What is "acqui hire"?
Acqui-hire is a business strategy in which a company acquires another primarily to gain access to its people rather than its products, services, or intellectual property. This type of acquisition typically occurs when the target company is struggling to gain traction in the market or has decided to shut down, but its team—especially key personnel like engineers, designers, or developers—is highly skilled and valuable. The acquiring company seeks to integrate this talent into its workforce, often dissolving the original company after the acquisition. Acqui-hires are common in fast-paced industries like technology, where the demand for highly specialized talent often outstrips supply.
Acqui-hires differ from traditional acquisitions in that the buyer is less interested in the business model, products, or customer base of the acquired company. The primary goal is to bring the team into the acquiring company to help with ongoing projects or to strengthen specific departments. For instance, if a tech giant needs engineers with experience in artificial intelligence (AI), it might acqui-hire a small startup whose team has that expertise. This helps the acquiring company save time and effort that would otherwise be spent recruiting and training individuals from scratch.
A notable example of an acqui-hire is when Facebook acquired Drop.io in 2010. Drop.io was a file-sharing service, but Facebook was more interested in the talent behind the company, particularly its founder, Sam Lessin. After the acquisition, Facebook shut down Drop.io and integrated Lessin and other team members into its workforce. This allowed Facebook to leverage their skills and experience in improving its own platform, while the Drop.io product itself was no longer a focus.
In many cases, acqui-hires involve startups that have built impressive teams but have failed to find commercial success. For example, Google has frequently used acqui-hiring as a means to acquire talent for its various projects. One instance is Google’s acquisition of Milk, a startup founded by Kevin Rose (founder of Digg). Milk’s products didn’t succeed, but Google acquired the company to gain access to Rose and his talented team, who then went on to contribute to Google’s product development efforts.
The acqui-hire process typically benefits the employees of the target company, as they are often retained by the acquiring company with favorable terms such as signing bonuses, stock options, and high salaries. Founders may also benefit financially from the acquisition, even if the startup itself didn’t become a commercial success. The new ownership may offer team members better long-term stability and career growth opportunities, which might not have been possible if the startup had continued on its own.
However, acqui-hires are not without drawbacks. The founders and team members of the acquired company may lose some autonomy, as they are now working under the larger organization’s goals and priorities. For instance, the culture and freedom that existed at a startup may change dramatically after being integrated into a larger company. In some cases, employees who thrived in a startup environment may find it difficult to adjust to the more structured, bureaucratic processes of a larger corporation.
A well-known example of an acqui-hire that made headlines was Apple's acquisition of the photography app Lala in 2009. While Lala was a music streaming service, Apple was more interested in acquiring the team behind the technology, including Bill Nguyen, who helped Apple in building out its future music initiatives. Shortly after the acquisition, Lala was shut down, but the talent it brought into Apple contributed to future developments, including the creation of Apple Music.
Acqui-hires are also common in the gaming industry. Zynga, for instance, frequently acquires smaller gaming startups, not for their products but for the developers and designers behind them. Zynga acqui-hired the team behind the game OMGPOP, creators of the popular game Draw Something. Although the game’s popularity faded shortly after the acquisition, Zynga retained the team members to work on other projects within the company.
In conclusion, acqui-hiring is a strategic move in which companies acquire other businesses primarily for their talent, rather than their products, services, or intellectual property. This approach is especially common in industries like technology, where skilled talent is in high demand and short supply.
