Innovative startups that manage to hire great teams and build interesting products don’t always find the huge consumer or enterprise market they need to survive in the long term.
When this happens, the natural thing for the startup to do is shut the whole thing down.
But sometimes, there is an alternative to liquidation: sell to a larger technology company for a nominal amount – a few million dollars.
Larger, wealthy tech companies (Facebook, Google, and even, lately Apple) like these deals because its an easy way to hire talented and entrepreneurial tech workers.
This kind of deal is called the aqui-hire.
The most successful example of this kind of deal is Facebook’s purchase of FriendFeed – a social sharing service that never gained much traction. FriendFeed executives ended up in very senior roles at Facebook, and FriendFeed technology rooted deeply into Facebook.com.
But not all aqui-hires end so cheerily.
Over on Quora, there is a question: “Has a startup founder (or founding team) gone through an “Acqui-Hire” but regretted it later? Why?”
Here is the best answer, from a startup lawyer: