Winning A Bidding War With Facebook, Google Picks Up The Entire Milk Team | Hacker News Reader

Winning A Bidding War With Facebook, Google Picks Up The Entire Milk Team

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104 pointsolivercameron70 comments

$2-4M/person, just for the people. Boy does this sound like the telecom bubble, and the internet bubble before that.

The music is playing, find a chair.

That's just incredible. Milk made one application, gave it away for free, summarily shut it down, and sold for $15 - $30 million. I understand these guys are very talented, and that Google was buying the talent more than the product, but that's quite a price for some gifted people!

Yep...why go through the normal interview process to work at Google when you can get acqui-hired, get paid the same, but get a million-dollar "signing bonus"?

Don't hate the player, hate the game my friend.

Well, keep on hating the player and miss all the action then.

Do remember when the bubble collapses, you will be hurt far more than the players who already made their millions and can weather the collapse.

why not hate both. everyone has a choice.

b/c if 99% of us were placed in that situation, we'd take the money

Milk was a rather quick flip, but if you consider a more average 4 year run to acquisition, and also consider the risk factor, isn't so much obviously better than just getting a job with Google salary and stock from the start.

> quite a price for some gifted people!

Every time I saw this happen in the 90s the result was the same: Small team shows up in big company after big $$, gets frustrated with big company BS, doesn't really care and runs down the game clock until vesting is nearly complete, leaves without fanfare.

I'm sure there must be counter examples, please let me know some if you have them.

Bret Taylor at Facebook.

He didn't exactly get picked up to be some random engineer in a big corp.

That's a good point. In his current role he is essentially the top technical person in the company.

I wonder if the reason alot of acquired entrepreneurs leave is that they are used to having so much authority and latitude that getting a middle manager role at google just feels like wearing a straight jacket.

Thanks for the counterexample. Just to be clear: His vesting clock is done?

Two team-centric acquisitions that Google has made in recent years: Aardvark and Slide. Both were cases of products that were mostly ahead of their time or just-off re: product-market fit, and had genius teams. As far as I know, the majority of both teams are still at Google.

Max Levchin left Google and Aardvark was shut down.

Google had Foursquare in house (called Dodgeball) but couldn't execute.

Android is the best counter-example I can think of.

max levchin -> slide max ventilla -> aardvark

Very little of the Aardvark team is left at Google, and those who are are scattered across different teams.

What has become of the Slide properties that Google inherited? What do they do with Slide stuff now?

"I'm sure there must be counter examples"

Measure Map was a small team acquired by google that made a pretty analytics app for blogs and they went on to overhaul Google Analytics, which at the time still look pretty rough because it was an acquired app (Urchin) that was made for power users.

That team worked pretty well. After everyone vested, Jeff Veen put the band back together and they started cranking out other apps, first WikiRank and then Typekit, which was just bought by Adobe.

I can see the parallels with Milk: 1) a small interdisciplinary team that works well together and with a kickass designer (Daniel Burka) that has a knack for making the complex look simple, and 2) an app like Google+ that's just as important to their new core mission as Analytics was to their old one and also has similar room for improvement.

Andy Rubin and the Android team had a pretty big impact on Google.

That was one of few acquisitions were Google actually wanted the product, and needed it badly. Mobile was Google's main growth area for years, until the social black hole opened last year or so.

So I heard this hundred times before and while it feels like Google (in this example) is making mistake, perhaps the second bottom here is that they wanted to shut down a competitor (at some field) and the nice way of doing it is to acquire. Then Google won't care if they find themselves behind gold cage of Google or not. They may leave or whatever. I don't think dropping $30MM is a big problem for Google either. For me or you that may be a waste, for Google it is 1) drop in the ocean 2) cheap way to shut them down.

0.1% of Google's capitalization just to knock out 15 people is not a sustainable strategy.

Ack, no, it's 0.01% for 8 people. Slightly more sustainable than I thought.

So talented that they couldn't build a product that netted profit...

No. Suppose these 8 guys are paid $150k a year on average. Engineers, good ones at least, bring in more than they cost. In some cases like Instagram and Facebook, the ratio of users to engineers is in the millions. Google is similar. When you also bring into account the caché of someone like Rose, the lifetime earnings from that team probably well exceeds what was spent to aquire them.

And how do you think the reasoning went during the telecom and internet bubbles? Hint: Exactly the same.

I encountered competing business plans which went along the lines of: Hire a team of 10 badass engineers, sell for $10-20M. It was a helluva time to hire people.

Your argument assumes that that "caché" will translate into instant/increased earnings. That is far from a given.

caché = hidden http://fr.wiktionary.org/wiki/cach%C3%A9

maybe what you really mean is "cachet" http://fr.wiktionary.org/wiki/cachet I know it doesn't have an accent

You are correct. I don't use the word often (apparently) and always thought the correct spelling for "cachet" was with the little e. Thanks for the tip!

Niggle : Cachet is the version that means 'prestige; distinction', caché is 'hidden' - both from 'cacher' (to hide, French).

All employees should bring in more than they cost. Even the fry guy at McDonalds. Otherwise why would you employ them?

... in aggregate. there are lots of people in even small companies that work for "cost centers"...

Even "cost centers" are a net benefit, unless something is horribly broken.

Maybe you don't have the data to make that determination.

Maybe fries aren't profitable yet, but you're hoping to make them become so.

Maybe you have to have fries on the menu even though you make more money off soda.

I'm sure there are a few people that Google employs "Because awesome." The self-driving cars thing comes to mind, though I'm sure that could be explained by giving people another hour every day to sit on the internet looking at ads.

