In ‘Bittersweet’ Deal, Digital Ad Company AppNexus Acqui-Hires Fantuition

Just as the tech press was busy talking about the first academic paper on acqui-hires, another acqui-hire deal closed, with online ad company AppNexus acquiring fantasy sports startup Fantuition.

Co-founder and CEO Pat McCarthy announced the deal in a blog post that also recounts some of Fantuition’s history and discusses McCarthy’s feelings about being acqui-hired (or, as he spells it, “acqhired”, because no one can agree on the spelling of this awkward, awkward word) — in other words, getting acquired by another company just so that they can hire your team, while your product gets shut down.

McCarthy says the terms of the deal aren’t being disclosed, though he does answer the question, “Did anyone get rich?” in the following way: “The answer for almost every acqhire deal we’ve seen in the tech space over the last few years is ‘No, at least not yet.'” That last caveat is thrown in because the deals usually include equity, which could turn out to be very valuable down the line.

The Fantuition website, meanwhile, uses some blunt language to announce that the service has been shut down: “Your slow climb up the leaderboards truncated. Your records and trophies nullified. Your prediction results erased. Game over.” (That’s a softened a bit by the next sentence: “Thanks for playing and we appreciate your support.”)

As described by McCarthy, Fantuition is a pivot from an earlier local recommendation startup called GuideMe. McCarthy and co-founder Michael Walrath both worked at online ad company Right Media (Walrath was CEO), which was acquired by Yahoo, where they then held executive positions. GuideMe/Fantuition raised money from WGI Group (where Walrath is a manager), SV Angel’s David Lee, Marker LLC’s Richard Scanlon, Yext CEO Howard Lerman, and AppNexus CEO Brian O’Kelley, who was previously CTO at Right Media.

In explaining the rationale behind the deal, McCarthy says that the startup’s momentum had “stalled”, though it still “had enough cash left to consider a bunch of options,” such as building an iPhone version. At the same time, O’Kelley suggested an acqui-hire, and while McCarthy was initially skeptical, he eventually came around: “I wanted to be a part of something bigger. I wanted to change the game like we did with Right Media, but to do it on a bigger scale and in new ways.”

Reflecting on the deal, McCarthy doesn’t take the bland, celebratory route of most acqui-hire announcements. Instead, he admits that there’s a “bittersweet” feeling among the team and the investors, concluding:

Even though it is painful to shut down our product, I’m extremely pleased to be joining one of the best technology companies in the world while also managing to continue to work with our team and live up to our investors’ expectations.

Consider this a story to be continued…