> In early October 2013, Guillory met with 28-year-old Vogt, a self-proclaimed MIT drop-out who had spent a month to earn a degree in installing Microsoft Windows, and whose most impressive technical achievement by his own account was to build a device to crack certain kinds of high security safes. But Vogt had a shared interest in the emerging self-driving field from his days at MIT and its entry in the DARPA challenge. More importantly, Vogt had millions in capital from his successful sale of two previous start-ups in TV and video gaming, along with investor contacts.
Can someone shed light on this paragraph? Twitch sold for $1B, so it's probably a bit disingenuous to take so many digs at Kyle's expertise & accomplishments... If anything, Kyle's software expertise is just as (if not more!) valuable than Jeremy's MechE skills for the early Cruise product.
EDIT: Also, I'm pretty sure Kyle worked on MIT's DARPA entry [1]. At the very least, I know he was working with laser rangefinders -- I wrote an article back in 2008 using photos of his SICK LRF teardown [2]. If anything, after reading this "he stole my expertise/idea" claim, I'm more inclined to side w/ Kyle & sama.
I think he's implying that Vogt took pride in not finishing his education, which is an implication that Cruise would've never made it had Guillory not agreed to collaborate with him.
I would imagine that this is supposed to help support their argument for conversion, that Kyle was inclined to use Jeremy's IP contributions in part because Kyle was otherwise incapable of practically accomplishing the company's goals.
It does seem harshly written, but the same could be said of the complaint and sama's post.
after reading this, YC and Sam altman might be the dagger to kill the acquisition by GM...
if true of course... but cant deny that he was a founder and has somewhat of a claim. do i think he deserves 50% in any possible scenario? no... but he was being strong-armed into taking the deal (which is just business as usual).
if this goes to Jury trial he has a case for more than the measly 4.5million
edit: "deserves" was a bad choice of words, i meant entitled.
That is probably more than an engineer with a typical 100 basis points would get. You think he deserves more than someone who ACTUALLY built something at the company.
What is interesting to me is that the video offers some hints that both parties are being uncharitable in their description of the other party.
Jeremy acknowledges previous robotics and technical competency of Kyle, and Kyle describes both of them having a fairly developed plan involving commodity components, a plan to bring to market quickly, and "constraining the problem".
Nothing in the video is a silver bullet, and I have no idea what the final legal implications are. But it seems complicated. It certainly doesn't sound like you can write off the short 1-month period in which Guillory worked on it, and it suggests he may have contributed to patentable items or significant architectural designs, which if then used to carry out Cruise's products, would really raise questions if Guillory's degree of ownership (yes, 1-month of architectural designs really are that big of a deal).
But it also absolutely does not seem like Kyle is so devoid of technical expertise that he couldn't have advanced the company without critical work from Jeremy.
Whatever the outcome, I think it will be contentious and drawn out.
the application that Vogt himself submitted to Y Combinator described repeatedly that Guillory was a founder of Cruise Automation and states unequivocally in response to a question asking “who are the shareholders and what percent does each own?” that “Cruise Automation is a Delaware C Corporation created in September 2013. 50/50 split between Kyle and Jeremy."
If true, that could be worth hundreds of millions, which is an even larger amount of money to walk away from.
I wouldn't read too much into that or anything said in the complaint until the actual source documents are filed and we see the response to the complaint filed in court.
That could very well be the nuisance value of the suit for them in their situation. Trying to judge a case from just the initial complaint is far too incomplete a picture to go on. I'd withhold judgement until there are more facts established that both sides have had a chance to argue over.
Almost everything you read in the media is ill-informed analysis of non-lawyers. Haven't had much good coverage since Groklaw.
I agree that the source documents are important. But the question shouldn't be whether Jeremy's side can produce them. If they couldn't, this lawsuit wouldn't be happening right now. Clearly, they think they have a significant chance of winning. Otherwise, Jeremy wouldn't have turned down $4.5 million.
I agree with you, but remember that Jeremy turned down the 4.5 before having a chance to consult with his lawyer. So he must have believed he had a significant chance of winning at that point, and his lawyer must now believe there is some chance of winning or he wouldn't take the case, but we don't know that the lawyer would have advised turning down the 4.5.
Certainly turning down a $4.5M settlement suggests you believe there's merit to your claims. Also, reputable lawyers won't take on a case they don't believe they have any chance of winning, and Keker & Van Nest appears to be a reputable firm. So not always, but in this case, basically yes. Admittedly there is a bit of a difference between "chance of winning" and "some merit" (unfortunately) though.
Even SCO hired reputable lawyers. Alas, it's generally the less rational plaintiffs where people give them entirely too much credit.
It's always better to wait for all the facts first. We have no reason to rush to judgement, nor is it a good idea. It simply makes one easier to manipulate, as the truth is most often the last thing to be heard. It's always easier to toss out a few quick lies than to painstakingly document the truth, especially in court.
His beliefs may or may not conform to reality. I don't find it worthwhile to prejudge the cases based on my read of someone's actions. He's not required to act in a rational manner and the less rational a plaintiff's behavior, the more outlandish the claims may be (see also: Paul Ceglia).
So I'm going to stick with no opinion either way and wait for the hard evidence, rather than trying to read the behavior of people I don't know, who may or may not conform to my ideas of rational behavior, which is something we've yet to establish.
This is very important given that flat-out crazy parties (see also: SCO) have tied up the courts for, well, decades based on stuff and nonsense (and mostly the latter). As I can't prove whether plaintiff or defendant are rational until I see evidence, we're stuck with "stay neutral until you get the facts."
I've read plenty of cases and I've yet to see a case where prejudging the parties was a good idea. Contrarily, I've seen plenty of people get excited about nonsense that was laughed out of court later.
So no, there just isn't a good reason to rush to judgement on this or any other case. Whether the plaintiff or defendant is right is something we should wait to decide later, once we have a more complete set of facts.
