Ask HN: Tired founders facing acquihire – please advise
I'm having a really difficult time making a decision and appreciate any advice the HN community can offer.
Here is a quick summary of my situation:
A bit over a year ago, I left a high paying corporate job to start a company. For ~6 months, my co-founder and I did not pay ourselves and ran through a lot of our savings. We soon got accepted into a top tech incubator and were able to use their small investment to keep running. After graduating from the incubator and without even really trying, an investment of more than $1 million fell into our laps. Shortly after, a very successful company contacted us about a potential acquisition and after two months of talking extended a "low-ish ball" acquihire offer to myself and my co-founder.
I wish we had the momentum and growth to comfortably pass on the offer but the reality is that we have not had much confidence in the business for a while. Even before the investment fell into our lap we considered "pivoting" to an entirely new idea because we were so frustrated with the highly competitive market in which we were operating. The acquiring company now also has plans to enter our market and it would be very difficult to compete.
The terms of the deal allow us to mostly pay back our investors in full and would line us up with great jobs. It is not the exit we dreamed of but it gives us a nice story for the future and allows us to "wipe our hands clean".
We have been working 80+ hours weeks without weekends and extremely low pay. My health has been declining (I was recently injured and need surgery but cannot without better insurance) and I had to move away from friends and family. I'm still young but my savings have essentially run out and I have become somewhat disillusioned by startup life.
Is it time to call it quits?
Thoughts?
84 comments
[ 2.7 ms ] story [ 51.8 ms ] threadAre you suffering from burn out?
If you are, I have some bad news for you. An acquihire likely won't provide a short term fix to your burn out. Instead, going from co-founder to employee will be stressful. You will have a new set of organizational politics to deal with, and you may find yourself plagued with constant "what ifs".
If you do take the acquihire, remember that your start date is an incredibly important part of the negotiation. If you are burned out (and seriously my friend, you sound burned out), take a bit of time off before you start.
It's possible to be a true believer but still have doubts about logistical matters, such as ability to execute or the product's sales potential.
If you and your founder are completely demoralized on all fronts, have been for some time, and there's no way to rectify that (e.g. perhaps fixing your burnout), then by all means throw in the towel.
If there's still a spark somewhere, then do what you think is best.
>...and hundreds of thousands of dollars of opportunity cost income, I am tired.
I know the feeling, and it burns. Perhaps you can negotiate the acquisition offer to make up for that?
Given the amount of stress you are dealing with, this sounds like a good thing to me. You get to undo the damage this has done to your finances, I assume it also would let you get the surgery you need and you can stop running yourself into the ground.
What are you hoping to get if you don't take this? What makes you hesitate to take it? Are the things that give you pause genuinely realistic scenarios or issues?
My main fear is limping out of this a few years from now. With the money we have raised, we do have runway for a small team for a few years. But given the technical maturity of our product, we should really be in growth mode with the intention to raise a series A in 18 months to 2 years. Our current projections make this story seem a bit far fetched so we have to make a decision of whether to keep fighting along with the same product or to try something entirely different.
You hear the brilliant stories of Instacart and Mattermark and Slack where a later stage pivot turned out to be the greatest decisions of a lifetime but you don't hear about the stories that don't work out. I was 100% willing to spend a year working my ass off while learning a ton and meeting awesome people, but now we are talking about 3-4 years going towards an uncertain future.
The other thing you can try to do is arrange a "third option." Can you get a break, even a short one, so you can get some rest and make this decision under less psychological pressure?
My dad was diagnosed with a clot in his leg when I was 17 and was told they wanted to amputate. He said "Can't we try something else first?" He was told they could, but odds were poor it would work. He wanted to try it anyway. He got to keep his leg.
If there is some way to say "no" to all the worst case scenarios -- to get some breathing room and try to make a saner decision -- that is the way to go.
I hope that makes some sense. It may not be very well explained.
Now imagine you're an 3rd party investor. You have $200k "return", health benefits, vacation, savings in one year on the one hand and a startup with your size stake with your current idea on the other. Which one would u pick?
As a selfish investor which would u pick?
I don't know the terms of your deal but you should be able to sit down and make an apples to apple comparison.
I was also a founder for 52 months.
I would not ask for money for next 6 months. We can take it forward beyond that.
It is not money that I am after, it's the redemption and I hope you would understand.
Use the r&r to recharge, and the acquisition to bolster your track record. Start something new once you vest.
Also, having sold a company, I can't stress enough the value of having a good lawyer handle the legal bits. The last thing you wanna be dealing with when tire & grumpy is trying to find the loophole about how you could get screwed in a thick jumble of legalese.
