[ChuckMcM]

Its still 750K - 1.5M per employee, its not like engineers are less valuable if they are bootstrapped. But a better question is given the businesses involved what values change. Does the acquiring company become more valuable? Is there less competition? Is there intellectual property involved? Customer contacts?

A much better way to start this process is to do a fund raising exercise. How much would you expect the company to be pre-money and post-money, and why? If you have been unsuccessful raising money it is possible your post money valuation expectation is too high. At the end of the day though its value not a 'rule of thumb' for these things.

People will use the 'rule of thumb' to cross check the value of their offer. If they feel like they are only in it for the employees and offering more than a 'typical' acquihire they will need to understand why that is. If less then that is another data point.

[lgsilver]

Though I think this is a good response, the first part is not correct. The point of an acqui-hire is to acquire talent at an amount that rewards the team for their previous efforts. In a true acqui-hire the acquirer values the product at $0.

No investor would accept less than their principle back, and so an venture-funded acqui-hire is always going to take into account previous rounds of investments.

All this said, a $10m acquisition of a vc-funded co with 10 employees will probably include at least 25%-30% return to investors depending on preference, or else they won't accept.

I would expect to see a 1/3 to 1/2 price discount on a bootstrapped startup, or even more depending on how short a time you've been working on the product.

[ChuckMcM]

Lets take this apart shall we?

   > All this said, a $10m acquisition of a vc-funded co
   > with 10 employees will probably include at least
   > 25%-30% return to investors depending on preference,
   > or else they won't accept.

   > I would expect to see a 1/3 to 1/2 price discount 
   > on a bootstrapped startup, or even more depending 
   > on how short a time you've been working on the product.

My understanding here is that the only difference in those two statements (other than the price) is this ... or else they won't accept.

If that is the case, then the assertion boils down to "VCs will hold out for more money", and they get it, so where did the "extra" value come from? We could speculate that BigCo is doing a 'favor' for the VC but really? And from an economic standpoint BigCo is not looking at a material impact on their books. My assertion is that the value proposition for BigCo is the same, VC or not, so the price they are willing to pay "should be" the same. I get that they may want to haggle more, but the acquisition target should understand the game here. There are many BigCo's that are buying engineering teams.

[lgsilver]

You'll be hard-pressed to find an acquiring company that would be willing to pay $1-1.5m / engineer for a bootstrapped co :). But sure.