Color acqhired for $2-5M | Hacker News Reader

Color acqhired for $2-5M

appleinsider.com

48 pointsujeezy45 comments

An explanation of how this deal probably works:

Color had 41M in funding, of which $25M are left. That money goes back to investors. Apple threw in maybe $5M. That also goes to investors.

Apple interviews each employee and decides who stays and who goes. The value for Apple is that a team that works together well is more than the sum of the parts, but only if they keep the people who would fit well within Apple.

The people who stay usually receive a retention package which could be a mix of restricted stock units and cash, vests over three or four years, and is determined by:

- the experience and seniority of each person.

- the perceived value of each person to Apple.

Apple tries to gauge what it would take for the core of the team to stay long enough. Someone may need 500k over four years in addition to salary, someone else may need 2M. It's impossible to say what is being offered to each developer unless you're an insider.

For that reason nobody can know what the deal really costs to Apple, but it's definitely more than what investors get. Otherwise, the really valuable people would not go to Apple just for a paycheck.

Source: I've been involved in deals of this sort since the late 90s, mostly on the side of the acquirer.

Why does Apple even have to pay the $5M to Color and its investors.

Why not just offer the employees the package and ask them to quit Color?

I can only speculate, but these things can get messy. Investors could find a way to sue Apple. 5M is peanuts to Apple compared to the value at stake. If they bother with the acquisition (which takes lawyers, due diligence, lots of boilerplate work), they might as well make sure nobody involved feels shafted.

Or Apple just went to the team directly and hired them, and the $2-$5 mil are signing bonuses.

This isn't an aquihire situation, this is just Apple hiring a bunch of people.

It's unlikely Color has any real leverage in this case.

Doubt it. Why would Apple want to alienate Sequoia of all venture funds? It's more likely that Sequoia called Apple and they worked out a soft landing for some people.

Why would Apple feel that it's necessary to keep the investors happy? It's not Apple's fault that Color's board is unable/unwilling to attempt to keep their employees. California's an at-will employment state, remember. Non-compete clauses have also been ruled unenforceable, so that doesn't apply either.

Seriously, this is such a small amount of money for an entire team that I sincerely doubt that anyone on Color's board was involved. If Sequoia was involved at all, I would expect to see a lot more money changing hands(probably somewhere to the tune of $50 million to cover the investors), and the IP moved to Apple. None of that is happening, so it makes more sense that the board and the investors were not involved in the deal at all.

Your comment suggests that you are not very familiar with the nuances of Merger and Acquisition processes. As someone who has been involved in a significant number of M/A deals in different capacities, I can tell you that your speculation is uninformed. I won't comment further.

I think you're essentially saying Apple pays $5 million or so to have the first right to go through the 20 person development team? From there they can make any type of offer to anyone they like or not?

I'm arguing that this isn't a merger or an acquisition.

The numbers don't add up for either a merger, a full-on acquisition, or an aqui-hire. It's simply too low to fend off the investors. This sounds, very strongly, more like Apple has decided to hire all of them, and is paying them the money either as a salary or as a signing bonus.

You mean the guys who made billions off arch-competitor Google? Why would they care about them?

Do you know the history of Apple, Sequoia, and the Silicon Valley? Does the name Don Valentine ring a bell?

http://www.sequoiacap.com/us/apple/info

Yes. The point is that it's silly for the world's largest company to worry about what a VC firm thinks. It's rather the other way around.

Apple and Sequoia have a rich history, but Apple and Adobe have a rich history too.

5 million is such an insignificant figure to apple that it would be be in no way worth even taking the chance of burning bridges over. If they were putting up a billion somewhere to keep sequoia happy it might be a different story.

No, it's not silly at all. For example, what if Apple pissed off Sequoia and was always second in line to acquire Sequoia companies? This is a very nuanced topic, especially if you don't know the ins and outs of M/A and VCs. 5M (or that magnitude) is a token amount.

Feel free to speculate, I won't try to convince you. On Hacker News everyone is an armchair expert anyway.

Again, I think in the scenario you describe, it's Sequoia that should bend over backwards. Apple has enough cash to buy any company in the world several times over, and most Sequoia companies would feel screwed if they can't accept an offer from Apple because of politics.

For Sequoia to get pissy and hold out for terms because somebody's feelings got hurt --- and for the news to get out -- would be grounds for a lawsuit from LPs.

And yes, I know the ins & outs of M&A and VCs.

Jeez. How do I become the guy that requires 2M to stick around? Are these often irreplaceable programmers or are they typically product management types?

Be 20 guys?

I don't think it's that they're "irreplaceable", in the sense that they could never be replaced.

It's more of a time-to-market thing. I've spent years working on distributed systems and sync algorithms, so when the time came to improve our setup to a Google Spanner-like system, it was fairly easy for me to make the changes. From that perspective, my ability to do that right now makes me pretty much irreplaceable at my company.

But I certainly am replaceable, in the sense that any other competent programmer who'd spent as much time as me could presumably be doing what I'm doing. It's just hard to find them. :)

This is a very analysis. short-term mission critical. and long-term. &etc. well said.

Thank you for sharing your knowledge

So if I work for company A, and one day, company B comes to my boss and says :

B: 'Hi, sell us 10 developers for $n million'. A: 'Sure, any prefference?' B: 'No, not really what do you got?' A: 'Well I have a good 2 men team, 1 really good debugger and blablabla...'

