Uber Technologies Inc. reported interest in engineers of the car-parking app developer Luxe Valet Inc. reflects Silicon Valley's constant hunt for tech talent.
Uber is interested in Luxe as an acqui-hire, a form of transaction that flourished from 2013 to 2014 but still occurs in technology, the Wall Street Journal reports. In such deals, the buyer is shopping for tech talent rather than the company's products or service. In many cases, the target may be shut down after the deal closes.
Backed by Google Ventures, Venrock, Sherpa Ventures, Redpoint, DataCollective and Lightspeed Venture Partners, Luxe is the Uber of parking, allowing customers to request valet to pick up or drop off their cars. The company promises to make parking tickets and other hassles of urban car ownership obsolete.
Marissa Mayer of Yahoo! Inc. (YHOO) was a champion of the acqui-hire, though Alphabet's (GOOGL) Google, Facebook Inc. (FB) , Apple Inc. (AAPL) , all part of Action Alerts PLUS Charitable Trust Portfolio, and others have deployed the practice.
Because the target companies might not have revenue, or even a finished product on the market, valuations are often measured per-engineer rather than as a multiple of Ebitda or sales. Law firm Cooley LLP reports that prices range "anywhere from a few hundred thousand to two million per head," in a blog post.
As you might expect in Silicon Valley, the price tag for acqui-hires can go much higher. TheStreet's sister publication The Deal takes a look at some of the acqui-hires of years past for some of Silicon Valley's biggest tech heavyweights.
Editors' pick: Originally published June 10.
Google's $380 million purchase of enterprise software outfit Bebop in 2015 was not the typical acqui-hire, largely because founder Diane Greene was not the typical startup techie.
Greene is the cofounder and former chief executive of VMware Inc. (VMW) , a software infrastructure company with a $36 billion market cap. She heads Google's cloud business and sits on Alphabet's board.
More modest acqui-hires by Google include the 2015 purchase of app development group Apportable; the 2012 acquisition of Milk, a mobile app group founded by Kevin Rose, the creator of news aggregator Digg; and the purchase of virtual reality studio Owlchemy this year.
When Facebook agreed to shell out $2 billion for virtual reality headset developer Oculus VR Inc. in 2014, the target did not have a product on the market. Oculus had 75,000 orders for a developers kit, however, and Mark Zuckerberg was clearly impressed with founder Brendan Iribe's team.
A Federal court in Texas found this year that part of that team improperly took IP from his former employer, game-maker Zenimax Media Inc., and dinged Facebook for another $500 million. Zuckerberg disclosed in testimony that Facebook would invest billions more in Oculus and virtual reality.
While Oculus may or may not fit the definition of an acqui-hire, Mark Zuckerberg has openly advocated buying talent. "Facebook has not once bought a company for the company itself. We buy companies to get excellent people," Zuckberg said in 2011, according to HuffPost.
Facebook's 2010 purchase of Chai Labs for $10 million was a more typical acqui-hire. The team assembled by Chai Lab's founder Gokul Rajaram, a Google veteran known as the "Godfather of Adsense," was the real draw. Rajaram left Facebook for Square Inc. (SQ) in 2013.
With its $3.2 billion purchase of Beats in 2014, Apple acquired a popular line of headphones and a music streaming service. Still, analyst Gene Munster, now with Loup Ventures, described the deal as an acqui-hire designed to bring music industry legend Jimmy Iovine into Apple's ranks.
Earlier this year Apple acquired artificial intelligence developer Lattice Data for a reported $200 million, or $10 million per engineer. Other acqui-hires include photosharing app Color in 2010, security consultancy LegaCore in 2015 and automation app Workflow this year.
These days, Yahoo! is a seller and not a buyer.
When Marissa Mayer arrived in 2012, however, she embraced the practice of acquiring tech talent. "Yahoo became a pioneer and leading purveyor of the "acqui-hire" - acquisitions of struggling, dying and/or wounded tech companies with the intent of acquiring a smart, talented team of people with little to no interest int he underlying technologies or products the company had," CB Insights observed in a blog. Yahoo! made 30 deals in 2013, most of them acqui-hires.