Start-ups warned over “acqui-hire” trend following Facebook’s latest purchase
Start-ups need to “recognise the tradeoffs” with regard to acqui-hires, according to tech start-up expert Mick Liubinskas, after Facebook snapped up the team behind mobile content-caching start-up Spool.
Spool, which launched in September 2011, allows users to save their favourite articles and videos to their computer, tablet and phone.
In January, Spool raised $1 million in venture capital from a group of investors including SV Angel, Felicis Ventures, Yuri Milner’s Start Fund and YouTube founder Steve Chen.
In a company blog post, Spool co-founder Avichal Garg confirmed Facebook has acquired Spool, although it doesn’t look like any of Spool’s technology will be integrated into Facebook.
In fact, Facebook has already shut down the Spool service, suggesting the acquisition is first and foremost a talent buyout, also known as an acqui-hire.
“We are proud to announce that… we will be pursuing our vision as a part of Facebook,” Garg wrote.
“We are extremely excited to accelerate our vision and help Facebook’s users connect and share with the people in their lives.”
Facebook also issued a statement about the deal, commending the Spool team on its “deep expertise in mobile software development” and “passion for making content easy to consume”.
“We’re excited for the team to join and accelerate their vision at Facebook,” it said.
Facebook isn’t the only company fuelling the talent buyout trend. Fellow tech giants Twitter, Google and Groupon have also been known to acquire start-ups primarily for their talent.
Mick Liubinskas, co-founder of tech seed fund Pollenizer, says talent has always been one of the reasons why companies are acquired, although it is more common in Silicon Valley.
“Certainly in Silicon Valley, finding good technical talent is very, very difficult… It’s a lot more prevalent in the Valley where technical talent is tight,” Liubinskas says.
“The negative side of being acquired for your talent is you have very strong handcuffs because there’s no point acquiring you for your talent and then the team leaving.”
Liubinskas says the trend could take off here in Australia, “as corporates realise the value of innovating through start-ups”.
“I would love for it to ramp up in Australia… but it’s definitely really active in the US,” he says.
But Liubinskas says there are drawbacks with regard to acqui-hires.
“If you really believe in your product, it’s going to be very difficult to try to keep that dream going the way you want to keep it going… The devil is in the detail of the deal you do,” he says.
“That’s really important. Certainly, people like Mike Cannon-Brookes and the team at Atlassian, and Elias Bizannes, say, ‘Stop worrying about building to flip. Build for greater value’.”
“Even [if you are being acquired by] companies like Facebook, you’re never going to be as fast as when you’re running your own thing, so it’s important to recognise the tradeoffs.”
“If they’re acquiring you for your talent, you won’t be calling the shots.”