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By J. Daniel Kim I February 12th, 2024
- In the last two decades, acquisitions have emerged as the primary channel through which ventures successfully exit. Yet, post-acquisition, a burning question lingers: What happens to these acquired employees?
- The San Diego biotech cluster was born after the acquisition of Hybritech by Lilly. The former employees of Hybritech started their own startups and competed with Lilly, contributing to the rise of the San Diego biotech cluster.
- The Hybritech saga underscores a crucial lesson: startup acquisitions can unintentionally spur employee departures and fuel a competitive landscape. In my recent research, I discovered significantly higher turnover rates among acquired workers compared to regular hires.
- Acquisitions often lead to a difficult fit and higher turnover rates among the acquired workforce.
- After being acquired by Yahoo, Dialpad employees became frustrated with the bureaucratic environment and left the company. Several ex-employees went on to start another company, GrandCentral, which attracted Google's attention and resulted in yet another acquisition.
- Employees from acquired startups depart and venture into their own enterprises, some becoming direct competitors to Google Voice. The underlying reasons for this departure trend reflect a discrepancy in objectives and resource allocations post-acquisition.
- When Google acquired Waze, Noam Bardin highlighted the difference in employee alignment. In startups, alignment includes the product, company, and brand, while in corporations, alignment centers on the corporate brand rather than the specific product.
- After an acquisition, the acquiring company should let the startup be, and try to convince the top management to stay with the company. This will create a domino effect for retention instead of departure.
- Acquiring startups and their employees is a fundamentally challenging tactic for firms, as many acquired employees choose to leave early despite knowing that doing so would leave money on the table.
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