He claimed to own 80% of Facebook after reaching a written agreement with Mark Zuckerberg and filed a lawsuit[1]. He managed to retain some very high profile law firms to pursuit the case on his behalf.
It was only discovered later, by his own representatives, that he had forged the evidence (he had hired Zuckerberg to do some work, but not on Facebook) and the case was dismissed[2].
Facebook went on to sue the lawfirms, Ceglia was charged with fraud and last anybody heard from him he escaped house detention awaiting sentencing and is now a fugitive[3].
The complaint suggests that he was asked to make up his mind really quickly without extended discussion with a lawyer.
"Altman, also said he was authorized to negotiate on
Cruise’s behalf and offered Guillory triple the amount of Vogt’s previous offer, but only if Guillory would agree to sign a formal settlement agreement that same day. Cruise’s attorneys then sent Guillory a lengthy settlement demand and Altman told him he could have only two hours to propose any changes. When Guillory told Altman he would not be able to meet that deadline because he needed to review the proposed terms of the agreement with legal counsel, Altman told Guillory he should fire his lawyer if he had already retained one, and offered to send him a list of lawyers to consult. Guillory could not comply with Cruise’s unreasonable deadline, and as a result, it passed on Friday, April 8, 2016."
If this is true (and given the obvious biases being displayed by both sides, I'm not sure it is), but if it is, it would really lower my opinion of Sam Altman.
He knows exploding offers suck[0] and he knows they are used to exert time pressure on people rather than letting them make informed decisions.
I know he said in his Cruise post they had no choice because they were under time pressure themselves from the merger, but to not give him sufficient time to consult his own lawyer and to suggest instead to choose one from a list he provided, doesn't really seem like someone acting in good faith.
Whatever time pressure they are under due to the merger is only going to be intensified due to this matter and I can't help but wonder if it's made things worse.
Exploding offers suck for whom? That's what's missing from that post. They suck for the disadvantaged party. They're used because they're beneficial to the advantaged party. That blog post is propaganda for YC; it says "Hey, look, the other VCs are gonna try to be mean to you, but we're gonna be REEEEAL nice ;)". They just picked something that they knew was a pet peeve for founders and that they knew wouldn't really cost them substantially to exclude from their courting strategies (as YC already has the best reputation in the business, they don't need exploding offers to get founders to sign up with them). There was probably a list of 5 "X sucks" articles that could've been written and sama just picked the one he felt he could work with best that day. Such pieces should be recognized as the intentionally-placed PR pieces they are, instead of pretending like it's just a random, unvetted musing from the YC president.
sama really wants this deal to go through and he is pulling out all the stops to try to make it happen, including pressuring Jeremy in a way that he's already stated is unfair (though it's unclear how sincerely-held this belief is and how much is just an attempt to court more founders; sama's employment of this technique seems to imply he doesn't really think it's that bad) and then publicly shaming Jeremy to try to get control of the story's narrative and make it "lazy nerd tries to defraud noble investors who push the boundaries of tech" instead of "mega-rich investors won't let a founder get his share of a massive buyout".
Every action is a tradeoff. If I'm being honest, I would probably do a similar thing if I were in sama's shoes, and do everything I could to spin the situation in my favor, since I had already convinced myself that my position was fundamentally correct and that this guy really was trying to rip everyone off. I think most of us would, even if we're not willing to admit it on HN.
I still hold however that if true it would lower my opinion of sama - not because he used an exploding offer, but because it would mean he set a bar he is only willing to meet when there's no disadvantage to him (everyone wants to apply to y-combinator) rather than because the bar is a worthwhile thing to aim for.
P.R. or not, he's on record as saying these types of offers are a poor way of treating people, ergo, if he used one, then by his own definition he is engaging in 'terrible behaviour'.
$4.5 million seems to me to be a very generous offer based on actual work performed, but I don't know how many people would consider 2 hours (as alleged in the complaint) to be sufficient time to assess an offer worth $4.5 million (and potentially much more).
If he doesn't have the money to pay the attorney out of pocket, he is then most likely going to pay them with a big % of his "winnings", if he does succeed. In which case, the attorneys would fight tooth and nail to get as much as they could "for their client."
Jeremy was "waiting", while Cruise raised seed, Series A then B, and congratulated them assuming that he still had 50% and was happy to see his work grow?
He never thought to protest, or sign any documents at each round giving his consent. If this isn't extortion I don't know what is.
It will be pretty easy for Cruise to prove he wrote no code/prototyped nothing. All he has is association with Kyle and Cruise for 4 weeks before they parted ways.
Sad to think all the engineers at Cruise, working their ass off, getting fucked over by this guy. He'll probably end up with more than all of them.
The engineers will not be screwed over. They get the same amount -- whether Jeremy wins or not. Jeremy is seeking half of whatever Kyle is slated to receive, i.e., his diluted pre-seed 50% stake.
1. Deal falls through (unlikely)
2a. Deal goes through, and engineers amount are held in a reserve fund for 18 months to 2 years until the lawsuit is settled or the after the above timeframe. This is standard in situations like this.
2b. GM may reneogotiate to have this come out pro rata. Also unlikely (this may be incorrect if dillution only impact Kyle. Jeremy does claim he wants 50% of the whole pie)
So in all scenarios, this does not bode well for them at all. Kyle must be furious, but for the engineers who had no part in this, who there is no question have both ownership and actually wrote code, I feel very sorry for.
> So in all scenarios, this does not bode well for them at all. Kyle must be furious, but for the engineers who had no part in this, who there is no question have both ownership and actually wrote code, I feel very sorry for.
I agree in principle that Jeremy does not deserve any proceeds of the sale, because he did not contribute to any of the valuable IP that GM wants to acquire.
But there is one serious issue here I don't understand (devil's advocate mode) ....
