Ask HN: How much should a bootstrapped startup ask for an acquihire?
I've seen numbers thrown around in the range of $750K -$1.5M per employee, but this seems to be for VC funded companies correct? If you are a bootstrapped start-up with very little debt, 2-3 co-founders, but with no revenue or customers yet, what should be the per employee price for an acquihire?
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I'm going to disagree with the consensus here and say that the price per employee is probably lower when its a bootstrapped company vs a vc funded company, all other things being equal for two reasons:
1) With a VC you have someone in your corner with considerable connections and pull( The VC), to advocate for you. As someone who has been on the acquiring side of the table I think alot of people would be very surprised to see just how many aquihires are either "favors" to the VC or deals that came about because the VC is able to get ahold of the correct person at the acquiring company to make the deal happen.
No VC, no favor.
2) VC funding is a signalling mechanism. Someone, who is presumably a good judge of ideas and talent, has blessed you as worthy and therefore you've passed this bar. The bootstrap company, has not had the blessing and therefor is unproven. Think about it, who would you hire, someone you've never met before or someone who has been vouched for by someone you respect and trust.
Again this is all other things being equal.
So if I'm the acquirer, my question to you is, why am I paying you a per employee premium when I can wait two months for you to shut down and then offer each employee on your team a job at a market salary. That seems to save me a lot of money. Heck why not give each person at your company a blanket offer of employment right now.
If you want to get paid, you need to give the acquirer a reason to pay a premium to aquihrie you. Like others have said, the first, second and third rule of negotiating is to always have a BATNA.
https://en.wikipedia.org/wiki/Best_alternative_to_a_negotiated_agreement ↗
Do you know why they are acquihiring you?
Bootstrapped or not, VC funded or not, profitable or not, a company's value is given by its potential. This potential will be measured (with different metrics, some of them quite subjective) by both parties, then negotiated hopefully to somewhere in between. In your case, you need to come up with your number by best estimating what the value of your team will be once acquired and assigned your new task.
Ie. you are making a cool AI board but you got no traction (hence no VC, revenue or customers). Now Intel wants to acquihire you to make their next generation of synaptic chips something cool. Just lately IBM closed a deal valued at $100M with a Chinese manufacturer for their synaptic chips. Since they are looking at an internal BP for the acquihire of a $100M potential, a 10x ROI puts you all at $10M. Now you have your own BP that you can use to support your intended price for the deal.
Once you have that potential value, you will want to figure your opportunity cost and BATNA by looking at the potential value of your product or company in X reasonable years. This will be your leverage for negotiating.
Its still 750K - 1.5M per employee, its not like engineers are less valuable if they are bootstrapped. But a better question is given the businesses involved what values change. Does the acquiring company become more valuable? Is there less competition? Is there intellectual property involved? Customer contacts?
A much better way to start this process is to do a fund raising exercise. How much would you expect the company to be pre-money and post-money, and why? If you have been unsuccessful raising money it is possible your post money valuation expectation is too high. At the end of the day though its value not a 'rule of thumb' for these things.
People will use the 'rule of thumb' to cross check the value of their offer. If they feel like they are only in it for the employees and offering more than a 'typical' acquihire they will need to understand why that is. If less then that is another data point.
How much has doing the startup cost you. If you're bootstrapped you've probably both put personal funds in as well as a salary opportunity costs.
Thats your base.
Now you need to find a multiplier for the opportunity you're giving up. Have fun with it. Say you'd think you could sell your company in 2 years for $20M. Say there's a 10% chance of that happening. That $2M. Divide that by number of founders/employees. There's your markup. Maybe you add some padding to leave room for negotiation.
At the end of the day you need to also find some sort of bottom line. How much are you willing to take to give up to take a normal job (noting you're probably locked in for a year or two)? With my business it's enough to pay off my house. Thats the least amount I'd take to sell my business (not a startup, bootstrapped services)
More than they're willing to pay.
This is far more about negotiation than market rates. Who cares how much VC funded companies get, start by asking for 3 to 5 times what they are getting.
Flip the conversation, being bootstrapped, and having a dedicated team means you have no pressure to leave, so they must entice you with more money because you have no market forces acting against you.
Also, your team is there because they love you, not because your paying them, again another reason for them to give you more money.
VC repayment is tangible, it's easy to figure out how much VCs need to be made whole, loyalty and dedication are far more intangible and valuable.
If you negotiate like that you'll figure out pretty quickly whether they really want your team or whether they are trying to fill 4 seats.