Photo: Flickr / Joi
The acqui-hire – that last refuge of failed startups – is under threat, says former TechCrunch editor and current VC Michael Arrington.In acqui-hires, the acquiring company (usually Google or Facebook) will, using retention bonuses, pay the startups executive team more than it pays the startups investors for their stock.
Obviously, this doesn’t make investors very happy, and some of them are doing something about it, says Arrington:
“I do believe we’ll start to see are clauses being added to investment contracts that are designed to change these deals. Specifically these clauses would force all deal consideration around a deal – including stock options and stock grants to employees – to be pooled and distributed pro rata among all shareholders.”
We highly doubt such clauses will become common any time soon. Entrepreneurs have too many options right now when it comes to choosing funding. Also, remember, Arrington is a VC now, so he has a reason to spread mistrust about the competition.