Acqhire model – Good or bad for the tech industry?

Whether or not you agree with there being a bubble in Silicon Valley right now, there seems to be a lot of startups getting bought out by larger web companies.

There is a war for talent going on. Facebook has been quoted as valuing good engineers at $500k – $1m each. Most of the acquisitions appears to have been about buying talent (i.e.”talent buy”) and not necessarily for the products they have created. The products themselves are likely to be killed off, because they simply want the staff.

But is this good for the tech industry?

These are talented engineers / entrepreneurs who have left larger companies or were looking to do their own thing. Only to be brought back in and having their innovative products shut down, and consumed into a larger company.

I would never begrudge another entrepreneur for getting bought out – its everyone’s dream. I am just pondering what are the long term effects it has and whether it will stifle innovation in the long run. Rather than wanting to be the next Google / Facebook / Twitter, people want to be bought out by these companies.

Here are a few articles I read recently on the “AcqHire model”:

A lot of the newer products I have started using, I came across because larger companies bought them. For example, I started using Beluga at SXSW and I noticed that Facebook bought it to integrate with the new Facebook groups. This was a big selling point when getting my non-tech friends to use it, in addition to the actual product itself. Beluga got a lot of exposure from being associated with Facebook, and the team behind it are 3 ex-google staff that previously worked on gmail. Beluga was only in existence for 5 months before Facebook bought them out.

The advantages of getting bought out are:
  • Creating new distribution & revenue models
  • More exposure
  • Additional resources – engineering, financial, & marketing horsepower
  • Allowing the founders to exit (to pursue other opportunities)
  • Founders can reinvest that money into new startups and keep the cycle of innovation going

From what I understand the first few years of a startup are hectic. You are making a lot of quick decisions with little information, hiring people for positions you don’t have experience with, trying to keep it alive everyday, having to pivot, and getting angel/VC funding. So I appreciate that entrepreneurs want to exit, as it validates and rewards all the hard work they have put in.

I’m out like the rapture,

Matt

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