3 ms·
> Must be a pretty nice sum for them to agree to it Not necessarily: if the investors don't agree to a reasonable amount, the wanna-be acquirer will simply hir
by overfeed 4mo ago
> Must be a pretty nice sum for them to agree to it
Not necessarily: if the investors don't agree to a reasonable amount, the wanna-be acquirer will simply hire the entire team with generous sign-on bonuses, and the investors will be left with a shell of a company.
In this case, the core product is MIT-licensed, the team can quit on a Friday and pick up exactly where they left off under a new org on Monday.
- bix6 4mo agoNot necessarily. There are likely key person clauses in the prior round docs.
- overfeed 4mo agoIt has happened in the recent past (2-4 years ago?); I can't remember both the acquirer and the hollowed-out startup, and searches are returning chaff, but it got to the HN frontpage. IANAL, but at-will employment cuts both ways- thr best an employer can do on behalf of investors, are golden handcuffs - and people can be bought out of those.
- borski 4mo agoThat’s not quite actually true and it is a bit more nuanced than that. For example, while non-competes and non-solicits are unenforceable in CA for employment agreements, they absolutely are enforceable for mergers and acquisitions. The laws governing employment are a subset of the laws governing M&A.
- misterinfo 4mo agoIn M&A's you usually sign non-competes.
- overfeed 4mo agoThe husk of a company would still be bound by whatever contacts were signed by its officers. However, non-compete enforcement against individuals have been declawed in California, where VoidZero is headquartered, and (I assume) where its investors are, and whose courts they've likely agreed to adjudicate disagreements. This is an extreme measure not usually taken, but it's a nuclear option that sets a ceiling on how much investors may play hardball.
- borski 4mo ago> However, non-compete enforcement against individuals have been declawed in California, where VoidZero is headquartered Not in M&A. https://www.freshfields.com/en/our-thinking/blogs/a-fresh-take/non-competes-in-california-a-practical-guide-102lqgq https://www.freshfields.com/en/our-thinking/blogs/a-fresh-ta...
- overfeed 4mo agoThanks - I wasn't aware about the M&A carve-out, which makes sense. It reads to me like clause (c) is the most relevant: (c) all of the ownership interest of any subsidiary, may agree with the buyer to refrain from carrying on a similar business within a specified geographic area in which the business so sold... has been carried on, so long as the buyer... carries on a like business therein. and it prohibits competition "on a similar business". The Vite team would be blocked from competing against VoidZero, but Cloudfare isn't a similar business IMO, and they would be free to work on a private "Pronto" fork within Cloudflare (which is unlike the real-life Cloudflare/Vite scenario where they will continue public releases)
- borski 4mo agoMaybe. It would require courts and nuance; cloudflare is in a lot of businesses nowadays. It rarely comes into effect regardless because people rarely spend less than a couple years at the acquirer, but regardless.