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The End Of The Acqui-Hire?

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Re: The End Of The Acqui-Hire?

#11

Post by kimcheeme »

The startup idea failed and the founders do not have another idea / the seed investors do not want to give the founders any more money than what's already invested. So then you should let the markets decide what the price of the assets are. The assets of the idea and the assets of human capital.

1) The investor can still say that they had an acquisition exit and make their portfolio seem better than it is.

2) If you don't have strong enough connections where the strategic players will throw you a bone for a long-lasting relationship with your fund then you don't deserve the bone.

3) Investors gave founders education but the founders also gave investors education that they can leverage lessons in future investments.

4) Investors frequently say that they're investing in people but at the end of the day, they investing in people to execute the good idea and they would not hesitate to replace another set of people to execute that good idea... so in essence, they're investing in a good idea. What kind of investing are you doing when you invested in a bad idea and expect to get paid PAR for making the wrong call. A zero downside early stage investing but 1000x upside seems like a fantasy market that, even if it lasted for a year or two, would have never worked out in the long-run.

Re: The End Of The Acqui-Hire?

#12

Post by pkaye »

unreal37 wrote: post #8
suyash wrote: post #3

Earlier quoted context omitted.

they don't get burned, they still make a return on their investment just not 10X or 100x or more that they would otherwise get for example in an IPO.

They lost 90% of their investment. Not what people usually call "a return".

VC investment don't guarantee a return. The market has decided that the company is worth little.

Re: The End Of The Acqui-Hire?

#14

Post by objclxt »

mkal_tsr wrote: post #10
unreal37 wrote: post #8

Earlier quoted context omitted.

They lost 90% of their investment. Not what people usually call "a return".

Maybe VCs should be more selective about who they give their money to. I'll get downvoted for this, but it seems 90% of funded start-ups don't deserve the mass funding they deserve (a portion of it sure, but the hundreds of thousands to hundreds of millions in VC $? no).

You are making an assumption that VCs believe all their investments will turn a profit, which in most cases isn't true. You invest in fifty startups, twenty lose money, twenty break even, ten make stonking, huge amounts of profit that cancel out your losses and leave you with a nice pile of cash left over.

You're right: 90% of funded start-ups probably don't deserve the money, and will fail to produce any return at all. That's part of the game. It is not always clear what exactly will make you billions until after it's big.

Re: The End Of The Acqui-Hire?

#15

Post by hkmurakami »

malvosenior wrote: post #5

tl;dr Z grade "seed investor" doesn't have the network to make acqui-hires happen. Top tier investors have no such problem.

After reading this comment, I misremembered the VC fund's name as "third tier capital" and had to go back to the article to recall the actual name :p

Re: The End Of The Acqui-Hire?

#17

Post by mkal_tsr »

objclxt wrote: post #14
mkal_tsr wrote: post #10

Earlier quoted context omitted.

Maybe VCs should be more selective about who they give their money to. I'll get downvoted for this, but it seems 90% of funded start-ups don't deserve the mass funding they deserve (a portion of it sure, but the hundreds of thousands to hundreds of millions in VC $? no).

You are making an assumption that VCs believe all their investments will turn a profit, which in most cases isn't true. You invest in fifty startups, twenty lose money, twenty break even, ten make stonking, huge amounts of profit that cancel out your losses and leave you with a nice pile of cash left over. You're right: 90% of funded start-ups probably don't deserve the money, and will fail to produce any return at a…

Oh for sure, there's definitely a market for the ones you know will fail ... but I'm one of those "take calculated risks instead of just risks". Of those 20 that failed, I wouldn't be surprised if you could have guessed 10 would have failed, and of those 10 making it strong, maybe guess 2-3 would have done well, with everything else up in the air (luck, market, timing, and a billion other factors you couldn't see) ... but even then, I would ask the person managing the fund, "why would you invest in those 10 you knew would fail?". I guess for my, I'm more aligned to the "directed funding" rather than a more "spray-and-pray" approach.

But then again, I don't invest in start-ups so my opinions and any advice should be taken with a huge grain of salt - my forte is software engineering, not finance and investing ;-)

To those downvoting, please explain your reasoning. I can't learn why my opinion is wrong with a simple downvote and no feedback.

Re: The End Of The Acqui-Hire?

#18

Post by pixelcort »

If investors want a cut from these people being hired, they should make that part of the terms of the investments.

For example, "we get X% of the company for $Y, and if the founders get hired, Z% of their compensation for N years."

Re: The End Of The Acqui-Hire?

#19

Post by bjelkeman-again »

pixelcort wrote: post #18

If investors want a cut from these people being hired, they should make that part of the terms of the investments. For example, "we get X% of the company for $Y, and if the founders get hired, Z% of their compensation for N years."

That is a contract I would never sign.

Re: The End Of The Acqui-Hire?

#20

Post by curiouslurker »

malvosenior wrote: post #5

tl;dr Z grade "seed investor" doesn't have the network to make acqui-hires happen. Top tier investors have no such problem.

Actually I have been at events/panels recently where even top tier VCs were complaining about this--being stiffed in acqui-hires especially when life changing money is on offer if the execs just go along with the acquirer's designs.
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