Ask HN: Talk me through the acquihire process

19 points by MagnitudeFC 2 years ago | 30 comments

I need your advice, guys.

My seed stage startup isn't going to make it to its series A, and we have 1.5 months of cash left. I am exploring an acquihire to see if I can find a soft landing for our team. I’ve got a meeting scheduled with a fairly senior Corp Dev person at a FAANG for Monday. I’ve never worked for a BigCo before nor have I been through an acquihire process, so I would love any advice on how I should navigate this.

(In hindsight I am very aware that this was a lousy situation to have put myself in, but here we are anyway.)

Specific questions:

1) What can I do to maximize my chances of getting my team acquihired?

2) Are acquihire packages substantially better than just trying to interview at these companies?

3) How long does this process take from start to finish?

4) What can I expect post acquihire? Will my team get absorbed into the org or will we have a chance to continue working together?

I know there are a lot of variables here so I'm providing some context below.

TL;DR we have decent traction on our product but not enough to justify a Series A and I don't want to keep treading water by taking on any extension capital from our existing investors. Therefore I am exploring an acquihire for our team. We are a 4 person team consisting of 2 founders (CEO and CTO) and 2 amazing engineers who have worked together for 4 years. We work really well together, work insanely hard and have built products together that we are proud of, but sadly didn’t find PMF.

On a personal note: I’ve been in the startup game for the last 10 years and I’m 36 years old. Expecting my first child this year. I need some stability in my life. Therefore I think it is time to go work for a BigCo for some time and figure out my life.

kjellsbells 2 years ago |

First of all, its excellent news that the FAANG is willing to talk about this. That deserves congratulations alone.

That said, if this is the first conversation, be cautious. After all, what stops them from using the conversation to identify who your star people are, and simply poaching them after your company winds up?

Assuming that you are further along, you need to identify which big org division of the FAANG you fit in and agitate for that, eg get time with the CVP or the Level X person and make your case. They are typically measured on how much contribution margin acquisitions bring, so make sure you have numbers, and if you dont have great numbers, have a very compelling story. Maybe you unlock a segment for one of their products by being "better together" for example.

You should also be prepared to answer deep questions onnthings like security, not because they suspect you of having a virus or anything so 1990s like that, but because if you want your product to survive and evolve into a first party offering from the acquirer, you will be expected to go through the compliance that all their other services go thru. Trivial examples: is there a software BOM for every package in your stack. Is your code control up to par with their standards. Etc.

b20000 2 years ago | |

what does CVP stand for? same thing as corporate development?

kjellsbells 2 years ago | | |

My apologies. Corporate Vice President. Typically senior-ish execs, but not board level and not quite in the inner sanctum of the senior leadership team of direct reports to the CEO.

MagnitudeFC 2 years ago | |

excellent advice, thank you!

brailsafe 2 years ago |

I was in the spot of one of the employees (contractor at the time) for a further along startup that run out of money and wasn't going to get further investments. It looked like the owner of the company was under mega stress during this time, and so was I, because I was waiting on hypothetical buyers to float us cash while they did their due diligence.

What ended up happening, after months of being in the dark, was that most of company was absorbed into the new parent, but somewhat at arms-length. We weren't put on the standard engineering track of the parent because most of the remote employees were working through Remote Inc (a proxy).

The CEO and leadership changed immediately, maybe sticking around in some kind of advisory role for at most a month, and are now all at others.

I got caught in round 2 of layoffs, so managed about 8 months of true employment or so. They eventually renamed the product, and many of the engineers are still there afaik.

It could have been worse, I suppose, the package was less than I was making as a contractor but more stable. Things got more bureaucratic pretty quickly, more long arbitrary meetings that were very difficult to keep up with and more pointless than I'd ever seen.

MagnitudeFC 2 years ago | |

Thanks for sharing your experience!

brailsafe 2 years ago | | |

I should add that there wasn't an interview process on an individual level, but I believe they did some behind the scenes evaluation of who they could keep, and ironically one of the HR people was the first to get cut, before the deal was done

meagher 2 years ago |

Was an employee at six-person tech company that was acquihired. We went through a process with 7 companies (at least - founder tried to drum up interest with others), team interviewed with 4, we got 3 offers, and the founder chose the one that best fit the narrative. Answering from that perspective.

1) To maximize your chances, you need to speak with multiple companies and get multiple offers. Offers fall through so it's good to have backups and be able to tell potential acquirers that there is other real interest to up the urgency. If you haven't already told your team, you should tell them so they can prepare for interviewing with potential acquirers. If the majority of the team doesn't pass their interviews and/or is not a good fit for the company, they will pass. If a single person does not pass, they might decide to offer the whole team roles besides that person (happened to us).

