Bijan Sabet has a post up about getting rid of Non-Competes and Fred Wilson suggested that other VCs chime in with their thoughts. His thoughts are here.
If you are just spending dollars for something you don't intend to enforce, well, don't waste the money. I think that is something everyone will agree on.
I would not give up non-competes. To be even clearer, if the founders of the company pushed back hard/refused, I'd probably question the deal.
The key points for me:
Tightly defined. Mark Evans had a non-compete in his b5 agreement and when he moved over to PlanetEye, there was no issue even though he is blogging and working with community at PlanetEye. If Mark had left to run a blogging network, nope. The key is very very tight language that narrowly defines the specific circumstances under which there is a competitive or imminent harm issue. Don't let the lawyers go crazy here.
Tight confidentiality. The big issue is confidentiality, trade secrets, etc. What I care about is somebody leaving with customer lists, marketing plans, etc, and using that information as a direct attack on a company. The NDA, Trade Secrets, super hush hush stuff also should be defined and the impact of disclosure should be made clear to everybody.
Pay to bench. You can not simply deny somebody a livelihood. If I want a 6 month or 12 month non-compete, there needs to be compensation to the individual as part of the enforcement. If you bench somebody, they have to be paid.
Applies to key people. A star developer is super important as is a start sales person. Both should be covered, both should sign and both should get paid if you decide to let them go.
So, no, I don't believe you should do away with them, sorry Bijan. I do believe they should be narrow, tightly defined, and properly implemented.
lawyers always revert to broad language. and the company lawyer has way more strength than the new employees does. That's the problem.
i'm specifically not opposed to NDA, confidentiality or trade secrets. Those are different issues.
Posted by: Bijan Sabet | December 03, 2007 at 09:22
Never seen a truly narrow non-compete agreement. Typically what I see is either no agreement, or else one that essentially says "we own every thought that passes through your head beginning five years before you came here and ending ten years after you leave, whether or not said thoughts pertain in any way to our business, and once you leave you'll have to change professions or move to Mongolia, because if you ever work in your own field in America or Europe again, we'll sue you into destitution". And I've never in my life been offered any kind of guaranteed severance package by either type of employer. (In fact, the only time I've ever gotten any kind of severance was at a company with NO noncompete agreement...at least none for people in my team.)
More than a few otherwise-good job offers were spoiled by my response to such terms. Indeed, it's the major reason I'm an entrepreneur instead of an employee.
You want me to agree not to divulge insider information if I leave? Sure, no problem. Want to own everything I write under instructions from management on company time? Only fair.
Want me to risk plunging myself into poverty if you wake up one morning and decide I'm not the guy for you? Want me to sign over the royalties on the novel I might actually finish one day? Want to take over the software I wrote in 1993 and still have paying clients for? Uh...no.
Posted by: Matt | January 13, 2008 at 11:20