There’s a cold war going on right now, and everyone knows it. Its a talent war, and its happening right here in the high tech industry. Its evidenced by the number of startup teams that are being bought and products being shut down. I’m not going to delve into the war itself, and I’m also not going to talk about the logical merger of a mature startup into a larger company (a mature startup being one that I define as having been around for awhile, the product is out the door, and it has a monetization method in place).
Instead I’m going to focus on bringing up some issues on why this is a war of attrition: the acquiring company thinking one tactic to outdoing its competition is to snatch up technical talent, and why this practice might not bode well for the acquiring company or the young startup that is being acquired, if they don’t think about the long term. I’m not passing judgment because I know there are deeper issues that cause people to take extend offers and for others to take them. I just want to point out some key factors that I think both parties should think about before this war gets out of hand, and people stop generating value (i.e. product development is stalled or worse yet stunted).
Is it really efficient and effective?
Acquiring tech companies see the acquisition of a young startup as a way to get a great technical team. Finding a group of 2+ individuals can take months and a lot of money. But a big motivation for the young startup team is the insatiable need to build, iterate, and carry out a vision. Will giving them a warm home, comfy chairs, few million dollars or shares in the acquiring company keep them just as hungry?
Integration of anyone takes times, whether its a new hire or a team. People need to understand the culture of the new company, learn processes, come up to speed on a code base, and have a sense of belonging, all of which takes time. In the case of a team, if the entire team has come on board then there will be a struggle to shed the culture they had built up and integrate into a new one. There will also be an emotional dissonance of who and what they were building for before and their new focus. Not to mention the case of those who may defect in the process and how it might affect the emotional stability of the remaining team members. I figure it must take 3-6 months after the acquisition for the acquired startup’s team to get back to making progress.
And what about the young founders? There are two scenarios they can “pick” from. Either their product will live on and they will continue to build it in their new home with more resources than they had before, which is great. But what happens in the case of their product being shut down? If not immediately, then in a few months. How will the founders feel then? And how will they go on to motivating their startup team?
Finally, if the acquiring company truly cares about finding the best talent and keeping them motivated for the long haul is that even possible given the entrepreneurial spirit that may be hidden inside the souls of everyone who was at the acquired startup? Sure an earn out is an easy way to keep around and focused on a product roadmap, but I figure a smart and talented team with an entrepreneurial spirit will start to defect if not immediately then a year or two down the road. Is that enough time to meet the acquiring company’s goals?
Is it an offer you can’t refuse?
Like I said before I don’t want to pass judgment on founders. Believe me when I say I know how tough it is to run a startup, and to also feel defeated at times when you aren’t seeing numbers you want or experiencing the progress you had hoped for.
As someone who been a part of an acquisition before (in which I was not involved in the decision making process), and as someone who has been presented with a few offers I’ve learned to ask myself the question: “what next…?”
- for the team?
- for the product?
- for my customers?
- for my own life and happiness?
I’m not sure if people consider the first three, but they actually feed into the last. Building a team and giving them the freedom to a build a product, and sharing it with customers is what keeps me as a founder happy, even when I’m in the trenches. I also only do what I do best what I do best when I’m constrained.
Not everyone can think long term…
Ok I get it. Times get tough, money runs out, and founders burn out. But at what point does that happen, and can it be avoided? Let’s go back and re-examine the vision of the young startup, and also ask ourselves as founders: are we focused on a building a product or do we want to build a business?
Businesses take time.
I think you’re intuition is right on that one – founders turned employees in a talent acquisition don’t stay motivated for long. It’s a risky decision.
Thanks Brian! I think it would be interesting to also know how engineers feel, since so often they aren’t consulted and are going along for the ride, but they’re the ones who end up staying on the longest.
you’re => your 🙂