4 ms·

Call me crazy, but there's a huge difference between non-competes in startup-land and non-competes in corporate america. In a startup, the whole endeavor rides

Call me crazy, but there's a huge difference between non-competes in startup-land and non-competes in corporate america. In a startup, the whole endeavor rides on secrets. The company doesn't more money, talent, or employees than big companies. This applies to a pretty broad definition of startups that includes unicorn and high-growth public companies. The only things that matter to those companies are what they're doing and how they're doing it, and in many startups, every employee has specific knowledge that would be valuable to a bigger company or competitor. [Ironically, the state with most of these companies (CA) doesn't allow non-competes, so it's obviously not death, probably because trying to replicate a startup's success means starting after they've become successful, so it may not matter. The point is, non-competes make sense in a world where knowledge is core to the business.] In a large company, execution dominates. You can go all the way to factory worker, but anything that looks like "use your trade skills to make this thing" obviously shouldn't be protected by non-compete. Trade skills should cut across companies. There's ways to argue that, say, developers for CA startups could go either way. React / Ember / Angular / etc. is certainly a trade skill. I'm going to hire somebody eventually to help with munging our data set, plugging into more APIs, and figuring out how to make sense of the data that comes back. If that person went to work for another marketing analytics company, I wouldn't be too happy, because to some extent, our specific mix of APIs to integrate with and what we got from them is proprietary. If an engineer I'd worked with and developed that knowledge with went to somebody trying to solve the same problem as me, I'd be kind of pissed. Analytics the way we do it isn't a trade skill, and I expect an informal agreement that you're not going to go work for one of the ~5 companies in the world doing something really similar.

nitrogen 11y ago
Everything is a trade skill. Some trades are just very specialized. Telling an API expert they shouldn't practice their trade is bad whether there are five or five hundred companies in the industry. If you want someone not to work, you have to pay them not to work, and you still shouldn't be able to force it on them.
zekevermillion 11y ago
A noncompete is not about protecting secrets, but about preventing employees and former employees from competing "unfairly". The nondisclosure provision of the employee covenants package is what restricts disclosure of secrets. There are also laws that restrict the misappropriation of trade secrets. These separate issues and related legal claims get confused a lot, b/c in employment litigation the claims are often brought at the same time. And of course in CA, employers are not allowed to include certain types of noncompete restrictions in employee covenants, so they lean more heavily on trade secrets claims even when the underlying issue is one of employee loyalty (a term that makes me kind of nauseous). But legally the contractual noncompete, contractual NDA, and legal trade secrets misappropriation claims are separate issues. I would also point out that if you've ever worked for a large corporation, you would know intuitively that most big boy companies have employees sign extremely punitive and one-sided restrictive covenants. Startups actually tend to place less value on contractually restricting employees, and the mindset of startup entrepreneurs can be less focused on protecting trade secrets / more on execution. (The IP assignment portion of the covenants package is, however, just as important to startups.)
nopzor 11y ago
I'd argue that "execution dominates" in a startup, too. Not a fan of non competes (even as an employer).
prdonahue 11y ago
Not even sure where to start on this comment, but I'll try: > In a startup, the whole endeavor rides on secrets. ... In a large company, execution dominates. Have you ever worked for a startup? Most likely at least 10 other companies have had the same idea. And 100 people outside those companies. Your ability to (out) execute is all that matters -- regardless of the size company. See also: talk is cheap. And yes, there are trade secrets that can be hugely important, but these are handled by NDAs and other Confidential Information agreements, not non-competes. If those are stolen, you sue under those agreements, not your non-compete. > If that person went to work for another marketing analytics company, I wouldn't be too happy, because to some extent, our specific mix of APIs to integrate with and what we got from them is proprietary. ... If an engineer I'd worked with and developed that knowledge with went to somebody trying to solve the same problem as me, I'd be kind of pissed. Then you should give them a reason (ideally, several) to stay. Your employment agreement trades some form of compensation -- typically cash and equity -- for their output. You're getting value, they're getting value. If you don't treat them properly, you don't deserve to keep them, regardless if you "wouldn't be too happy" about it.
- trjordan 11y ago
  I have. Last company I was the first the join, was acquired by a bigger startup, and left at 120 employees. I'm currently starting my own company. Maybe idea is the wrong word. Vision? Strategic plan? Narrowly-focused execution with an emphasis on coherence? Facebook and MySpace are the same idea, but vastly different companies, no matter when you compared them. Communicating all the things you do differently isn't something that you can do with a website or a quick chat with a single employee. That structure of shared ideas is important, and in small companies, it's basically all that exists. Comparatively, the code and customer base replaceable. And anybody can leave, at any time, in the same way that I'm allowed to fire anybody or sell the company with a provision to devalue the equity. There's a million ways for us all to screw each other. There needs to be trust in the company, because if you're just after short term cash, there's way better ways to find it than startups.
  - prdonahue 11y ago

