How do you start your own company while running someone else's company?
I've been running an in-office and online educational business for 3 years. The original partners are offering me a small equity share, but there is no contract yet (nor has there ever been one). I have a lot of actionable online business ideas that I'm ready to pull the trigger on and I'm trying to decided if I should quit my current job running their company and start my own personal technology startup or try to do both at the same time.
Since I am being offered such a small equity share in the company I run, I don't want to launch my ideas through this company. I want to launch the ideas through my person technology startup and if the company I run wants to use some of my ideas or software from my technology startup then they may license the ideas from me or I'll work out an equity share with them.
Since there are no contracts yet there doesn't seem to be any fiduciary obligations or intellectual property issues that I can see. However, some of the ideas I may come up with in my technology startup could compete indirectly with the company I run (not necessarily though). So it's a little hairy. I take more of a sales, marketing, and management role at the company I run. The original partners are not very tech savvy and their vision of the current business is stubbornly narrow. So, if I launch my ideas through their company then the partners won't fully understand the ideas and they won't support the ideas the way I need. However, they will own a majority stake in the ideas when they are bringing very little of value to the table (also, finding outside investors is not a problem here). Quitting seems like the easy choice here, but I really want to finish what I started with automating the business I run; which will take another 1-2 years, so clearly I'm trying to have my cake and eat it too!
What do you think?
Any advice on pulling this off? More specifically, do you have any ideas on how I can structure this type of relationship? Thanks!!!
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3 years and nothing in writing yet? Do you have confidence it will ever materialise? – Matt 13 years ago
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Good question. They've given me a set of terms and are ready to create the contract once I sign off, but originally it was a battle just to get equity. If they wouldn't have been so greedy in the first place this would be a non-issue, but now its clear they are not looking out for my best interests so I need to protect my other ideas and projects if I want to continue with them. – Anthony O 13 years ago
2 Answers
It's great that you want to start your own company.
You can't do this while running another company for someone else unless you get an agreement in writing that your current employer is completely comfortable and waives any interest.
My recommendation is to have a candid conversation and work out a mutually acceptable departure date and then go full speed on executing on your new company. Depending on your relationship and the personalities, you should be prepared for a range of outcomes - from "yes, we'd be delighted to invest in your new start up" to "this is not what we expected nor what we want so you're fired right now".
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Thanks for the reply Warren. You are correct; we'll definitely have to come to an agreement after a candid conversation. I've let them know my concerns already during equity talks, but I have not alluded to starting my own technology company along with running their educational business. During our next talks I would like to have some ideas on how I can structure this type of relationship. I would really like some advice on that if you have experience with this. Thanks! – Anthony O 13 years ago
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What is your basis for the second paragraph? This is likely different in each state. In California, corporations do not have de facto claim to inventions or other work if no company resources were used. In many cases, even contracts claiming such are not lawful (you cannot sign away your rights). – Charstar 13 years ago
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Basis for the second paragraph is just plain basic ethics - sometimes these supersede what's legally permissible. – Warren E. Hart 13 years ago
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What's the implication? That any employer _should_ have an unbounded claim to ones ideas, inventions, and ventures developed on free time? That's "basic ethics"? That quandary aside, you've presented an opinion as if it were a fact ("You can't do this...unless..."). Foul. Plenty of people spin up startups or home businesses (especially in my neighborhood). Doing so isn't unethical in and of itself; only exceptions such as active harvesting of research or resources from an employer. – Charstar 13 years ago
Legal Aspect: If you have signed a non-compete or an assignment of inventions contract then you would have yourself a legal. Also this is state by state, in some states non-competes are not even enforceable. In Michigan, they are.
If the startup business is different enough from your current work then there would be no conflict and you shouldn't worry much about it. Just start working on it.
If you got the idea from your current job or work you currently do then the ethics would come in to play. It would not be good to get an idea from work and go start on it on your own. You should discuss it with your employeer - discuss your interest in having a more critical role in the company, working on innovating and building new products, and maybe work out a special equity / commission for anyone that buys that product that will put you in a position to make more money and get paid for your hard work.
But if you have multiple ideas - pitch one of the bad ones to them ;) just get an idea of whether you could come to some agreement on how you could work on it and still get a good payout if it succeeds.
If they are not receptive then quit and rock it out!
