Ask HN: Am I blowing an acquihire offer?

Don’t go do business with people who are insulted by your expectation to be paid well.

It is a tell.

You have been told they don’t want to pay you.

If you do business with them, don’t be surprised when you are not paid.

Warning you is how they will justify non-payment when it happens.

Not to you, but how they will justify it to themselves.

You want to do business with people who are happy that you are making good money. Business with people who want to make you rich. Good luck.

And especially don't do business with people who insult you before they pretend to be insulted by your response.

And make no mistake, "hand over control of your project and quit your job for our lower paying gig, and if our 65% of your startup does really well you might break even" is an insult

I don’t think this sounds like an acqui-hire tbh. In that case they would pay you better than the 160k... In an acqui-hire they’d probably rather ask you to shut down your side-project...

1) Don’t look at the revenue but the profit. So take the 40k and deduct your personal time (e.g., 100 USD/hr) and the costs. Let’s say that leaves you at 20k. Mulitply with 25 for a conservative 500k valuation for your side-project. 2) What happens when they let you go? Do you get back the 100% stake? What happens if they merge it into another product and “yours isn’t making any more revenue”?

I might suggest the following: 500k for your side-gig vesting in salary/stock over 2-3 years (and guaranteed unless you do something evil). Plus your market rate salary.

As soon as you join them, revenue share doesn’t make any more sense because you don’t have control over the product any more. And should you be penalized because they screw it up?

25x annual discretionary income is a "conservative" valuation?!

Yeah, there’s no way that’s correct. A project making $40k net is not magically worth half a million dollars. Unless there is some equally magical tech running the business, or some other underlying voodoo/hidden value asset, that figure makes no sense to me.

In fairness, the most likely explanation seems that they mistook that figure as monthly rather than annually.

Well, take it from somebody who successfully built and sold a startup and worked in M&A...

If you have zero growth and whatnot - yeah, 25x on EBIT may sound steep. But software can scale w/o much incremental costs (given what the author mentioned).

If you assume they know their business (you know, those MBA kind of guys...) and see a 30-40% yoy growth in revenue with a rather fixed cost base - what exactly does your calculator tell u?

10x on sales and 25x on EBIT isn’t exactly greedy... Look at FAANG valuations...

You can also do some back of the envelope math with discounted FCF. Take a 15% discount factor and 30-60% yoy growth (if you don’t see something like that or anticipate it - it’s not worth much tbh).

Update 3/10:

After more dialog, the acquirer updated the offer with a $50K rev share minimum at the end of year one and $25K rev share minimum at the end of year two with the sentence "assuming you are still employed with [acquirer]". The base salary still remains $25K lower than my current base salary.

Also, my current employer just informed me that they will not be providing / continuing my pay during my paternity leave; I will just receive FMLA coverage and PFL through the state of California. Due to this, I did ask the acquirer for part-time work so we identified a project I can work on but they haven't provided any payment / salary information.

Dude, no one cares anymore.

I don’t understand why you would at all consider employment anywhere near your current income that also involves giving up your side project for ??? reasons. Let alone for less.

Valid point; I'm considering it because my current employment has its own issues I wouldn't mind leaving behind and because new parenting & family responsibilities have limited my time to work & grow the side project.

If you don't like your current job, look for a better one. If you don't have time for your side business, sell it. You can sell your side business to a company and then go and work for that company. That's aqui-hire.

Revenue sharing is what you do with business partners. In any partnership, you need to have a lawyer review the contract to limit the ways your partners could cheat you. Becoming business partners while also being an employee is unconventional. You will have a giant conflict of interest. They are a big company. Some director will have control over your side business and may someday cancel it without warning. Then your revenue sharing will be worth nothing and you will hate your job.

You may want to consider a broker. There will be fees, should you decide to do a deal.

However, they supply dealflow and they will work on your behalf.

If your numbers are as described you may have acquisition opportunity better than what your being presented now.

You will be given a solid idea of estimated value well in advance of meeting anyone, and are not obligated to sell at all.

I sold a side project using a broker last year and was pleased with the outcome.

If you have questions feel free to contact me.

Sounds like a terrible deal. I can’t see a scenario where this is good for you.

Selling the side project for 100k on flippa would be better than this, although not ideal either.

> saying I just wanted a job and was not being entrepreneurial.

I'd probably respond, "and you just want to hire me and take most of the revenue, so it sure sounds like a job offer to me. What is the problem?"