Also, drink an emergency beer. You've earned it.
You actually cannot take this too serious. Often an earn-out depends on achieving certain revenue/ebitda/milestone targets. However, after the acquisition, you will find that someone else is in control over the resources you get (e.g., employees, budget, etc.). In other words, they control the input that you can use to achieve the agreed-upon output.
Thus the acquirer is frequently in a situation where they can manipulate the outcome by simply decreasing the input and thus driving you out of your earnout.
There's people who say that you should not rely on the earnout at all and make a deal ONLY if you would make it based on the immediate payout.
If you have earnout targets based on resources such as headcount, marketing spending, or anything else not under your control, you either have to negotiate that the payout is triggered if resources fall, or accept that you will likely be manipulated out of the money by future resource constraints.
Edit to add: someone like you may be great and exactly what they need to get through this step of course, I hope they will have a clear enough mind to not make a rash decision.
If you go in with those facts at your fingertips, you'll be in a pretty good starting point.
The harsh criticism against acquihires is mostly reserved for companies who raise too much, too fast and/or lavishly waste money and opportunities available to them. That doesn't sound like you at all.
Then when you come back, spend a week brainstorming with your co-founder on a new idea (pivot). Prepare a few slides, setup a meeting with your investors and ask for their support.
If they don't like it, sell.
I say this as somebody who has recently returned to work after 2 months away due to surgery and needing rehabilitation post-surgery that was very intensive. I'm still feeling burned out, and I'm hoping to take a couple of weeks out in a month or two to just regroup and gather my energy back.
You need to figure out whether you can take some time out before making a decision, or if you need to make the decision now and then take the time off. If the acquiring company won't let you have enough time off (or more depending on the surgery), well, that's a problem, and you need to talk to your co-founder about whether you can do it whilst in the company.
The absolute top priority in all of this is your health: you can't pivot, sell or work for somebody else if you're not well. Deal with the burn out and surgery as an urgent priority, everything else is secondary.
Also, you can give it another go in a few years. There's nothing stopping you from doing that.
If you feel like you need someone to do a mental dump on and you are in the Bay Area, please feel free to contact me. My email is on my profile.
At one point I was juggling full time university with a full time job and an open source project on the side. My grades suffered, the startup I worked for failed, my open source project failed. I did manage to graduate though.
Then I started another open source project, worked on it for 2 years, it also failed because of tough competition.
So then I started yet another open source project and finally it did well and people seem to like it (almost 4k stars on Github) - It's been 3 years.
I was working full time the entire time and I was exhausted all the time.
There is no point complaining about your situation because there is always someone who has it worse than you.
You have to learn that nobody cares and nobody will try to help you - I think this is the right way. I personally don't mind the struggle but I hate to see people getting easy exits because someone wants to protect someone else's feelings. Nobody deserves anything.
I wish more people would understand how it really works and you can only get that from continuous failure over many years. It gives you a more accurate feeling for what the odds really are.
From what I understand (no disrespect meant, just anecdotal accounts), it's more difficult to remain hired as a coder after 40 (especially with kids). Getting some management experience on your resume will help later in life.
This is one of the key phrases. You built something amazing that someone wants to have. If they set you up with a good job, you should take the offer.
As nhangen said, try to get a long vacation and take it. My recharge tip would be: Find a nice place to stay for at least 3 weeks. Maybe something with a beach and all necessary shops in walking distance (if you are in Europe, Paros is amazing). Stay for at least 3 weeks. The first week will be strange, it's really hard to come down from a lot of work. The second week will feel better, you start to relax. The third is bliss - you come down and kind of only wander between different states of relaxation (wake up, nice breakfast, beach, maybe a nap, afternoon tea, dinner, sleep). It really helps to get ready for the next step and gives you enough distance to re-evaluate what you want to do.
And I'd agree with others that 18 months isn't very much, 6 months without pay is even less impressive. But that doesn't really matter, in the end it's up to how you feel. Just don't expect too much sympathy. A better way to look at it is this: what are the chances that your startup becomes a 10x:er? Investors donttreally care if you keep it up for another year and increase the calue of the company by 20%. Could it become massively successful or not?
also: White People Problems. (aka: extreme First World Problems.)
"... I left a high paying corporate job ... We soon got accepted into a top tech incubator ... without even really trying, an investment of more than $1 million fell into our laps ... a very successful company contacted us about a potential acquisition ... would line us up with great jobs."
It's a great outcome by any standard!
https://news.ycombinator.com/newsguidelines.html
I found your own comment to be unnecessary, passive aggressive, and, for me, debate chilling. But I do appreciate your effort.