AcquiHiring, where an established company acquires a startup primarily for the talent, is an under-appreciated strategy among large enterprises. The technology behemoths have transformed, acquihiring an art form. It is now time business and technology leaders of traditional enterprises step up acquiring startups for talent.
There are several reasons why acqui-hiring a superior strategy. Here are a few compelling reasons:
Acquihiring helps Recruit Talent in Bulk
A critical advantage of acquihire is the ability to recruit a sizeable team in bulk. Technology leaders know the challenges of recruiting one candidate at a time, particularly given the scarcity of tech talent. Of course, one may acquire a startup with a handful of employees to possibly dozens. It depends on the company’s needs, including whether the intellectual property the startup is developing will be continued as a separate project or folded into an existing workstream.
Acqui-Hires Bring onboard a Cohesive Team
Another advantage of acquihiring a startup is bringing onboard a cohesive team with complementary skill sets. That could be the difference between hitting the ground running or a long ramp-up period. Of course, this is not to say that interpersonal challenges don’t exist. Still, as a practical matter, if a startup is worthy of an acquisition, that means the team has demonstrated an ability to work together.
Acquihiring Means Adding Risk Takers to the Mix
Any Startup is a risky endeavor, and the founders who started the company and the employees who choose to join an early-stage startup are the epitome of risk-taking. In legacy enterprises, where conservative attitudes tend to make people risk-averse, the startup teams may change it up a bit.
Startups have an Entrepreneurial DNA
By definition, startups have an entrepreneurial DNA, which means they are self-starters, take the initiative, work with frugal means, and overcome obstacles. In traditional enterprises, these traits will foster innovation and agility.
Cutting-edge Technology Concepts
Legacy enterprises have tenured staff and a slew of obsolete technologies. Startups, on the other hand, tend to work on advanced technologies and concepts. Hence, an acquihire will immediately boost the technology sophistication of an enterprise.
While acquihiring is a powerful way to add caliber and capacity to enterprise technology teams, here are a few tips on making the process efficient and effective.
AcquiHiring: Factors to Consider
Due Diligence of the Technology Platform and Products:
Conduct an in-depth assessment of the startups’ platform and products from a technical perspective. Often, financial due diligence takes primacy in acquisitions. Still, if it is an acquihire, the focus should squarely be on the application architecture, coding standards, data and application security, scalability, and extensibility.
Funding as an External Validation:
It is not to say bootstrapped companies are less worthy. Still, a reputable VC investment adds a level of comfort and confidence that an investment-savvy third party has conducted due diligence and found the startup worthy of their money.
Startups tend to be tech-heavy and, at times, do not have the proper depth in business, product, sales, and marketing. If the goal of the acquihire is the acquisition of tech talent, those concerns are moot. However, if the goal is to build the product/platform, the right team composition is a critical success factor. Hence, an excellent place to start is to take a skills inventory and map it to the enterprise’s needs.
Thought Leadership and Open Source Contributions:
Another way to evaluate the startup team’s strengths is to look at their thought leadership and open source contributions.
Of course, patents will offer a moat and protect the intellectual property and hence a strong testament of the startup team’s innovation cred and technology chops.
Once the acquisition is complete, here are a few ideas to integrate and make the team successful:
Do not underestimate the importance of proper onboarding. This is not just in terms of the HR onboarding but also in integrating the team into the projects and priorities and acclimating them to the various technical and architectural, and procedural standards and norms.
Ramp Up Time:
Do not expect miracles immediately. However, agile and fast, the startup team’s work ethic is not operating within a large organization’s constructs and context. So, level set expectations on all sides allow for adequate time for teams, ideas, concepts, and technologies to blend.
A startup team operates in a highly flexible and autonomous mode. While that level of flexibility and autonomy may not be feasible in a large enterprise, technology leaders must ensure not to stifle the creativity and ability to move quickly.
Like operational flexibility, startups delegate decision-making to lower levels and have no bureaucracy to deal with in an ordinary business course. While eliminating the safeguards and decision hierarchy may not be entirely possible, allowing the acquihired team’s decision-making authority within broad guardrails and guidelines is an effective strategy.
To cross-pollinate ideas and achieve a level of osmosis and synthesis of capabilities, thinking, and workstyle, it behooves enterprise leaders to mix in some of the existing talents into the acquihired teams and take the technologists from the startup teams and position them in other projects.
After consummating the acquisition, the game is not over. Most startup entrepreneurs and critical talent will be itching to try their hand elsewhere on a different idea. Hence, it is incumbent upon the corporate technology leaders to identify the long-term talent and offer them the right incentives, job challenges, and occasional golden handcuffs to retain the talent.