If Kyle and Jeremy actually founded a Delaware C-corp in Sept 2013 (claim #11), then both their names would be on the officer's list. If that charter specifies a 50/50 split of corporate control, then legally Kyle has no ability to simply tell Jeremey that he's "fired" (claim #14). In fact, I don't think it's legal to fire a significant shareholder outright, unless you have an official company meeting and hold a vote. In this case, it's just 2 guys, so theoretically some impromptu meetup counts as a shareholder meeting. Also note here that the courts don't like having shareholder meetings without records, and in such cases leads the courts to treat such activities as non-corporate events (aka unofficial). In any case, it boils down to what ownership was declared when the C-corp was incorporated.
If someone controls the majority voting rights (or a collection of voters), then they can vote to remove someone from the shareholder's group. However, as far as I know you cannot simply seize ownership from the person you remove from the shareholder's group. The company must then be valued, and the person being ousted must be compensated for the value of his share. Furthermore, you can't simply revise arbitrarily future ownership. Jeremy's holdings would be appropriately diluted whenever fundraising events occur. Weirdly, Jeremy expected to receive his "50%", which as any person should know would have been diluted by investment rounds. Major investors are always involved during these events, and everyone knows exactly what they are getting. The fact that he thought at the end he would "get his 50%" leads me to believe he never cared about asserting ownership until the final big payday arrived.
I think Cruise as a company has a serious problem. If the documentation exists to prove this 50/50 ownership in Sept 2013, there is no way this lawsuit will be smooth sailing.
Exactly. If the 50/50 split is on paper, and signed by both parties, then Kyle is basically fucked. It literally doesn't matter of Jeremy "wrote any code" or whatever during his short time working with Kyle.
This was supposedly in place before the vesting schedule. Vesting is designed to limit, not give, shares to owners. So if he never signed anything and was part of the company when it formed and it was agreed that it was a 50/50 split I don't believe that vesting would matter for his position at all.
It still isn't clear to me how Vogt cut Guillory from the company. How that is even possible when they had already established the company at a 50/50 split?
This also sounds like he was around for a lot longer than Sam implied in his blog.
I have a lot of mixed feelings about this whole thing; parties on both sides have been rolling around in mud it seems.
I would say most likely. No doubt would it be requested during trial and they would both know what's on it so saying something untrue about it would be profoundly stupid. In my opinion anyway.
This whole case is really surprising. I would expect intellectual property assignment agreements and a vesting cliff, particularly after cofounding Twitch.
On the other hand, I know how normal it can feel to trust each other, procrastinate on docs, and just get all over the tech.
Ok but one would think that some enterprising lawyer at GM or Ycombinator or on retainer to Sam Altman, investor, would think to do this, right?
Without looking at the incorporation documents on file, I'm sure they don't say that Jeremy gets 50% of the stock. If they did, there wouldn't be a lawsuit. It would be cut and dry.
I think what Jeremy is arguing is that he and Kyle had an agreement in the early days before paperwork, and that that agreement was not properly documented when the paperwork was written up. This is an extremely difficult thing to prove, and Kyle and his investors will no doubt lean heavily on the actual paperwork to sway the court.
This is wrong. Both the original suit and counter-complaint directly reference the fact that Kyle founded the company before meeting/engaging with Jeremy.
I dont think it has officers names on that $20 report.
>If you are requesting the $20 detailed information option, this application will not return actual images of the documents on record. This application will return a page listing the 5 most recent filings, franchise tax assessment, total authorized shares if applicable and tax due. Officer and Director names and addresses are maintained on the images of the annual reports and are not available through this application. If you wish to order a copy of an annual report please call 302-739-3073 for more information
The YC application isn't a legal document and Kyle (having gone through YC) knows this. Legally he'd have full ownership and in the application specify 50/50 meaning if/when they formalize the relationship that is what the equity split will be. YC doesn't really care what the actual current/legal split is at the time you write the application. What they care about is what the split will be by the time you start YC because that is what is relevant to them.
And (my guess) is that the real reason they care about the split is that they're looking for red flags. i.e. is the cap table already messy with lots of people on it? Is the split NOT 50/50 signalling the founders don't consider each other equals which is a bad sign, etc.
Well, I mean, presumably a lawyer associated with the case who was interested in proving it could depose Mr. Vogt and ask him under oath if he posted that comment.
That would seem to be the case. If Jeremy's claims were true there wouldn't be any lawsuit, as Jeremy would already have what he is currently suing for.
It amazes me from the other HN replies comments how much debate and confusion there is, about something so obvious.
As someone who has both started and worked very early at multiple startups, it's so incredibly outlandish to hear someone claim that they brought in a business plan and some ideas, and that ideas alone should represent an equal percentage ownership to someone who actually worked on building a business for multiple years. In startups no battle plan ever survives first contact with the enemy. There is a reason why most successful companies release an initial version of a product early, then adapt to market conditions rather than sitting down, writing a long business plan, and executing it.
If Jeremy's MechE experience and background in self-driving cars was so valuable how did Cruise manage to pivot from just offering an autonomous driving add-on that only worked on the highway to building a fully-autonomous city-based driving solution without him. How did they manage to raise millions of dollars, write all the code, and build all the hardware without him. It just doesn't add up.
> it's so incredibly outlandish to hear someone claim that they brought in a business plan and some ideas, and that ideas alone should represent an equal percentage ownership to someone who actually worked on building a business for multiple years.
I really don't understand your view here. If the value of the business plan didn't merit equal percentage, that should've been made clear at the onset. At the time, according to Jeremy's complaint it was valued at 50% of the company:
... Vogt agreed that Guillory should be a co-founder and 50% equity owner of Cruise.
If the business plan and some ideas didn't merit 50% ownership, Vogt shouldn't have agreed that Guillery should be a 50% equity owner of Cruise. Simple as that.
Ownership as stated in a Y Combinator application 100% of the time implies there is also a vesting agreement.
I've filled out my own (successful) YC application which stated that I owned 50% of my company. My own equity was still subject to a vesting agreement requiring that I continue to be employed at the company.
