The vast majority of successful startup exits are not Initial Public Offerings (IPOs) but rather acquisitions — big or small, including acqui-hires. Acqui-hire deals are common due to the competition for top talent by rapidly growing technology companies like Google, Facebook, Twitter, and Amazon.

As a startup entrepreneur, building toward an acquir-hire exit may work to your advantage. This type of exit can provide a solid financial return, offer little distraction from business as usual, and provide good jobs for your team. In addition, a large company can provide the money you need to continue to build your vision. You could achieve your idea within a larger entity – bigger, better, faster, and with more reach.

What is an acqui-hire investment?

Acqui-hires are investments in new capabilities. Typically it is a deal that is for talent only. The acquiring company pays a company for the right to make offers to the target company’s employees. They are not stealing their employees but instead paying to hire the target company’s employees. Many large acquirers, the ones with name recognition, don’t want to earn a reputation for raiding other companies. They want the deal to be up and up. So an acqui-hire is for talent only. It’s about getting the experts. Sometimes the acquiring company will purchase a license to the technology, even if they have no plan to do anything with it, to protect itself from an intellectual property perspective.

What does an acqui-hire look like?

An acqui-hire is typically a small team of fewer than ten people. The team has deep domain expertise and is passionate about a specific area. Examples include things like artificial intelligence, robotics, and other new technologies.

What’s the benefit of an acqui-hire for the acquirer?

The benefit of an acqui-hire is the ability to advance R&D, often by years. Having a high-impact individual or team makes it easier to recruit other high-impact individuals, and it’s certainly faster than recruiting these experts one at a time. It often brings connections to universities and access to a valuable talent pool for future hires. More importantly, for these people, it’s usually an opportunity for them to chase their dream. They’ve been working in an area or a field for ten to 15 years, and it’s an opportunity for them to join a sizeable successful technology company. The large company will have funding and support for developing these new capabilities.

Consider All Your Exit Plan Options

If you are a technology startup entrepreneur, be sure to consider how an acquire-hire could fit into your exit plan. It may be the best opportunity for you and your team to realize your vision in many cases.