Its kindof stating the obvious, but detailing some of the juicy parts of these deals is pretty fascinating. Definately gives you a better idea of the value your company has, even if your company on a whole doesn't succeed.
Re: In Silicon Valley, Buying Companies for Their Engineers
#3I'm assuming it's not... But... doesn't this sound like slavery? Especially if you are an engineer who joins the startup and has no significant say in who you get acquired by... My guess is that you could just walk away but lose any promise of some kind of substantial pay. What's the deal?
Re: In Silicon Valley, Buying Companies for Their Engineers
#4I'm assuming it's not... But... doesn't this sound like slavery? Especially if you are an engineer who joins the startup and has no significant say in who you get acquired by... My guess is that you could just walk away but lose any promise of some kind of substantial pay. What's the deal?
The deal is that you can withdraw your labour at any time and seek work elsewhere, but you will probably give up earning opportunities in exchange.
Comparing "golden handcuffs" to slavery is a bit of a stretch.
Re: In Silicon Valley, Buying Companies for Their Engineers
#5Yea, agree with bifrost that this article is stating the obvious. But I guess it might not be so obvious to those not in Silicon Valley.
Seems to me that this is just enabling companies to pay engineers what they're really worth without having to deal with the HR repercussions of having really large salary disparity.
Re: In Silicon Valley, Buying Companies for Their Engineers
#6Its an expensive way to acquire talent but it can keep some known producers in your company for a while. Generally its good to look at how much funding went into a company before trying to analyze the per-capita numbers. Most VC's don't want to leave with just their money back or worse less than their money back (I've heard such deals being called a 'hair cut')
So company A gets 10 million in funding and then gets acquired for 25 million, all 25 million might go to the investors with may be 2 or 3 million divided up amongst all the common stock. The goal it seems is to have the big 'retention' contract where you get some chunk of stock as part of the deal (or an 'earn out') 12, 18 even 36 months later. It keeps the stars on the payroll and out of the hands of competition or worse disrupting your own market.
A conversation I had with an entrepreneur friend who had been acquired by Cisco went like this ...
Me, "So how's the company doing?"
Them, "We were acquired by Cisco."
Me, "Oh, so how long are you in for?"
Them, "24 months but we can get out in 18 if we meet the numbers."
We both joked that if someone had over heard us and didn't know the valley they would think he was in prison or something :-)
One can always 'walk away' from these deals, generally it leaves stock and cash on the table if you do that. And there is a pretty steep drop off in benefit from the founders to the last person who was hired and had yet to reach their stock options first vesting cliff.
Re: In Silicon Valley, Buying Companies for Their Engineers
#7I agree this happens - a lot. But if it's a matter of supply/demand and engineers being worth "$0.5m - $1m" then why are we not seeing salaries for developers a lot higher?
It would be a lot cheaper for Facebook to offer good developers $500k/year + options straight up rather than spending several million to buy a startup of a few devs, where a large %age of the purchase price is going to invetors and not the developers.
I wonder if Facebook, Google, etc paid that kind of money whether we'd see more young, talented developers joining Facebook rather than creating a startup?
Or maybe companies like Facebook already do pay that kind of money to the best engineers - we just don't hear about it?
Re: In Silicon Valley, Buying Companies for Their Engineers
#8I agree this happens - a lot. But if it's a matter of supply/demand and engineers being worth "$0.5m - $1m" then why are we not seeing salaries for developers a lot higher? It would be a lot cheaper for Facebook to offer good developers $500k/year + options straight up rather than spending several million to buy a startup of a few devs, where a large %age of the purchase price is going to invetors and not the develop…
As I recall from a different interview, it's because the only reliable indicator that you are a great product person is to built, ship and maintain a great product.
Re: In Silicon Valley, Buying Companies for Their Engineers
#9I would have thought the kind of people that build startups aren't always the type that would enjoy working at a company large enough to acquire them.
What's the standard obligatory time a founder has to stay with the acquiring company? How many founders stay beyond that time?
Re: In Silicon Valley, Buying Companies for Their Engineers
#10I would have thought the kind of people that build startups aren't always the type that would enjoy working at a company large enough to acquire them. What's the standard obligatory time a founder has to stay with the acquiring company? How many founders stay beyond that time?
There is no "obligatory time." It is just the benefits package that they would have to forgo should they choose to leave their acquirer.