Maybe I'm biased, but when did we become comodity? Can you trade developers at say a country fair or what?

This is a really interesting idea. If developers can be sold as a group, why aren't we seeing group recruiting websites, where you can buy a team?

https://grouptalent.com/main/employers/

My guess is that a good group of people not already at a company would more likely want to work together, for themselves.

Also, it would probably send a bad signal if the head of a startup started posting groups of his employees up for sale.

I would also imagine the transaction cost involved with selling individual groups of developers is more prohibitive than selling a company wholesale.

I didn't mean that the founder would start posting employee groups up for sale, I meant that A-level developers would find other A-level developers and band together to get a few million as a signing bonus.

I was guessing you didn't mean that, that part of the response was in the context of the parent comment. I wasn't entirely clear, I'm sorry.

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As far as "A-Levels" banding together to get hired, I'm not totally sure where I stand after I think about it. Some questions:

-What exactly, is the advantage of hiring unproven pre-conceived teams for a project over assembling teams through individual hires? Don't acquihires already meet this need (proven team)?

-Why would a company pay a few million signing bonus to an unproven team?

-If the developers were already grouped together, why wouldn't they work for themselves?

-Wouldn't an "A-level" developer be concerned about companies that need and/or want to buy flocks of talent?

(perhaps there is a certain size/type of company that this service would be ideal for, I'm not sure which company that is.)

-Wouldn't a multi-MM signing bonus to an unproven team skew incentives for both parties?

-If an "A Level" was looking for a stable job over a risky payout, would he want to be grouped into a unit?

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I think a lot of these multi-MM signing bonuses reflect more than the skill (+ deva devb devc).

I also wonder about what types of developers/companies this type of service would select for.

If you'd like to share any thoughts, I'd look forward to hearing them.

Might actually be on to something here. But what situations would you have a cohesive team together outside of a company?

Developers know who other superstar developers are. If you allowed superstars at different companies to band together and market themselves as a team, that might be interesting.

Consulting teams looking to move away from client work and get a nice signing bonus.

It's not common but a group of Rails developers and designers did this once in a blog post. Didn't even say who they were, just that it was X developers and a designer or whatever. They were hired as a group pretty quickly. So you might be on to something.

The developers basically get their choice of a job at Apple or quitting and going off on their own. Better yet, they can stay with Apple for a few months and see how they like it, or stay with Apple while they figure out what their next move is. "My company was acquired but I'm looking for the next opportunity" looks a lot better on your resume than "we went out of business and now I'm unemployed".

When the other option is your company being "wound down" and you having no income, this seems like a pretty good deal. And if you don't like it, you're under no obligation to actually show up in Cupertino. You're a free agent who can go find a better deal at will.

This one is really stretching the definition of an acquihire. It may be that the $2-$5M is unvested stock for the team itself.

See points 3-6 here: http://daslee.me/quick-thoughts-on-acquihiressoft-landings

I've worked for multiple companies that were acquired and was never able to feel at home in the new parent company.

My feeling was always something like "I never actually chose to work for you, and you never actually chose to hire me, yet here we are"

Hey a lot of good romantic comedies have made millions at the box office on this same type of premise.

I don't care how successful they are at the box office, I'm not going to model my career strategy after the contrived plots of romantic comedies.

It's unusual for developers, IME, but given how popular it is in sports, it doesn't surprise me, at least. Some developers have the cachet of sports stars within their niche.

(Hmm, maybe we'll see wanted ads for "Rails world champions" and "JavaScript sports stars" soon instead of ninjas and rock stars ;-))

$2 million for 20 engineers is $100,000 per engineer on average. That's not much in an acquihire.

$100,000 is low just as a signing bonus for desired talent at an A list company. Apple must not think very much of their skills. In which case, why hire them at all? Strange!

I find this hard to believe: $5 million for a team of 20 developers is incredibly incredibly cheap. 20 developers would go for $20-$30m.

$250,000 per developer with qualified subject matter experience in your company's native technology. And there's 20 of them. It's a friggin' steal!

Actually pbiggar is correct – the going market rate for employees (or, at least, engineers) in an acquihire is usually around $1-2MM/employee. E.g. a small startup with 4 engineers would be acquihired for $4-8MM. Thus, if this were a full acquihire and Color has 20 engineers, I'd expect the acquisition price should have been around $20-40MM, not $2-5MM.

In an acquihire like this, the acquisition price and each employee's final compensation and options grant from Apple are entirely unrelated. diego has an excellent post in this thread covering that in more detail. [1]

[1] http://news.ycombinator.com/item?id=4670637

The problem I see with this is the profile of the developer. Color was a cutting edge startup. I assume developers who went there did so with the idea of tremendous upside on their stock options. Apple, while a fine company, is really at the other end of the spectrum right? So if I'm at Color haven't I made the decision to forgo the safety and security of a large company for the upside of a startup? I suppose a few, after what's happened, may have changed their mind. It does seem an odd fit though.

Pretty clear there's no upside to Color stock options at this point. And that may have caused more than a few of those risk-takers to reconsider whether they want to do it again. Apple could look like a pretty nice deal by comparison.

Apple isn't going to bounce paychecks?

It's nice to see that the early employees of Color aren't going to end up completely screwed, and have a stable job with a company that is doing well, if they so desire.

And vice versa, it's nice to see that they are not getting ridiculously high $1-2MM/head for the privilege of being acquihired to do basically the same job they would be doing if hired through the regular channels.

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