A proposed (or even stated) equity split doesn't grant outright ownership. It would be impossible to raise investment from any professional Series A/B investor (anything involving a priced round) without founder and employee vesting, typically on a 4 year vesting schedule with a 1 year cliff at the very least.
> Ownership as stated in a Y Combinator application 100% of the time implies there is also a vesting agreement.
An ownership agreement doesn't require vesting, unless one was agreed to. An implication is worthless.
> A proposed (or even stated) equity split doesn't grant outright ownership.
In a YC boilerplate stock vesting agreement, perhaps. Doesn't apply to contract law as a whole.
EDIT:
> It would be impossible to raise investment from any professional Series A/B investor (anything involving a priced round) without founder and employee vesting, typically on a 4 year vesting schedule with a 1 year cliff at the very least.
You can raise investment from someone if they never know of an outstanding ownership claim until an event occurs.
There has to be a definitive and clearly stated offer to do something in exchange for valuable consideration to make a valid contract. A document that simply says what the proposed ownership is doesn't make said ownership legally valid.
Consideration takes many forms. Just because a small, niche population like HN thinks something isn't consideration, doesn't mean a jury of 12 is going to see it the same way.
The complaint says that Jeremy brought to the initial relationship his previous work on self-driving car technology, for which he received 50% equity. Kyle brought his capital, experience, and VC contacts, for which he received his 50% equity.
Now, maybe that's a lie, but taken on face value, it reads to me like there was exchange of value between the company and each founder.
OK firstly, consideration doesn't have to be "valuable". It has to have _nonzero_ value, but that value can famously be as trivial as "a mere peppercorn" [0]. Furthermore: "a peppercorn does not cease to be good consideration if it is established that the promisee does not like pepper and will throw away the corn".
The point is that the law doesn't attempt to make everyone "be nice", nor does it protect you from making a bad business decision. It's really just ensuring that there was _some_ business (ie, some exchange of nonzero value) occurring at all.
Secondly, it's important to note that a written contract is not absolutely needed to enact shared ownership; a written contract (or a deed, or a shareholder's agreement) is just to formalize the agreement in writing to avoid disagreement later.
If you start working together, shared ownership is the _default_ in the absence of any mode-changing agreements. Were they working together? A recorded video, in which they take turns looking into the camera and effectively saying "We are working together" [1] is a pretty strong evidence that, at one point, they were working together.
Thirdly, in the absence of formal documents saying "We are officially working together" or "We are officially not working together", the court has to fall back on attempting to determine the intention. It will have to fall back on looking for any evidence (like that video) that suggests they were in agreement about working together at some point.
I'd imagine most of them start that way. Most startups go without a formal partnership agreement or incorporation until they need it (like being funded). Look at the winklevosses and facebook
No, most of his stake is almost certainly from shares given to him as a founder. Mark Zuckerberg publicly admitted at Startup School that it was a billion dollar mistake not to have founder vesting (because he didn't know anything about startups at the time), and claims that Eduardo "just bounced."
Anyways, this is irrelevant because the fact is Facebook initially did not have founder vesting.
Just because your ownership agreement stipulates a vesting schedule doesn't mean all companies are organized that way. In fact, I believe the default is to have no vesting, which is why we have vesting agreements in the first place!
I'm not arguing that having immediate vesting is a smart way to organize a company. But, to claim that a YC application 100% of the time implies anything is a stretch.
Vesting is absolutely not implied, expected, or required by the law. Regardless of common practice in YC companies or YC applications, vesting is not the automatic default mode in corporation law or contract law.
If there is evidence of an agreement (whether written or oral) between the parties to apply a vesting schedule, then that will override the default mode; otherwise the default mode (no vesting) prevails.
> it's so incredibly outlandish to hear someone claim that they brought in a business plan and some ideas, and that ideas alone should represent an equal percentage ownership to someone
This is a filter bubble that startup founders need to snap out of...in the real world, two people can agree to anything, and general startup best practices dont dictate or say anything about the past, they can just guide you in the future.
That startup advice about how to split equity is sound advice and it is arguably outlandish to not follow it...but that in no way shape or form makes it the reality of what actually happened. People agree to all sorts of things all the time.
Unbelievable. An experienced & successful entrepreneur would take on an unknown cofounder without any kind of vesting schedule + cliff. Doesn't make any sense to me. I am not buying Jeremy's side at all.
Yeah, but if that is true the agreement should be in writing. So I think Kyle should be able to easily prove Jeremy wrong if they did have a vesting schedule. Edit: according to Sam Altman's blog post they never got around to signing employment agreements.
I can't see how there is any possible explanation of the agreed upon facts that doesn't paint Kyle as making a horrible mistake with respect to ownership rights.
He submitted a YC application that listed them as co-founders, and has no paperwork showing the Jeremy gave up his share (whatever it might have been).
So, the only explanation I can come up with is that " An experienced & successful entrepreneur" took on "an unknown cofounder" without proper paperwork.
That's a pretty surprising set of circumstances, but it seems pretty clear that it happened.
> The promise was memorialized in the October 21, 2013 Y Combinator application, submitted by Vogt with the knowledge and approval of Guillory, that identifies Guillory and Vogt as the founders of Cruise and lists Guillory as a 50% shareholder of Cruise Automation
This is interesting, as the YC Application does require breakdown. ["If you have not formed the company yet, describe the planned equity ownership breakdown among the founders, employees and any other proposed stockholders. (This question is as much for you as us.)"]
"According to Kyle, Jeremy did not write any code or build any hardware during this exploratory period. He did help find an office for the company. At the point of Jeremy’s departure, neither he nor Kyle had signed employment agreements, stock agreements, or any documents of any sort with the company. Even if Jeremy had signed a stock agreement, he wouldn’t have reached the standard 1-year cliff for founders to vest any equity."[1]
Right, but even without contracts, if there's a document listing that the planned ownership split is 50%, and that they're both listed as cofounders...
It sounds like there's documentation that this was the original agreed upon split. If there's no documentation of some sort of "vesting" or "minimum effort required", I don't see the legal argument for this person to not have this split.
