I have always been against the non-compete clause for employees.
Conventional wisdom says we need them to protect employers and companies. But in California they are deemed illegal and against public policy. And last time I checked, startups and big companies are alive and well in California.
Can you imagine if employees agreed to a non-compete clause in California? Consider how many new companies would not have been created. How much value would be lost? It would be substantial.
Proponents for having non-competes may also offer the argument that they are generally not enforced - so let’s just keep them anyway. In Massachusetts they are enforced consistently. It is true that in some states they have less weight in the courts (e.g NY). Regardless, who wants to take the risk of going to court? Would you start a new company if you were concerned about going to court? Would you be able to raise money with this type of risk? Or would you be able to hire people with this type of risk?
At the end of the day, the non-compete clause is a significant barrier to startups and innovation. I believe it significantly hurts business in the state of Massachusetts and other states that have not followed California on this issue. I’ve heard from many successful entrepreneurs that haven’t started a new company in this state because of their non-compete. Some have actually moved to California because of this.
To be clear, I do firmly believe in maintaining strict non-disclosure agreements and confidentiality with regards to trade secrets and intellectual property. Those are essential and should considered completely differently from non-competes.
The very name “non-compete” is an afront to employees.
My partners and I at Spark Capital have decided to do away with the non-compete clause. Starting today. We will not require a non-compete clause with our portfolio companies and new investments.
And we ask that our fellow investors, CEOs and founders support this effort.