Yes, you might be blowing the offer. But if they don't want to pay you what you feel is right, is that so bad?

IME it's a bad sign when someone is trying to shame you. If that's their last bargaining chip then they know they don't have much of a position.

People have funny beliefs sometimes and sometimes they're dicks about it. Like I only want to back someone that is an entrepreneur and entrepreneurs only act this way.

I had a friend apply at my former work place. He was a brilliant programmer and a millionaire. He wanted a job to get immigration. So he said he would work for the minimum required to get immigration. My boss at the time was insulted that someone would offered to work for cheap. He didn't hire him and went on to ridicule the guy, assuming he would have been a bad hire. Little did he know the guys priorities were different due to money he had made offshore.

I'd say that is what is happening here. Some people can work with folks like that. I wasted to much time with those sorts. I'd rather not personally.

If the side project has significant costs that they'll cover, that changes things drastically. Assuming not, then the obvious question is whether you can grow revenue to 330k in two years to break even on the 50k/year loss implied by the current offer. On the face of it, that sounds really hard to do, but maybe not if your new employers have lined up a marketing team.

It's a cut-and-dried VC prop. Give up control to work on something full-time. It's many a SWE's dream to work full-time on their side hustle. Doesn't sound that way for you.

Thankfully the side project's costs and expenses are of little significance. The acquirer does have an existing marketing team so it may be advantageous to have their resources if scale increases.

1/3 of $40k + $160k is significantly less than $185k. I would walk away.

To be fair their offer was 1/3 of revenue not net income. The $40k was net income.

So 1/3 of revenue could easily be > 40k but no clue with what is said here.

Revenue share with acquisitions are rarely worth it IMO. First of all, a good number of acquisitions get shut down. I don't know if there are stats anywhere but it might be close to 80% from my experience. If you're even considering selling it for that cheap, there's likely some related overhead you don't want to deal with, and they won't deal with it either.

It sounds like you just want a better job, so why not negotiate more on that?

It seems risky. What if they hired you then fired you 2 months later, paid you the 35% revenue share and that's that.

Not saying it will go that way but the risk is there.

You might consider how you connected with the acquirer. Did they find you? Were you shopping your project to buyers? Are they the only game in town, considering what your project offers?

It sounds like you're not excited by the deal. If you can sustain the status quo for a while more, I'd advise you to ask for more than you really want and be ready to walk away.

Thank you for your reply. The acquirer found me when they were searching for companies that offer this particular niche of data they have small amounts of. I am not the only game in town and companies in this industry have varying amounts of this niche data.

I was excited to hear from their CEO and flattered to receive an offer but lost some of the excitement when that offer came $25K less than what I make now. If I hadn't heard from the acquirer, I would just continue my full-time job until I go on paternity leave in a couple months.

Update 2/28:

Thank you all for your comments. I did receive an updated offer letter today that writes out that the minimum revenue in year one will be $50K. There is no revenue share after year one so I just asked if a revenue share can be provided after year one.

Yeah, I couldn't tell whether "1-year revenue share" meant annual or one-time. Since it's one-time, I don't know why you even entertained it.

Yeah, when we spoke over the phone there was no mention of a revenue share time period. It was only after I received the written offer that they stipulated revenue share is granted for the first 365 days. I did ask them if there are opportunities to extend the revenue share beyond 1 year but no response yet.

What would happen if they took your stuff and fire you after 2 weeks? E.g., they do not sound like they are paying at all for your assets - what are they paying for? Employing you as an engineer? The niche product you are offering? What you describe raises so many questionmarks and red flags tbh.

To me it’s not really an aquihire without you making significant money over your normal salary — usually paid in cash or stock over time while you are in the new role. Revenue share seems strange and maybe implies they aren’t as successful as they seem?

I see red flags. I'd continue the side project until you get other offers.

You know you can be fired at any time? They can hire you and fire you within a month, you know that right? Best of luck tho.

A content-free remark. Anybody can be fired at any time. I consider myself a pathological cynic, but if you go into business thinking everyone's trying to steal your * , you'll never scale up. If they fired him, you can be sure OP would lawyer up to extract as much value as possible from his 35% revenue share.

Actually the remark is very good imho. Thinking through those scenarios is really important when you are in that honeymoon stage. “Lawyer up an whatnot” - no offense, but do you honestly believe that this will be “fair game” and they didn’t cover their a*?

Walk or just save up the $40k a year to compensate

Yawn. Exploiting the code monkey n00b once again. How can it be so easy, yet so profitable?