How eBay CEO John Donahoe Keeps Founders From Leaving After Acquisitions

TechCrunch Disrupt NY 2013 - Day 2

At TechCrunch Disrupt 2013 NY, eBay’s CEO John Donahoe talked to Bloomberg’s chief content editor Norm Pearlstine about how the company screens its acquisitions and how he keeps founders from leaving after the acquisition. Since becoming eBay’s CEO, Donahoe said, the company has made about 20 acquisitions. Currently, fifteen of the founders that joined eBay and PayPal after their companies were acquired are still at eBay and most of them are in executive positions.

After the company acquired Zong in 2011, for example, Zong’s founder David Marcus became PayPal’s vice president for mobile. After essentially getting tested in that position, he became the President of PayPal last year. Similarly, when eBay acquired Hunch (also in 2011), its team of co-founders, including Chris Dixon, Tom Pinckney and Matt Gattis joined the company (with Dixon leaving after about a year). Today, this team is in charge of eBay’s homepage.

Donahoe believes that in order to keep founders from leaving, eBay needs to give them the opportunity to grow inside the company. Because of this, he is also most interested in acquiring companies where the management team believes that they can execute their vision inside eBay. “We are always looking for companies that have a strong vision,” Donahoe said. “And then we allow them to innovate at a higher level.” The kind of founders he likes, he said, are “founders come to us and say we founded our company to do x and would like to take it to the next level.”

In his view, this strategy has been a key ingredient to eBay’s and PayPal’s success. Acquisitions, in his view, drive innovation inside a large company like eBay and bringing in founders as executives – and giving them monetary incentives to stay as well, of course – is a key part of this strategy.

As for the details of these incentives, Donahoe noted that “most of the founders make money in the acquisition In some cases the acquisition price is tied to staying for a two-three year period. But yes – we provide incentives to stay. We provide good compensation, but at the end of the day, we need to create a culture where they can realize their visions.” He does, for example, regularly meet with founders to discuss the state of the company. These discussions have, for example, lead to the redesign of the eBay’s homepage. It’s that kind of impact, he believes, that keeps founders at eBay.