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Comment by throwaway-acct | Hacker News Reader

> I have to point out though your assumption is that the product is the key asset a buyer will be interested in. Is this the intention of the founders as well? Because counter-intuitive as it may seem, the new company might be more interested in the people who sold this product than the thing itself

This is a really good point, which I'm having a difficult time answering without going into more detail than I'm comfortable revealing even with a throwaway account.... Let me put it this way: I believe the tech staff, while skilled and a great team, is probably too small to be worth acquiring for its own sake -- (But maybe I'm wrong about that? It's 3 guys, one of whom is a long-term contractor rather than FTE) -- and the non-tech staff (including the co-founders) is, um, I'll just say not a likely acquisition target IMO.

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3-5 people sounds like a pretty normal acquihire. If it's a distressed sale, I doubt the buyer is going to care much about IP. It's going to be all about hiring a functional team. The product is just proof that you guys are functional.

I have trouble understanding why a buyer would waste time and money negotiating the acquisition of a liquidating business if the only valuable portion of the company is 2 engineers. That's what recruiters are for.

You would be surprised. Dropbox for one does these kinds of deals all the time.

That said they wouldn't care about anyone other than the 2 engineers and any designers on board.

It definitely happens. I don't think it makes sense for the buyer, but it definitely happens.

It's somewhat confounding but the simplest way to think of it is that's it's a really expensive recruiting play - it's positioned as an acquisition because:

1. There's real value to calling it an acquisition, to both the buyer and seller, though mostly to the founding team who can now claim they were "acquired" which is better than saying "I got shut down and got a new job somewhat related to the company I started." Buyer can also tout themselves as "consolidators" within an industry.

2. Usually, deals like this no more than $100K in additional cash will get pushed to founders and/or key employees each, which seems like a lot but assuming the founders and key employees are deemed REALLY good engineers, paying a recruiter for them could be upwards of $20K each, and if you treat the rest as a bonus it's not more than say, how much a 3rd year investment banker gets as a bonus, so it's expensive but not outrageous.

3. Investors want to say they have an "exit." The really confounding thing is why the investors would or should get any $$, though they often do. I understand the reasons (founders want to treat them well, the VCs may threaten a lawsuit if they are not), but it still seems pretty weird and unnecessary. I think it mostly has to do with companies having too much $$ and stock valued too highly =)

> The really confounding thing is why the investors would or should get any $$

Because they invested in the company and company was purchased? I don't understand why you'd think for a moment that investors wouldn't get any money from the sale of an asset they helped created.

if they are selling the product, yes, you're right. But if it's a true acquihire (which I was assuming..) and they are going to shut down the product and dump the IP, then it's basically just a really expensive hire no? In all the ones I've seen the real reason is (1) companies are willing to overpay and don't care who the $$ goes to and (2) founders really want to do right by their VCs. But I've also seen plenty of times where the founders can just tell the investors: "look, it's either we shut down or I take this job, but you get nothing - but if we call it a deal, we all look good, cool?" and the investors capitulate.

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