Contracts are documentation of agreements, but the agreements themselves are what hold legal strength. The contracts just help when there's a dispute over the facts.
To have a valid contract you need consideration: you can't get 50% for doing nothing, you have to put up something in exchange (money, skill, resources, etc).
edit: (I'm not saying anything as to whether Jeremy did so).
IANAL but it seems plausible they could argue that the 50% was for the original concept and all the work he had done on it up to that point. Or are they really arguing that they threw all that away and started with nothing after he left? I agree with those saying that ideas don't make a company, but startup companies don't suddenly become worth a billion real dollars to GM without ideas. If what GM is buying is largely IP, and that IP is largely based on the departed co-founder's ideas, then his claims seem reasonable to me.
Edit: reading further I guess they are arguing that none of his IP is in what GM is buying. So I guess that will be the real point of contention.
I don't think this is true. Unless said contract specifically says that your 50% of the share is contingent upon a list of explicitly spelled out contributions, you would actually be entitled to the 50% even if you did nothing.
Yes, but what if, for example, the work that he had done prior to beginning that one month's involvement in Cruise was the majority of the IP that GM wants to buy? Would you still interpret it the same way? I have no idea whose IP is in there, at all. Just pointing out that simply stating he did "a month's work" could be quite disingenuous.
The issue is (assuming what Jeremy says is true) that he was forced out after 1 month with no say in the matter, no agreement & no buyout of stock.
So while 1 month probably shouldn't be worth 50% of the company, you also can't just decide that you don't want your co-founder to have a stake in your company any more, and push them out.
At the end of that 1 month, they had both done equal work (about a month's worth) and had equal share (50% each). It sounds like (according to Jeremy's story) he still owns that because no one agreed to a formal change in ownership.
Conspicuously absent from this paragraph (and Sam's post) is any mention of the technology that Jeremy claims to have brought to the initial partnership from his previous work.
From this paragraph, it sounds like Jeremy could have been any dork off the street who can find some office space. The question then is why Kyle worked with Jeremy at all, and in particular, why he proposed to Ycombinator to found a self-driving car company with Jeremy as an equal partner.
The statement is suspiciously precise. It says that he didn't build hardware, write code or file any patents. But that's obviously not the stuff to be doing at that stage of the company. It would make sense that he's doing research and planning out what the build steps might look like. And Sam's post conveniently omits any reference to this kind of work.
..ir indeed do other invention work and introduce IP to the company from his years of prior engineering and design work. And no time to patent it before he got thrown out.
From the YC application video alone, there seems to be a major point of contention about what Jeremy actually contributed. In the video they are talking about specific plans involving commodity hardware, that they devised a way to constrain the engineering problem to make it feasible, and that they had co-developed a business plan to get it to market quickly.
That's all just plainly in the YC application video.
That doesn't seem compatible with what Sam Altman says, so either the video does not depict Jeremy's contributions up to that point in time, or else Sam is incorrect and has omitted many contributions from Jeremy. Those contributions may or may not justify Jeremy's claim, but they certainly complicate the issue and present a very legitimate position for Jeremy to at least make the claim.
Jeremy's claim may ultimately not be considered or may not be upheld, but either way the degree to which Altman seems to think it should be categorically ignored does not seem to match the facts regarding the initial formation of Cruise at all.
When I re-read this carefully, I get the feeling an analogy might work:
"You see, your honor, I meant to pay my bill at the restaurant, but they threw me out on the sidewalk before I had a chance to pay it."
As in, one of the two parties might have been genuinely interested in signing such documents, and one of the two parties might have had reasons to want to avoid letting the other one sign those documents.
This is exactly the right question. It's clear that Jeremy is not and has never been a formal shareholder in Cruise.
The question is whether having explored (and subsequently abandoned) a potential co-founder relationship constitutes sufficient basis for an equity claim.
I think the majority of this (counter)claim is that Jeremy provided critical IP to the company as consideration for (promised) equity. That makes the issue more complicated, unless Cruise can prove that they threw out 100% of the intellectual property he brought in during his short tenure.
The facts seem to be more on Jeremy's side than Kyle's except that the application video demonstrates that Jeremy believed Kyle also knew something about robotics.
Regardless of the outcome of this incident, if you apply to Y Combinator with someone who knows the YC partners better than you, and your cofounder decides to push you out, your cofounder will be supported by YC against you. This is now something that every team of founders will have to think harder about now. It will harm founder cohesion which will reduce the success percentage in each batch.
On the other hand, this is a positive signal to people who want to exploit a cofounder to get past the YC application process and then push them out of the company.
Or it means you should always get everything in writing no matter what side you're on. A simple statement regarding how the shares vest would have prevented this.
"If you apply to YC with someone who knows the YC partners better than you and your co-founder decides to push you out, your co-founder will be supported by YC against you"
What? One founder worked on the company for almost 3 years and the other party in question worked on the company for one month, yet this is a huge YC conspiracy? How do you get this crap out of the written complaints in any way?
Uh, how do you not get that from Guillory's counter-complaint, unless you believe that Guillory is lying? He claims to have been forced out. The YC app has him listed as a 50% co-founder. Altman's blog post and the complaint against Guillory don't dispute that fact.
Even if he was forced out how does this involve YC in any way. Everything in both timelines With regard to Jeremy and Kyle ceasing to work together happened prior to YC even agreeing to invest in the company.
Because YC accepted the application with the names of both founders and a 50/50 split. Vogt has not produced documentation that, at the time that YC accepted Cruise or shortly afterwards, that they formalized the fact that Vogt was sole founder.
A couple of years later, just as it is on the verge of sharing in a big payday, only now does YC take an interest in saying that Guillory is an extortionist who shouldn't get a co-founder's due. If you're someone who believes Guillory's side of the story -- that he was forced out -- then yes, you might see YC and Vogt conspiring against Guillory.
