What's Really Going on With Color: A Small Apple Talent Acquisition

http://allthingsd.com/20121018/whats-really-going-on-with-color-a-small-apple-talent-acquisition/

by ashishgandhi • 14 years ago

42 16 14 years ago

allthingsd.com

waterlesscloud• 14 years ago

They're paying millions to hire some people, but aren't getting any of the IP? Isn't that unusual?

Maybe I just don't understand how these things work.

georgespencer• 14 years ago

In this kind of deal, the reality is that Apple are getting some seriously valuable IP.

They're hiring a team of software engineers who have been working together for a while in an area which is clearly of interest to Apple (I'm betting they're going to be working on Facetime).

They've been working with live video extensively. They know the lay of the land. It's very valuable.

And if you want to acquire this many engineers from a company simultaneously you're probably fighting against a huge amount of non-competes, so approaching the company and negotiating directly for the hires is the best way to avoid getting slapped with a lawsuit.

001sky• 14 years ago

To paraphrase, they are getting the intellectual/s without the property.[1] =D

__________

[1] What is interesting, though, is that they may have legal reasons for this. Any extant creditors, for example. We may see a second stage disposition of the IP. Transfer of people for $$ != transfer of legal-owned Gaap assets, when it comes to fraudulent transfer. Relevant > http://en.wikipedia.org/wiki/Fraudulent_conveyance

akavi• 14 years ago

The IP (may be | is) worthless. The people, on the other hand, still have the potential to be very valuable (Remember, the reason that Color was able to raise so much money was because the team of founders has an impressive record of success.).

smacktoward2• 14 years ago

How do you "acqui-hire" a bunch of people from a company without buying the company itself? Isn't that just, you know, hiring?

smackfu• 14 years ago

Well, they're essentially buying the employees from the company, which is different than normal hiring.

smacktoward2• 14 years ago

But why would you want/need to do that? I'm not an expert on labor law, but AFAIK the company doesn't have any legal ownership claim to the employees or their services; employment in the US is at-will (http://en.wikipedia.org/wiki/At-will_employment), so if Apple and a Color employee come to an agreement that the Color employee will go to Apple, Color doesn't have much say in the matter. There's no Reserve Clause (http://en.wikipedia.org/wiki/Reserve_clause) in tech.

Maybe the employees signed a non-compete agreement, and what Apple is buying from Color is a waiver on those agreements? Non-competes don't have a great record of standing up in court, but OTOH $2 million split 20 ways isn't that much money per person either; might be considered cheaper than the risk of a legal challenge. I dunno.

The reporting on this story could definitely do with some additional detail, but given how rapidly the story's been changing we may just have to wait an hour or two for that detail to be uncovered :D

signalsignal• 14 years ago

In America everything is for sale, except people, see 13th Amendment.

ChuckMcM• 14 years ago

Easy the company A 'lays off' 20 employees and company B 'agrees to hire' 20 employees at the same salary. You present it to the employee as a yes/no choice, you want to work in the new company or not at all. It often saves the laying off company from paying any form of severance and is only modestly disruptive on the lives of the employees. (although at the hiring company you have to manage these people who come in really angry/confused.)

zoowar• 14 years ago

The real talent would have left long ago.

pacaro• 14 years ago

Having been involved in an informal[1] acquihire a long time ago, I both agree and disagree with this.

Engineering talent isn't always correlated with great organizational awareness, so while some of the better people will have moved on by the time it gets to this stage, there will still be strong engineers left.

That being said by this stage it is unlikely to be a team on top of its game, and if the stories about an increasingly poisonous work environment are to be believed, Apple is going to have to do a winnowing process, and keeping the "team" together may well be counter productive.

[1] Informal acquihire in the sense that our CEO got wind of a company closing down its remote sub (remote to them, local to us) and made a blanket offer to the team

mlinsey• 14 years ago

It's possible that both this report and the "double digit millions" report are true. $2M divided among 20 engineers isn't enough to convince each engineer to stick around at Apple for a few years vs. look for another job immediately. Usually in this case, there are separate retention bonuses for each employee that the acquiring company wants to ensure they keep. Sometimes these retention bonuses are included in the reported price of an acquisition to make everyone feel better, but the investors don't see any of that. So it's possible that from the investors' perspectives, it's a trivial $2M deal, but from Apple and the acquired employees' perspective, it's significantly bigger.

I have no information about Color so I'm not saying that necessarily happened, just that it's a way of reconciling all the conflicting stories. The submitted story on its own doesn't quite add up either ($2M for 20 employees is too low).

cube13• 14 years ago

Well, considering Color's history, the promise of a steady paycheck for a few years might be enough for that team right now. And the $2 million could be signing bonuses for the engineers, which would be a decent chunk of one-time money.

mitchellwfox• 14 years ago

It's reassuring to hear that what has often been cited as a case-study in over-ambitious fundraising and over-enthusiastic investment did, in fact, turn out to be a sobering lesson for entrepreneurs.

The tales of double-digit million dollar exit were frankly baffling and would have painted a very different picture of the current acquisition market.

What's Really Going on With Color: A Small Apple Talent Acquisition

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