What is an acquihire?
Acquihires are a fairly new way for startups to target talented employees who would otherwise be unaffordable. This has become a popular and controversial practice amongst middle-aged and large companies who choose to avoid the risk of acquiring smaller companies outright, or waiting until they grow too big and expensive.
Acquihire typically involves one of two things; either buying the entire company (and paying for them) “en masse”, or offering them enough money to make up for their current valuation (although many people would argue that this is simply rent-seeking, underhand tactics).
Regardless, the end result is usually a merger between a startup and a larger company, where the startup will cease to exist as a standalone entity. Those who work within the startup will usually join their new parent company straightaway.
How do target companies benefit?
For companies that undergo acquihires, there are many benefits, including significant funding that can help them grow. Employees will often have much greater job security when joining a larger business too, as they’ll likely have much more responsibility and power in their role.
Employees in startups also benefit from a greater sense of freedom in their work environment. Startups generally attract small teams of highly-talented individuals, who are given more responsibility and decision-making power than ever before. This can be a huge advantage to young, ambitious professionals.
Acquihire targets also get the opportunity to join an already existing team of professionals who they can learn from and grow alongside. This means a chance to learn a lot of new skills in a relatively short period of time.
What do acquiring companies gain?
Companies that acquire smaller startups typically do so with one goal in mind: to bolster their future prospects in some way. The main reason for this is because startups are often born out of a niche idea or technology, which has the potential to significantly improve a larger business.
Acquihires also make a lot of sense for a business’s growth strategy. Acquiring a startup allows companies to implement their ideas and technology from the outset, as well as develop an in-house team that can build up valuable experience from day one.
They also form an extremely useful resource for other members within the company, as they can provide valuable insight into what it’s like to work for a startup. This means that businesses can learn how to approach new hires and adapt their hiring strategy accordingly – something which is sure to have a positive effect on their growth plans.