Twenty-three. This was all very new to me. Even with some experience in the industry, I had no idea how corporations worked. No one in my family worked for a corporation.
So we went into the bigger company and did a presentation for several directors. They found it interesting, because we were thinking about the same problems that they needed to be thinking about. Because the big companies missed the boat on mobile, they were willing to write checks to make up for that gap. That’s probably the biggest phase of talent acquisition that I’ve seen in my career. Although maybe today acquisitions around AI could rival it.
They liked our product enough to make an offer. Their offer was many multiples larger than the first one we’d received. They were a larger company, with more money to spend. They were also more frightened of smaller competitors outmaneuvering them, so they were willing to spend more.
They wanted to acquire all of the assets of our company for a particular price and then wind the company down. The price they proposed was pretty high. And being a young kid with lots of student loan debt, I was blown away by the seriousness of that number. That’s the main thing I remember.How did they decide how much the assets were worth?
It was a charade. Our assets weren’t actually worth anything. We had a negligible number of users. Our service was not wildly popular by any means. So they valued the assets pretty arbitrarily—this chunk of code is worth this many millions of dollars.You said the smaller company wanted to acquire you as a way to hire you and your cofounder, but wasn’t interested in your technology or your code. What about the bigger company?
They were planning to throw away every line of code. There was nothing that they were actually acquiring besides us.Then why buy your code if they’re just going to throw it away? Wouldn’t it have been easier to just hire you, instead of hiring you and buying your code?
Sometimes the big tech companies acquire startups to acquire their technology, and sometimes they do it just to prevent those startups from becoming competitors. In our case, it was the latter.
Even if a big company is not directly threatened by a startup as a competitor currently, the thinking is that if they need to buy them later, they’re going to pay a lot more for it. So they might as well buy the startup as early as possible to nip it in the bud. Our startup was pre-funding, so they could get away with paying us much less. We didn’t have any investors they had to satisfy.
But acquiring our assets was also a way to justify paying us a lot. If they’re only going to pay you two times the normal salary, then that can take the form of a very nice job offer. But if they’re going to pay you more like eight or ten times, it breaks the whole idea of salary bands, which is how big companies organize compensation by experience level. So buying your assets is the back door—it’s a way to get away with paying certain people much more.
As far as what they’re buying—yes, they’re avoiding paying more for a potential competitor later. But the inherent value in a talent acquisition comes from acknowledging that most projects in software fail. Finding a team that can actually ship something that gets out the door is rare. Even at big companies, most projects will not see the light of day. So to find a group of people that have managed to build something—even if it’s small, even if it’s humble—means they’re probably a team that works well together. So they’re worth a premium. That’s the theory behind it, at least.
Also, they could make us sign a contract that locked us in for a long time. The deal to acquire our startup was a lump of cash and a job offer. We had to take both together. About half of the payment came up front, in the form of the cash. And the rest would come to us through salary and stock-based compensation on a vesting schedule over the course of four years.
Sure, I could’ve showed up on day one and quit. And they would’ve been angry at me, but I still would’ve been able to pay off my student loans. However, I would’ve been leaving a lot of money on the table.Were you excited? Paying off your student loans must’ve felt pretty good.
I was very excited and very terrified. I didn’t want to screw it up. The deal was complicated. There were hundreds of pages of legal documents that I felt very overwhelmed by. We had to pay a lawyer fifty thousand dollars to make sure everything was airtight. My parents didn’t understand it, and to this day don’t understand it. My friends in tech were happy—some of them had been through this experience before.
But it changed my life. I went from being basically broke—my next rent payment would have emptied out my savings account, not to mention my student loans—to not having to worry about money anymore. So that was great.How did it feel to go from running a startup to working for a big company?
It was intimidating, but there were some really positive aspects. As an engineer, I learned a lot. I felt like I was finally learning how to actually write software. I would go home and read the company’s internal wikis for hours. I was so excited about working there that I read documentation every weekend for a year, actually.
But coming in as a talent acquisition, you’re also expected to be a thought leader.