Even if he were forced out, do you honestly believe that someone who was fired after 1 month at a company is entitled to full 50% ownership in that company? Can you honestly not see how that claim, given its timing, is being construed as extortion?
I didn't say that I believe that Vogt and YC claim of extortion is false. You asked, "How do you get this crap out of the written complaints in any way?", because you seem surprised why any reasonable person could consider Guillory's side, given the facts stated in the complaint and counter-complaint.
Well, his counter-complaint claims that he was integral to the development of the company. To back that claim, he has actual paperwork, the existence of which has not been disputed by Vogt. Of course, there's plenty of time for Vogt to produce documentation showing that Guillory's stake was rescinded, but we haven't seen it yet, not even in Altman's principled "screw the lawyers" blog post yesterday.
As someone who has worked in early stage startups for 9 years now, I'd be hard pressed to believe that anyone who worked at a company for one month at its beginning was 'integral to the development of the company'. That's just not how startups work. The value isn't in the initial idea, or the detailed initial plan. It's in the hard work, the long nights writing code, the prototyping and testing, and prototyping and testing again, the recruiting, the sales, the fundraising, the deal-making. So no, I don't believe that anyone who has worked for 1 month at any company at any stage deserves 50% of that company. That is fundamentally unfair.
Fundamentally unfair happens all the time, especially when the law is at play. But unfair doesn't mean immoral, illegal, or even "mean".
Further I would dispute the notion that the value is in the hard work, long nights, etc. Value definitely does lie there and that's definitely measurable. But there's TONS of value in outlining the correct approach, dividing the problem correctly, etc. That's called architecture and I've worked on projects with none of it and it's a disaster.
For the starkest example of how this plays out, I would invite you to watch the NOVA special "The Great Robot Race" which outlines how all the competitors worked on getting "the best X hardware" where X was the piece that they thought was the most crucial to success including now giants like CMU. In the end it was folks from Stanford who recognized that the exact car, exact LIDAR, etc weren't the crucial missing link, but rather that the software was the problem. And they won based primarily on that insight and then successfully executing.
I have a counter-example. I worked at a small SaaS company where I built the foundation web service and performed query optimization that took from them a highly-inadequate non-scalable product to something that handled scale gracefully. A substantial amount of this work was done in my first month there - in my opinion, my domain knowledge ensured that what I did for them in this month would have taken them a lot more hardware and many months to even get close.
You seem to be very dismissive of turning-point ideas and crucial features that make or break companies. Archimedes' principle, the foundation of modern naval history, was a Eureka moment thought up in a bathtub. Should we ignore this contribution because it took moments to come upon this insight?
I am not taking sides here and wish to let the courts work through this complaint without casting aspersions on either side.
Come on, stick to the actual claims, don't make up strawmen scenarios.
Jeremy isn't claiming 50% of the company, he is claiming 50% of Kyle's share, minus whatever Kyle would be given in exchange for the $100k he put in.
Noone is saying that Jeremy is entitled to that share because of a month of work. Jeremy is claiming that Kyle promised him a 50/50 split, and that their YC application video is a writing of this promise. And if that's the case, then the magnitude of Jeremy's effort doesn't matter legally.
If you have 50% of equity, therefor 50% of the vote in corporate decisions, how can the decision be made to "fire" you without your active consent?
"Fire" seems to apply to someone compensated under the normal "right to work" ("right to fire") legal framework in the US, not a founder. So the terminology seems very odd to me.
(Maybe this just reflects my lack of understanding of business law?)
Would Cruise have been accepted to Ycombinator at all if it had just been Kyle applying?
Put another way, if Jeremy didn't contribute anything, then why did Kyle start working with him in the first place? Put him in the YC video? List a planned 50/50 equity split in the YC application?
These seem to be at least reasonable questions IMO.
All that said, I think the issue here is that Sam Altman personally invested in Cruise, which creates a subtle conflict of interest. It's in Sam's best interest as a Cruise director to crush Jeremy, but perhaps (as the parent suggests) it would be in YC's best interest to just stay out of it (above the fray).
They did get accepted into YC without Jeremy (who had already parted by the time the interview was done).
Perhaps your question should have been "would they have been shortlisted".
> Would Cruise have been accepted to Y Combinator at all if it had just been Kyle applying?
Are you seriously asking if YC would have accepted the former co-founder of a company that sold for over a billion dollars? Isn't the answer to that question obvious?
The answer is, Kyle was entirely comfortable granting 50% equity because it was subject to standard vesting, and everyone involved understood that Jeremy would own no part of the company if he left in the first year.
Not without begging the question. Because we could rephrase your sentiment as, "Are you seriously asking whether a co-founder of a billion dollar company should list some unknown engineer as his 50/50 co-founder on a YC application?" Most people would say, "Of course not", and yet it is currently undisputed that Guillory's name is listed as such.
> we could rephrase your sentiment as, "Are you seriously asking whether a co-founder of a billion dollar company should list some unknown engineer as his 50/50 co-founder on a YC application?"
Please don't, that is a completely different question. I'm honestly not sure how you managed to conflate the two.
> Would Cruise have been accepted to Ycombinator at all if it had just been Kyle applying?
Yes, without a doubt. He's previously YC by way of Justin.tv / Socialcam / Twitch. If you're good enough to go through YC once and have a track record of success you're a shoe-in for your next venture.
Realistically Kyle would have been accepted to YC without any idea and he would have been wildly successful with Cruise even without YC.
a vesting schedule is standard and would not have been overlooked by someone who founded 2 companies w/ successful exits.
here's a direct quote from sam's post (http://blog.samaltman.com/cruise) : "Even if Jeremy had signed a stock agreement, he wouldn’t have reached the standard 1-year cliff for founders to vest any equity."
i'm just reading the case as i see it. there might be more or less to this - but there were multiple opportunities for the guy to come forward especially after previous rounds.
no doubt Jeremy is opportunistic, but that doesnt really affect his claims legally if he was in fact identified as a cofounder when there is no contract in place to say otherwise.
