Forget acqui-hiring. Now you can go directly to startups themselves and start recruiting.
That's the suggestion of CB Insights, the venture capital and IPO research company, which has identified at least 60 companies in traditional startup corridors that may now be past their prime as takeover targets. In recent years, these companies might have been ripe for some sort of acquisition, as bigger companies looking to fill their ranks find it hard to locate tech talent. The trend is particularly acute, as the venture capital investing environment gets more and more challenging.
The so-called acqui-hire strategy refers to larger companies purchasing companies with promising development teams, rather than going out and hiring employees and creating teams to develop the products they want.
In the past, startups would most frequently become the targets of an acqui-hire if they'd raised less than $5 million, including in seed funding. And they'd most likely get acquired within 14 months of their latest round of financing, CB Insights has indicated in earlier reports. (And for many unprofitable companies, an acquisition might be a good alternative to simply going out of business, as may often be the case as companies blow through their funding.)
The companies identified by CB Insights range in geography from New York City to Massachusetts to Silicon Valley--three of the largest tech hubs today--and they run the gamut, from health care to gaming to the Internet of things technology. Yet all of the startups have received their Series A rounds more than 12 months ago, and have raised less than $10 million in total, without an acquisition on the horizon.
Need more proof that acqui-hiring may take a hiatus in 2016? Consider the tech giant Yahoo. After acquiring 30 companies in 2013, for example, Yahoo, one of the biggest acqui-hire companies out there, saw its acquisitions drop off by nearly 40 percent to about 17 in 2014, according to CB Insights. And 2015 looks to have been a quiet acquisition year for the struggling search company, which purchased only two companies this year.
Yahoo isn't alone, however. Tomasz Tunguz, a partner at venture capital firm Redpoint Ventures, of San Francisco has also reported that after peaking in the 2012, the acqui-hire trend has been steadily slowing, with about 61 for the full-year of 2014. That marked a 9 percent drop from 2012, and a 10 percent decrease compared to 2013.
And CB Insights suggests that directly raiding such companies for their employees might become the norm, rather than an acquisition, particularly if such companies aren't turning a profit.
"Talented people will become available as it gets harder for these 'non-profits' to raise follow-on financing," CB Insights said in a recent newsletter.