How to keep founders around after an acquisition

By boris, July 28, 2014

Facebook, Google, Salesforce, Twitter…all the top players in Silicon Valley want to get their hands on the best talent around. That’s why we’ve seen example after example of “acqui-hires” in the past few years as well as some very large acquisitions where a big driver was the talent behind a start-up (e.g. Nest, Beats).

However, only a few big companies have truly figured out how to keep founders around after the acquisition. In most cases, as Bloomberg detailed with Zynga, the founder leaves 1-2 years after acquisition. After all, someone founds a company because they want to be a leader, not a follower. Entrepreneurs have a difficult time when the acquiring company tries telling them how to run the business they have created and grown.

When the acquiring company is successful at getting the founder to stick around, it’s typically because they’ve learned to give their founders the latitude to run their start-up as an independent unit within the business. You’ll hear these founders say, “I work for Marc [Benioff]” or “I work for Jeff [Bezos]” rather than “I work for Salesforce” or “I work for Amazon.” And the start-up founders get direct access to the CEOs. Nothing changes for the start-up except who owns the company.

It is no surprise that the companies that best understand how founders tick are the ones that have still their founders at the helm: Google, Facebook, Salesforce, Amazon, etc. The companies that have figured out how to keep founders around can leverage their knowledge and expertise over time…and thus pay much higher acquisition prices than those companies that fear that acquired founders will leave as soon as they can, because they hate to get bogged down in bureaucracy and a big corporation.

 

  • http://www.startupmanagement.org/ William Mougayar

    That’s a very good point.

    The acquiring CEO almost becomes like a mentor to the acquired founder/CEO. The minute you place the acquired CEO under too many corporate layers and don’t let them continue to exercise their leadership, that’s the beginning of the end.

    That said, not all acquired CEOs can rise up to that potential and stay that way. Sometimes it’s more appropriate that they integrate their product/technology, transfer knowledge, then move on.

  • Joshua Lopour

    Well said. I’m still new to the process but my new CEO has been awesome and makes sticking around seem like a gift opposed to a curse.

  • bwertz

    Spencer IS awesome!