Big Tech ‘acquihiring’ is an ugly but useful trend

IF YOU’RE a venture capitalist, you dream of backing the next billion-dollar startup to one day feast on the returns of a sale. The buyer? A gargantuan tech company, of course. But these days, Big Tech isn’t buying so much as “acquihiring” the most promising artificial intelligence firms, specialised deals that scoop up the industry’s hottest talent while avoiding antitrust scrutiny, often by leaving behind business operations, aka the husk of a company.

The phenomenon has been great for tech giants which can remove potential rivals more cheaply, but it’s left venture capital investors in a rut with fewer returns than they would have expected from a traditional sale or even an initial public offering (IPO). How they react could set the whole industry on a different path and if we’re lucky, a better one.

One reaction to the trend has been to grumble. “I dislike this phenomenon,” says Ali Ojjeh, chairman of Northgate Capital, a venture capital firm with US$5 billion of committed capital.