If there were an existent contract providing for a cliff, this would have been the place for him to say so. He didn't; he referred to the "standard 1-year cliff". The remaining question is, absent the signed stock agreement, what was the disposition of ownership? That should come out pretty soon here.
Given that the plaintiff has turned down multi-million settlement offers, and given that there's two quite reputable law firms working for the plaintiff who aren't in the habit of taking no-hoper cases, what's more likely - that the case is 'total bullshit', or that something actually was missed and overlooked in the early days that's now going to cost the company dearly?
If they initially agreed to a 50-50 split and then never nailed down the vesting paperwork or resolved the ownership issue after the plaintiff's departure - well, that's unfortunate, but that's on them.
It looks like this whole case rests on whether Jeremy can actually produce any document that shows a 50/50 split. This can be the corporate charter, or it can be some sort of paper with both their signatures. IANAL, but even the YC application alone may be sufficient if it indeed does say they're joint owners.
As a side note, Sam Altman's recent blog post [1] vilifying Jeremy really rubbed me the wrong way. Sam is hardly a neutral player in this, and his post really felt like an attempt to ruin Jeremy's reputation in Silicon Valley. Sam really should have kept his mouth shut here, because depending on how this case plays out, it may be his own reputation that may be endangered.
The most interesting thing to me is that Cruise went through YC, several funding rounds and most of a massive public acquisition - apparently before anyone did enough due diligence to find out about this being even a potential problem (if the claimant has any grounds - which it seems there are at least some amount) and heading it off at the pass.
Agreed, this is a massive fuck-up by everyone involved (Altman, Cruise Board of Directors, Spark Capital, etc). Even if the claim has no merit it should have been dealt with long ago, before the company got to this stage. Now all the employees might get screwed as a result.
But if there's any anger from screwed employees, it should be directed at the criminals who did the bullshit crime instead of the detectives who failed to identify the crime sooner, no?
In this case there is a fiduciary duty from the investors (detectives in your metaphor) to make sure that the company is free from these kinds of things. So while they aren't to blame - they aren't really off the hook either - it's more of a sin of omission.
And yes, in many cases when detectives or investigators in law enforcement are lazy with their work and miss something obvious, they often pay for it with their jobs.
Investors do not have a fiduciary duty to the employees. Members of the board of directors (which all investors presumably are not) have a fiduciary duty to the stockholders (which many employees presumably are not).
Do they? Serious question. I mean, I assume someone involved in the VC firm has a fiduciary duty to its investors, but it's not like an employee typically has a fiduciary duty to his firm's investors.
I don't think it's fair to blame all of the investors. The later investors were almost certainly misled, and not informed of this risk.
YC on the other hand was clearly informed that there was an individual who was considered a founder at some point in time. Despite knowledge of this risk, they invested and they facilitated follow-on financing. Now there's a big, dumb, expensive problem. YC dropped the ball, big-time.
The fact that Sam Altman is turning this into a public spectacle is further evidence that he knows YC fucked up badly, and probably doesn't have a legal case. The only reason to write what he wrote is if you're out of actual ammo.
VC firms are sophisticated investors and are supposed to conduct due diligence on behalf of their L.P's. Part of what the big management fees they charge are supposed to go to is ensuring that each investment is legally sound - i.e. having their people verify the incorporation documents, cap table, etc.
So yes, the fact that this situation has become known at this terribly late stage reflects badly on all the investors in previous rounds.
I'm familiar with due diligence processes. They're why I believe the later stage VCs are likely the victims of fraud on the part of Cruise's D&Os. All of those investors would've demanded a clean separation agreement if they had any information regarding the co-founder.
> The only reason to write what he wrote is if you're out of actual ammo.
This is really astute. In my experience, more often than not, when someone becomes angry at someone else, deep down they are really angry at themselves for letting something happen.
> The fact that Sam Altman is turning this into a public spectacle is further evidence that he knows YC fucked up badly, and probably doesn't have a legal case. The only reason to write what he wrote is if you're out of actual ammo.
This. That post was a huge red flag and after reading the claim it's very clear why he posted it.
> The fact that Sam Altman is turning this into a public spectacle is further evidence that he knows YC fucked up badly, and probably doesn't have a legal case. The only reason to write what he wrote is if you're out of actual ammo.
Between this incident and pg's "startups must be allowed to break the law whenever they want or else civilization might collapse" essay a few months ago, it's getting hard to take anything the higher-ups at YC say seriously.
I think this really hits the nail on the head. "The later investors" here really include everyone except for YC, insofar as investors have heretofor been able to take the YC stamp on a company as certification that these sort of issues have been worked out. I think the end result of this is that you'll see a market correction against YC companies as VC's find they have to put in extra due diligence they didn't have to before. Altman raising attention to this issue may act as a catalyst.
If you had a partner who left after a month - then do a financing right thereafter with vesting schedules and the like it's easy to assume that those same schedules apply to everyone. If it were to be caught- it would have been at the Series A but it sounds like so much time passed and his involvement was so short people just forgot about the guy.
If Jeremy never said a word about it since it would never come up. If I owned 50% of a company and it did a financing- I'd certainly inquire about my shares. Sounds like he never even did that.
Kyle probably feels like shit I am sure- it's a sickening case to read but to be honest I could see it going down exactly like that.
I imagine that things that seemed insignificant in the HN application may prove now to be quite problematic. I'd guess that founders might feel inclined to nominate a 50/50 split, assuming that anything else could be a red flag for YC's judgement?
IANAL, but wouldn't Jeremy's 50% be relative to the time he left the company? No reasonable person would assume a co-founder leaving a startup would retain 50% equity.
It seems that the people who now own the company acknowledge that he was the cofounder but feel that "well he didn't do much, so he doesn't deserve his full shares".
The law doesn't work like that.
It's exceedingly strange to have had the initial cofounder depart and nothing was done to formalise the terms of that separation.
