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AcquihiringHuman Resource Management
Prepared By
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Manu Melwin JoyAssistant Professor
Ilahia School of Management Studies
Kerala, India.Phone – 9744551114
Mail – [email protected]
Acquihiring• Although coined in 2005 in the
West, acqui-hiring is relatively a new phenomenon loved by tech giants like Facebook, Google, Twitter in Silicon Valley and Alibaba and Tencent in China. A case in point is last year’s acquisition of Bangalore-based product start-up Little Eye Labs by Facebook for Rs 90 crore.
Acquihiring• “Little Eye Labs was acquired
because of its team members who were app developers offering performance analysis and monitoring tools to app developers in identifying and solving performance-related issues in Android apps. This is the value that Facebook felt could be used by its app developers,” says Sarath Naru, Managing Partner and Founder, Ventureast. Little Eye Labs was one of Ventureast’s portfolio companies.
Definition
• Acqui-hiring or Acq-hiring (a portmanteau of "acquisition" and "hiring") or a talent acquisition is the process of acquiring a company to recruit its employees, without necessarily showing an interest in its products and services—or their continued operation.
Acquihiring• Acqui-hiring has become
increasingly common in VC-backed startup companies, especially within the competitive technology sector; as of March 2013, Facebook was the largest performer of talent acquisitions, with 12 over the last five fiscal quarters. Twitter, Yahoo!, and Google rank alongside Facebook as similarly major users of talent acquisitions.
Smart Recruitment Strategy• In India, big and emerging e-
commerce tech companies like CommonFloor, Flipkart, Urban Ladder and Housing.com, and foreign companies like South Africa based media and Internet group Naspers’ owned ibiboGroup have done acqui-hires. It is not about hiring regular run of the mill talent just to add up to the workforce.
Smart Recruitment Strategy• “These acquisitions are mainly
done for the team. If there is a commonality in the work done by two companies, then there is a huge merit in bringing their teams together,” says Ashish Goel, CEO and Co-founder, Urban Ladder. The furniture e-tailer Urban Ladder acqui-hired online furniture and home decor marketplace BuynBrag in November last year for an undisclosed amount to expand its home decor segment.
Smart Recruitment Strategy• “These acquisitions are mainly
done for the team. If there is a commonality in the work done by two companies, then there is a huge merit in bringing their teams together,” says Ashish Goel, CEO and Co-founder, Urban Ladder. The furniture e-tailer Urban Ladder acqui-hired online furniture and home decor marketplace BuynBrag in November last year for an undisclosed amount to expand its home decor segment.
Smart Recruitment Strategy• More than the commonality of
work, the race to acquire the best talent in the market with the increasing growth appetite of tech companies is encouraging them to do such acqui-hires. “I am tired of finding new people. I have spent around a year doing around 150 interviews for a product manager profile. I don’t know where the good people are,” says Advitiya Sharma, Co-founder, Housing.com.
Smart Recruitment Strategy• Set up in 2012 and backed by
Japanese Internet and telecom major Softbank Corp., Housing.com is in talks to acqui-hire Delhi-based PropEquity, a B2B subscription based real estate data and analytics platform. The deal will help Housing.com earn revenues through PropEquity’s B2B clients.
Smart Recruitment Strategy• While product becomes secondary in
acqui-hiring, companies like online real estate portal CommonFloor have done acqui-hiring where product was out of the picture. Bullish on mobile, CommonFloor acqui-hired Bakfy in January this year for an undisclosed sum for its team’s proven capability in growing a mobile-only social network in India. Bangalore-based Bakfy is an anonymous app for college gossip and experience sharing among students and will help Commonfloor in products on social and mobile.
Smart Recruitment Strategy• Over the last many years, the
acqui-hiring trend has also been there in other sectors as well. French company Schneider Electric, which acquired 74 per cent stake in power backup and power solutions provider Luminous Power Technologies in 2011 for around Rs 1,400 crore, helped it to enter Indian B2C market.
An Alternative to Shutdown• Acqui-hiring gives a kind of an exit to
the companies, which are not able to hit their growth targets within time for multiple reasons, including inability to raise funds. As a better alternative to shutdown, acqui-hiring allows investors in businesses to recover some or most of their money and allows entrepreneurs to join a company they admire and create a possibility of earnouts in the future. “The acquiree gets an opportunity to work with a larger company and achieve its goals with more resources and backing,” says Tejavath.
An Alternative to Shutdown• Started in 2011, online bus tracking
and analytics platform YourBus was acqui-hired by ibiboGroup for an undisclosed amount and integrated with ibibo’s existing online travel portals, redBus.in and Goibibo.com. However, Rajesh Mallipeddi, Co-founder of YourBus never wanted to sell the business. YourBus used to charge bus operators for sending them MIS reports to monitor daily operations regarding arrival and departure timings of buses.
An Alternative to Shutdown• “We had more than 100 buses on our
platform, but we wanted to take it to around 1,000 buses. Being a value added service, it was very tough to convince bus operators to buy our services. Hence we approached ibiboGroup seeking an exit. Given that ibiboGroup already had redBus on its platform, it was complimentary for them to acqui-hire us for our team’s expertise in live bus tracking as well as for us to continue build what we wanted to through ibibo’s established platform,” says Mallipeddi. The entire YourBus team joined redBus. Angel-backed YourBus couldn’t think of Series A round without finding clear growth path.
Acqui-hiring Vs Traditional Hiring
• Acqui-hiring plays an
effective shortcut to hiring
best talent in large number
than taking the traditional
HR route which also filters
out those that don’t have
the entrepreneurial spirit.
Acqui-hiring Vs Traditional Hiring• “Sometimes building great
talent takes very long time. For example, if you want to get a large set of people around 100-200 in your company, hiring them through HR route will take a lot longer time and it will be difficult too,” says Goel
Acqui-hiring Vs Traditional Hiring• Though difficult but factually,
hiring through HR has the cost benefit over acqui-hiring which is highly expensive. However that’s not a smart move for growth-hungry entrepreneurs. “Instead of the cost benefit of hiring talent through HR, it is important to see its opportunity cost which is faster scalability of product and business growth that comes with acqui-hiring. So it is a strategic investment,” says Naru.
Acqui-hiring Vs Traditional Hiring
• A hyper-competitive
technology landscape like
India will see multi-fold
increase in acqui-hiring deals.
Good but how disruptive can
be the company’s success
post that is debatable.
Popular Acqui-hirings
• Flipkart acqui-hired Mallas
Inc., a digital media
distribution firm, in 2011,
Flyte was the service
launched after the acquihire.
Flyte, was the music service it
launched which shut down in
2013.
Popular Acqui-hirings
• Furniture e-tailer Urban
Ladder acqui-hired
BuynBrag (Social Scientist
E-commerce Pvt. Ltd),
furniture marketplace, in
November 2014.
Popular Acqui-hirings
• Online doctor discovery
company Practo
Technologies Pvt. Ltd
bought Mumbai-based
product outsourcing firm
Genii in 2015.
Popular Acqui-hirings
• Home design and
furnishing portal
BedBathMore (Encompass
Design India Pvt. Ltd). has
acqui-hired Crude Area
India Pvt. Ltd in 2015.