nitrogen 11y ago

Everything is a trade skill. Some trades are just very specialized. Telling an API expert they shouldn't practice their trade is bad whether there are five or five hundred companies in the industry. If you want someone not to work, you have to pay them not to work, and you still shouldn't be able to force it on them.

zekevermillion 11y ago

A noncompete is not about protecting secrets, but about preventing employees and former employees from competing "unfairly". The nondisclosure provision of the employee covenants package is what restricts disclosure of secrets. There are also laws that restrict the misappropriation of trade secrets. These separate issues and related legal claims get confused a lot, b/c in employment litigation the claims are often brought at the same time. And of course in CA, employers are not allowed to include certain types of noncompete restrictions in employee covenants, so they lean more heavily on trade secrets claims even when the underlying issue is one of employee loyalty (a term that makes me kind of nauseous). But legally the contractual noncompete, contractual NDA, and legal trade secrets misappropriation claims are separate issues. I would also point out that if you've ever worked for a large corporation, you would know intuitively that most big boy companies have employees sign extremely punitive and one-sided restrictive covenants. Startups actually tend to place less value on contractually restricting employees, and the mindset of startup entrepreneurs can be less focused on protecting trade secrets / more on execution. (The IP assignment portion of the covenants package is, however, just as important to startups.)

nopzor 11y ago

I'd argue that "execution dominates" in a startup, too. Not a fan of non competes (even as an employer).

prdonahue 11y ago

Not even sure where to start on this comment, but I'll try: > In a startup, the whole endeavor rides on secrets. ... In a large company, execution dominates. Have you ever worked for a startup? Most likely at least 10 other companies have had the same idea. And 100 people outside those companies. Your ability to (out) execute is all that matters -- regardless of the size company. See also: talk is cheap. And yes, there are trade secrets that can be hugely important, but these are handled by NDAs and other Confidential Information agreements, not non-competes. If those are stolen, you sue under those agreements, not your non-compete. > If that person went to work for another marketing analytics company, I wouldn't be too happy, because to some extent, our specific mix of APIs to integrate with and what we got from them is proprietary. ... If an engineer I'd worked with and developed that knowledge with went to somebody trying to solve the same problem as me, I'd be kind of pissed. Then you should give them a reason (ideally, several) to stay. Your employment agreement trades some form of compensation -- typically cash and equity -- for their output. You're getting value, they're getting value. If you don't treat them properly, you don't deserve to keep them, regardless if you "wouldn't be too happy" about it.

trjordan 11y ago
I have. Last company I was the first the join, was acquired by a bigger startup, and left at 120 employees. I'm currently starting my own company. Maybe idea is the wrong word. Vision? Strategic plan? Narrowly-focused execution with an emphasis on coherence? Facebook and MySpace are the same idea, but vastly different companies, no matter when you compared them. Communicating all the things you do differently isn't something that you can do with a website or a quick chat with a single employee. That structure of shared ideas is important, and in small companies, it's basically all that exists. Comparatively, the code and customer base replaceable. And anybody can leave, at any time, in the same way that I'm allowed to fire anybody or sell the company with a provision to devalue the equity. There's a million ways for us all to screw each other. There needs to be trust in the company, because if you're just after short term cash, there's way better ways to find it than startups.
- prdonahue 11y ago