Currently all of the Google Maps data for the US (and increasingly, other parts of the globe) is generated in-house by the street view cars - they don't just generate the data for street view, they also generate most of the data for the actual road layout of the maps now, too.

If the cars drove themselves, instead of Google having to pay actual people to drive around every single road on the planet all the time, that would be a pretty huge cost saving, I would imagine.

cachet

>When you also bring into account the caché of someone like Rose

Caché with whom exactly?

It's a talent bubble, and while it sounds ridiculous it's not (completely) unjustified. The idea mine for the current generation of the Internet is less verdant than it once was, and so the cost of talent is escalating.

Couple that with the new trend in 'Big Data' and the talent that is out there needs to attach itself to an entity that has the resources to provide that (often proprietary) data.

That's like a compensation for opportunity cost incurred by giving up startups for a while.

I remember hearing in 2008 that Google valued engineers at 1-3m per. At Google's scale, an engineer can theoretically create at least that much value over a normal tenure (and denies their competition access to that resource).

Google makes $1.2M/yr/employee... Presumably quite a bit more if you count dollars per engineer. I know it's not quite so simple as "add an engineer and make more revenue", but it seems correlative.

Forgive me for not knowing this, but when an acquisition like this happens that is solely for the talent, do the developers themselves get any part of those millions, or does it all simply go to the company owner?

If it does all go to the owner, what would stop the developers from banding together and leaving all at once so they could pick up those millions directly, instead?

In a small venture backed company like that, i would assume the developers had shares in the company, and therefor would get some of the money.

It many cases the developers share (if not enough) are supplemented by a large additional bonus with a long vesting schedule.

"Golden handcuffs"

The acquiring company has to give the employees incentives to stay. Otherwise they are under no obligation (barring a contract with the first company) to stay.

Usually: millions to the investors and founders for their stock. Employee stock will be worth little due to investor preferences. The acquirer will pay hundreds of thousands to retain a few "key employees", and tens of thousands to the ordinary developers (similar to what they'd get as a hiring bonus). This is why it doesn't make sense to be a startup employee.

Your question about why developers can't capture more of their value is a good one. Obviously acquirers would prefer not to pay $1M signing bonuses if they can avoid it, but they also seem to be happier about paying off VCs than engineers.

You seem to be assuming a gargantuan preference in this case. I thought just 1x to 2x was the max these days.

He's right about it being historically the case that being a startup employee is a bad gig.

I honestly think the value proposition for startup employees has to come down to risk appetite, the quality of the team you're working with, and getting to work on interesting problems.

Any kind of pure economic calculus that properly accounts for risk is going to favor established companies if you're good at the career game.

Let's look at the numbers:

Let's say investor puts $1M with x2 liquidation preferences into company valued $3M pre-money (25% equity post money). Company then gets acquired for $20M. Investor gets $2M+$4.5M=$6.5M, rest get $13.5 (of which a much larger part usually goes to founders, and a small part to employees - e.g. $12M to 2 founders, $1.5M to 15 employees)

If they put $5M with x2 into company valued $5M pre-money, and company gets aquired for $20M, investor gets $15M, rest get $5M. Employees will often get a nice signing bonus from it, but the only one who can have a potentially life changing event is the founder.

Clearly the team is awesome, so the question is: with a talent shortage apparently driving the market crazy, are the premiums justified? Is it really that bad out there?

All we are missing is a league where these players can be drafted and traded.

There's a weekend project for someone.

A fantasy startup game? :)

Not startups, founders.

Other than the data gathering/entry part it'd be a pretty fun project. Anyone interested in working on it?

Use crunchbase for the data.

Of course! I was thinking LinkedIn but not all founders keep that updated or even use it. Should've thought about Crunchbase sooner.

Other than the creepiness aspect it'd be kinda fun.

This is a very interesting idea. I could imagine a website that purposely copies CrunchBase's look and feel. Players create a startup company with a roster of founders to fill the usual CxO roles. Players score points for every venture round their company wins, acquisition, and (if you're lucky) IPO. :)

I wanna play a patent troll and sue Microsoft for "a method a button to call a function when clicked".

It's Fantasy Silicon Valley available for iPhone and Android! Trade your team's hustlers for their engineers, make billions in an IPO, and defeat the evil villain Mark Zuckerburg.

I'd say the Milk Team won the bidding war!

The Milk shareholders won the bidding war. The Milk employees probably had their share options converted to Google share options. Not necessarily a bad deal, but hardly the payday that the buyout makes for the shareholders.

(Some companies have their share options vest immediately on a buyout to protect people against these kind of shenanigans. Not that it helped with a previous employer of mine since they ran out of money & when a buyer came along they required all the employees to waive that clause in the contract if we wanted the buyout to happen at all. Beggars can't be choosers and all that...)

I really don't get it. If the people are so valuable, why pay extra for the company and the investors. Just offer all the employees $1 mill dollar hiring bonuses, and if they gave up on Oink (as it seems they did) they will join you.

Very bad karma in a very tight-knit community that is dependent on investors. Google has been said to do at least one M&A action per week. With that kind of pace, you can't burn bridges.

I always wondered if Facebook would acquire Google Ventures companies. It looks like the answer is yes.

Not necessarily. Facebook may have just been driving up the price for Google.

Some would say Facebook won. I am convinced that Facebook has a quiet strategy of driving up Google payroll costs.

So I don't see any confirmation anywhere. Techcrunch once told us that Digg was being bought by Google, so I'm somewhat skeptical.

Is it just me or are things getting a little bubbly...burp burp.

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