It took back-to-back acqui-hires for me to learn there’s a right way and a wrong way to do them.
We had made it. Despite running low on money and having little traction, my company was acqui-hired by Yahoo in October of 2013. I was thrilled to have a large salary at a well-respected company. Seventeen months later, I was laid off.
These days, many entrepreneurs consider an acqui-hire — the process of being acquired for your talent instead of your product — a safe alternative to company success. They think that if they can’t grow their business, they can get acqui-hired. There is plenty of advice on how to get acqui-hired and, incredibly, even a marketplace for helping you find potential acquirers.
So why shouldn’t you consider an acqui-hire a legitimate fallback?
It’s terrible for morale. My proudest accomplishment was keeping our team together through the acqui-hire. During the seven months it took to plan and finalize the deal, many major employees almost left. Employees were frustrated that we argued over subjective product features for executives instead of validating features with our real users.
Instead of being excited to work on a product our customers would love, we helped each other prepare for technical interviews, waited to hear back from Yahoo and hoped to get an offer letter before we ran out of payroll.
You have no bargaining power. Your startup is just another startup looking for a soft landing. Corporate development teams have spoken to dozens, if not hundreds, of companies, and are constantly receiving intros to companies looking for acqui-hires. They have little patience for a hard-nosed startup entrepreneur. While large companies effectively have all the time in the world to negotiate, your startup is on a ticking clock.
You’re in the middle of a game of tug of war. Your investors want as much of their initial investment back as possible. Your acquirer wants to spend as little as possible. Your team wants to work on a great product, make a good salary and have an easy commute. Unlike a typical acquisition, in an acqui-hire your investors, acquirer and employees all have competing interests — and you’re in the unenviable position of trying to balance them all and keep everyone onboard.
Sometimes the landing is not as soft as it looks.
It’s a zero-sum game; to make investors happy, you have to pay your employees less, and vice versa. To further complicate things, large companies are getting smarter about acqui-hires, resulting in stricter deal terms — sometimes requiring your entire team to stick around for four years.
You are set up to fail. Your team’s initial excitement for their well-paying, stable corporate job will quickly be replaced by frustration over commutes, meetings and reports to fill out. Of our seven employees that joined Yahoo, only three remained after eight months. Like your team, you’ll also become disillusioned. In your new role, you’ll have fuzzy success metrics and far less control. Now you’ll have a boss to keep happy — and that’s hard to go back to.
You might not be worth your pay. You’ll be paid significantly more than your new peers once acquired. You’re coming in with negative politics from the outset, making it difficult to fit into the acquirer’s culture. And when it is time for cost cutting, you’re the first to go. Despite my personal contributions at Yahoo, I’m sure I wasn’t accomplishing twice that of my peers. The layoff was a complete shock and although I think it was best for us, I couldn’t help but feel jilted.
That’s not to say that it was entirely negative. Entrepreneurs who go the acqui-hire route will learn a lot from the deal process and are likely to build long relationships at their new company. Working in such a corporate environment taught me a lot about professionalism, communication and managing expectations. I met a lot of great friends at Yahoo, and my acquisition will be part of my bio for the foreseeable future.
Sometimes an acqui-hire is the ideal exit. An acqui-hire can be a great fit if you’re excited to join a company, have little investment and are valued for your immediate impact.
Post-layoff, I thought a lot about what to do next. After calls with mom, a kitchen full of post-its and a trip to Esalen, I started a company helping coding-bootcamp grads find their first job. Unfortunately, I could only help a limited number of grads without a scalable business model.
My company was recently acquired by Bloc (an online, mentor-based coding bootcamp). At Bloc, my ability to help is scalable, the team is great and even the commute is short.
It pains me every time I hear an entrepreneur suggest that “worst-case scenario, I’ll just get acqui-hired.” Sometimes the landing is not as soft as it looks.