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So who gets the $12M that was paid for the team?

Any time someone acquires a team, it is not simply a matter of buying a company. Members of that team can quit anytime they like. Acquiring a team means showing them enough money that they are willing to stay after the acquisition.

I do not know the terms of this particular deal but the rule of thumb is that acquiring a good engineering team will cost $1-2M per head. Some of that will go to investors but a big chunk of that will also go to the engineers as an incentive to stay on.

But why not recruit them idividualy or as a team the Ex Digg employes are not indentured.

This is the way the City (london) works its common for whole teams to be head hunted en block but the ex employers dosn't get anything.

Probably the investors with preferred stock.

A team is not worth anything if they all quit the next day. Acquisitions of teams include substantial incentives to individual team members to induce them to stay.

Of the people I know who have been acquired in this manner, their payouts just to stay on were in the $500k-1M range. Given the way teams are usually valued, it suggests that the actual team members capture about half of the purchase value for the team.

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