2) Packages vary based on what you have to offer and how you can sell the team. In our case, investors got some shares in the acquirer (didn't match their ownership in the company, but at least they got something), there was a big PR campaign that saved face for the founder/investors/team, and the employees (including me) got solid base offers in addition to a small equity bump beyond our base grants.

3) From when I was told to when the deal was done, it took ~2-2.5 months. There was definitely some work the founder did prior to letting the team know, like gauging interest with founders/executives of the potential acquirers.

4) I wouldn't worry about this since you don't know what environment you are going into. In my case, it took a while for employees at the acquirer (~100 employees) to accept the the rest of the team and me, but ended up working out (we all stayed at least a year, most of us 2+ years).

Stop all work that isn't trying to sell the company and preparing for interviews. You may want to consider raising a bit more to bridge for another 3-4 months so you are covered if the acquisition process takes longer (e.g. during the summer key people might be out of office). This will also allow you to convince other potential acquirers that there is "synergy" to bringing your team and you in.

romanhn 2 years ago |

Just so you're not surprised later - the acquihire-to-big-company stories I've heard all involved the team having to interview for the jobs via the standard process. So it's not so much a shortcut into a FAANG, necessarily. There's also a chance that while you'll make some money as an owner, they might not find a spot for you depending on how your own interview goes. Also wouldn't hold my breath for the team staying cohesive even if they all pass. Wishing you good luck, hope it ends up a positive experience!

MagnitudeFC 2 years ago | |

Thanks, that is really helpful to know going into this. Any insight into what an interview process might look like? I am non-technical (founder/CEO, mainly focused on sales/biz dev) while the rest of my team (co-founder/CTO and 2 engineers) are highly technical. Our product is in the wheelhouse of what this FAANG is already working on.

romanhn 2 years ago | | |

I assume the Corp Dev person will walk you through what the process will look like. Don't know much about the sales/bizdev world, guessing that's the area that'll make the most sense. CTO will likely be interviewing for an IC engineering role unless there is prior experience with leading larger teams. Lots of material out there on how to get into FAANG - start prepping as soon as you feel their interest is legitimate (assuming they do subject you to interviews).

lulznews 2 years ago |

Try to get some help from your investors on the acquihire, if you have professional investors.

Btw 1.5 months likely not enough time to close a deal, need to be pulling alarm levers now.

climatekid 2 years ago |

Founder here of a company that attempted to do an acquihire Hail Mary.

Going to be frank with you. 1.5 months is not enough time. Go through the motions and meet with FAANG, but for all intents and purposes it is too late. There’s very little incentive for BigCo to buy a dead company.

Tell the team now, pay out their salaries for next 1.5 months but have them focus full time on getting new jobs. That’s the best you can do for them.

MagnitudeFC 2 years ago | |

Appreciate the frank perspective. Understand that time is not our friend here.

I guess I'm just wondering / hoping if it is possible that the BigCo just hires our team? I understand that there isn't going to be a big (if any) pay out for us as the founders here. We've proven that we can ship product and work well together.

The interview process shouldn't take too long if they want to do it, right? Or am I being naive / grasping at straws here..

acquita 2 years ago | |

Is 1.5 months enough to even keep them another day without going insolvent? For example you may need to pay notice and other termination related costs. Or is the runway taking that into account.

MagnitudeFC 2 years ago | | |

I'm taking that into account in my runway estimate

secfirstmd 2 years ago | |

It's probably not possible to do a regular hire in 1.5 months. To purchase a full business in that time? No chance.

brcmthrowaway 2 years ago |

Interesting. Ive always thought FAANG reaches out to small companies, not the other way around

MagnitudeFC 2 years ago | |

What we are working on is very relevant / core to what this BigCo does so there are legit reasons why they are interested. One of our investors made the intro to a very senior VP there who told Corp Dev to speak with me.

brcmthrowaway 2 years ago | | |

Is it AI

999900000999 2 years ago |

Honestly you should just be straight up with your team.

Tell them we're out of money and they need to find new jobs. I can't imagine you getting a sell done within 2 months.

Be an adult, shake everyone's hand and apologize. This is the startup life, we all know what we're signing up for.

That said, your investors might prefer you asking for more money while you try to sort out a sale vs just going out of business. This is very complicated, I'd talk it over with a professional of some sort.

For the love of God, communicate with your team on this. Give them a few weeks to find jobs.

MagnitudeFC 2 years ago | |

Yes I've been very transparent with the team - everyone knows our cash zero day and knows that I am looking for a soft landing.

999900000999 2 years ago | | |

Then your one of the good bosses. Usually employees are left in the dark. I wasn't even upset when one of my companies shut down, but we'd been losing money for a while and their wasn't any real warning.

Good luck.