Color acqhired for $2-5M

http://appleinsider.com/articles/12/10/18/apple-reportedly-bought-colors-talent-but-not-the-company

by ujeezy • 14 years ago

48 45 14 years ago

It's nice to see that the early employees of Color aren't going to end up completely screwed, and have a stable job with a company that is doing well, if they so desire.

reinhardt• 14 years ago

And vice versa, it's nice to see that they are not getting ridiculously high $1-2MM/head for the privilege of being acquihired to do basically the same job they would be doing if hired through the regular channels.

cbaleanu• 14 years ago

So if I work for company A, and one day, company B comes to my boss and says :

B: 'Hi, sell us 10 developers for $n million'. A: 'Sure, any prefference?' B: 'No, not really what do you got?' A: 'Well I have a good 2 men team, 1 really good debugger and blablabla...'

Maybe I'm biased, but when did we become comodity? Can you trade developers at say a country fair or what?

ssebro3• 14 years ago

This is a really interesting idea. If developers can be sold as a group, why aren't we seeing group recruiting websites, where you can buy a team?

thesash• 14 years ago

https://grouptalent.com/main/employers/

Snail_Commando2• 14 years ago

My guess is that a good group of people not already at a company would more likely want to work together, for themselves.

Also, it would probably send a bad signal if the head of a startup started posting groups of his employees up for sale.

I would also imagine the transaction cost involved with selling individual groups of developers is more prohibitive than selling a company wholesale.

majani• 14 years ago

Might actually be on to something here. But what situations would you have a cohesive team together outside of a company?

petercooper2• 14 years ago

It's not common but a group of Rails developers and designers did this once in a blog post. Didn't even say who they were, just that it was X developers and a designer or whatever. They were hired as a group pretty quickly. So you might be on to something.

GavinB• 14 years ago

The developers basically get their choice of a job at Apple or quitting and going off on their own. Better yet, they can stay with Apple for a few months and see how they like it, or stay with Apple while they figure out what their next move is. "My company was acquired but I'm looking for the next opportunity" looks a lot better on your resume than "we went out of business and now I'm unemployed".

When the other option is your company being "wound down" and you having no income, this seems like a pretty good deal. And if you don't like it, you're under no obligation to actually show up in Cupertino. You're a free agent who can go find a better deal at will.

notbitter• 14 years ago

This one is really stretching the definition of an acquihire. It may be that the $2-$5M is unvested stock for the team itself.

See points 3-6 here: http://daslee.me/quick-thoughts-on-acquihiressoft-landings

MartinCron2• 14 years ago

I've worked for multiple companies that were acquired and was never able to feel at home in the new parent company.

My feeling was always something like "I never actually chose to work for you, and you never actually chose to hire me, yet here we are"

jusben13693• 14 years ago

Hey a lot of good romantic comedies have made millions at the box office on this same type of premise.

petercooper2• 14 years ago

It's unusual for developers, IME, but given how popular it is in sports, it doesn't surprise me, at least. Some developers have the cachet of sports stars within their niche.

(Hmm, maybe we'll see wanted ads for "Rails world champions" and "JavaScript sports stars" soon instead of ninjas and rock stars ;-))

pbiggar• 14 years ago

I find this hard to believe: $5 million for a team of 20 developers is incredibly incredibly cheap. 20 developers would go for $20-$30m.

drewmck• 14 years ago

$250,000 per developer with qualified subject matter experience in your company's native technology. And there's 20 of them. It's a friggin' steal!

ryannielsen• 14 years ago

Actually pbiggar is correct – the going market rate for employees (or, at least, engineers) in an acquihire is usually around $1-2MM/employee. E.g. a small startup with 4 engineers would be acquihired for $4-8MM. Thus, if this were a full acquihire and Color has 20 engineers, I'd expect the acquisition price should have been around $20-40MM, not $2-5MM.

In an acquihire like this, the acquisition price and each employee's final compensation and options grant from Apple are entirely unrelated. diego has an excellent post in this thread covering that in more detail. [1]

[1] http://news.ycombinator.com/item?id=4670637

diego6• 14 years ago

An explanation of how this deal probably works:

Color had 41M in funding, of which $25M are left. That money goes back to investors. Apple threw in maybe $5M. That also goes to investors.

Apple interviews each employee and decides who stays and who goes. The value for Apple is that a team that works together well is more than the sum of the parts, but only if they keep the people who would fit well within Apple.

The people who stay usually receive a retention package which could be a mix of restricted stock units and cash, vests over three or four years, and is determined by:

- the experience and seniority of each person.

- the perceived value of each person to Apple.

Apple tries to gauge what it would take for the core of the team to stay long enough. Someone may need 500k over four years in addition to salary, someone else may need 2M. It's impossible to say what is being offered to each developer unless you're an insider.

For that reason nobody can know what the deal really costs to Apple, but it's definitely more than what investors get. Otherwise, the really valuable people would not go to Apple just for a paycheck.

Source: I've been involved in deals of this sort since the late 90s, mostly on the side of the acquirer.

alooPotato• 14 years ago

Why does Apple even have to pay the $5M to Color and its investors.

Why not just offer the employees the package and ask them to quit Color?

diego6• 14 years ago

I can only speculate, but these things can get messy. Investors could find a way to sue Apple. 5M is peanuts to Apple compared to the value at stake. If they bother with the acquisition (which takes lawyers, due diligence, lots of boilerplate work), they might as well make sure nobody involved feels shafted.

cube133• 14 years ago

Or Apple just went to the team directly and hired them, and the $2-$5 mil are signing bonuses.

This isn't an aquihire situation, this is just Apple hiring a bunch of people.

It's unlikely Color has any real leverage in this case.

diego6• 14 years ago

Doubt it. Why would Apple want to alienate Sequoia of all venture funds? It's more likely that Sequoia called Apple and they worked out a soft landing for some people.

allsystemsgo• 14 years ago

Jeez. How do I become the guy that requires 2M to stick around? Are these often irreplaceable programmers or are they typically product management types?

digeridoo• 14 years ago

Be 20 guys?

erichocean• 14 years ago

I don't think it's that they're "irreplaceable", in the sense that they could never be replaced.

It's more of a time-to-market thing. I've spent years working on distributed systems and sync algorithms, so when the time came to improve our setup to a Google Spanner-like system, it was fairly easy for me to make the changes. From that perspective, my ability to do that right now makes me pretty much irreplaceable at my company.

But I certainly am replaceable, in the sense that any other competent programmer who'd spent as much time as me could presumably be doing what I'm doing. It's just hard to find them. :)

kami8845• 14 years ago

Thank you for sharing your knowledge

droithomme• 14 years ago

$2 million for 20 engineers is $100,000 per engineer on average. That's not much in an acquihire.

$100,000 is low just as a signing bonus for desired talent at an A list company. Apple must not think very much of their skills. In which case, why hire them at all? Strange!

jusben13693• 14 years ago

The problem I see with this is the profile of the developer. Color was a cutting edge startup. I assume developers who went there did so with the idea of tremendous upside on their stock options. Apple, while a fine company, is really at the other end of the spectrum right? So if I'm at Color haven't I made the decision to forgo the safety and security of a large company for the upside of a startup? I suppose a few, after what's happened, may have changed their mind. It does seem an odd fit though.

ams6110• 14 years ago

Pretty clear there's no upside to Color stock options at this point. And that may have caused more than a few of those risk-takers to reconsider whether they want to do it again. Apple could look like a pretty nice deal by comparison.

jfb• 14 years ago

Apple isn't going to bounce paychecks?

Color acqhired for $2-5M

Related Stories