Also Sam seems really annoyed that this ghost-co-founder has turned up with this claim at the most inopportune time, and suggests that this is bad behaviour. I don't think so, it's the right way to play it. Wait until you have maximium leverage and then play your legal cards. The missing cofounder would have been a fool to play it any other way, thereby losing his leverage. The evidence that he has played it right is that so many people are running in circles desperate to resolve it - he has them against a barrel.
It appears the due diligence was pretty loose. Heads will roll.....
Why? Im merely pointing out how the law works, and that if you want to win a legal dispute, do it when the opposing party has incentive (or better, a requirement) to quickly resolve the issue.
Not sure why pointing this out makes me not a good person to found a company with.
I have separated from a co-founder and I made damn sure we had an agreement in writing defining the terms of the separation. Didn't take much, no lawyers, just a one page agreement, three people each with a copy, all with signatures. All still good friends.
Which side is being more dickish in this case is still very much in dispute, which is why it's going to court.
You seem to be certain one side is looking out for their self interest much more than the other, which you have no way of really knowing because you are just another person commenting on a discussion on the Internet.
Unless you are personally involved in this matter, and know more than what has been publicly reported so far? And even then, how would we know you are not being biased in your judgments by your involvement?
So you are against anyone being compensated at the amounts under discussion?
Which is a coherent, defensible position. Sounded like you were selectively accusing one actor in this dispute as the "greedy" one, which I think is why you got so much push back on your comments.
So you're implying that you'd never work with YC or Vogt or any of their investors? GM is spending $1B to acquire Cruise, which is a vast sum for a small company that has been around for 3 years. Even 20% of that would be a great payout for all involved, and think of how much money GM could have left over to continue to revive the dormant U.S. industry, and U.S. fortunes at large. By your standards, if YC and Vogt were ethical actors, they'd ask GM to reduce the offer, because building things and innovating is itself an honest reward.
> By your standards, if YC and Vogt were ethical actors, they'd ask GM to reduce the offer, because building things and innovating is itself an honest reward.
What do you need a reward for at all?
Why are you trying to build something?
By my standards, your motivation matters a lot, it sounds like you think people deserve rewards for doing things, I don't think that makes very much sense. Gold star you did the right thing, bullshit.
So is cutting someone out of a company. My point is that this probably became an emotional issue. If that's the case, it's not hard to see how someone would wait for an opportune moment to assert ownership.
But, since we don't really know all the facts, if this was a mutual parting of ways, then I agree that it's a terrible thing to do.
The bottom line is we really don't know what happened. I can at least see how a reasonable person could walk this path if they feel they've been maligned.
...Because you have an agreement with someone that you were a 50/50 co-founder, and that agreement is on paper? Sorry, are you privy to some kind of proof that invalidates Guillory's central evidentiary claim -- in the same way that Zuckerburg and Facebook were able to show that Paul Ceglia fabricated a contract -- or are you just arguing from circular reasoning that Guillory is a greedy asshole and thus his claims that he was unjustly forced out must, QED, be false?
I think the claim is that demanding what is rightfully yours is greedy and selfish. I don't know whether I agree in this case (probably not), but there have been cases in my life where I do agree.
It's that "rightfully yours" bit that really bothers me. Where does that come from and why is it so obviously rightfully yours? It takes some gumption to assume you're in the right. This land is rightfully mine because I bought it from someone else who genocided a people, but okay great, it's rightfully mine, I feel super great about it.
Legal documents are part of a negotiation, not a casual conversation. If one side says they owe you nothing, you come in saying they owe you everything. You meet in the middle.
Assuming Jeremy's story is true, then by the time he exercised that strategy he'd already by forced out by his co-founder and was no longer a "teammate".
I don't think it's fair to judge the ethics of a person by how nicely they respond to being screwed over.
if anything, i would say this make it a +1 to start a company with hodoof, atleast he has some sense of contractual/legal requirements imo... its not about being a dick, you and all parties should know what you getting into/not getting into make sure you have written contracts/agreements in place incase something changes
The company left a liability floating around, which was a disgruntled co founder. Like a liability on your balance sheet.
And if you're the disgruntled co founder, this is your most opportune moment to extract maximum equity value for yourself.
What I don't understand is, if a company did this to another company, people are all like 'yeah, that's how the market works', but when a person does it to a person, they're all like 'you're heartless and not playing nice'. Why the hypocrisy?
> It seems that the people who now own the company acknowledge that he was the cofounder but feel that "well he didn't do much, so he doesn't deserve his full shares".
And, this seems a specious argument if we're to take the assertions in the complaint at face value (that he was forced out). At the very least, he was deprived of his opportunity to continue to participate in the company.
"It seems that the people who now own the company acknowledge that he was the cofounder but feel that "well he didn't do much, so he doesn't deserve his full shares. The law doesn't work like that."
Exactly. The founding documents are controlling, unless later modified by a contract signed by the parties.
The founding documents explicitly list Kyle as the sole founder and shareholder of Cruise. If what you state is true then Jeremy's claim is entirely baseless.
This counter-complaint conveniently breezes past that fact, and moves directly on to allusions of a verbal contract, as memorialized in the YC app.
Founding documents aren't the only document through which someone can be given 50% shares. If you found a company on your own, and then give me 50%, and it is on paper with your signature and mine, I now own 50%.
It is more complex than than, someone may create multiple conflicting documents and the you need to resolve them by going to court to figure out how to resolve the conflicts.
The ideal time to get a legal dispute resolved is immediately prior to an IPO or acquisition event because these events tend to require that the company has no outstanding legal disputes.
I find it funny that people seem uncomfortable with facts like this. It's not emotional or bad behaviour, it's simply the rules. Everyone has to work within the law and the rules and it turns out that the law and the rules provide an ideal time for resolving such disputes - pre IPO or pre acquisition.
I'd be pretty uncomfortable with a senior manager or CEO who didn;t understand things like that - it means either that they will get caught out, or will not know how to win when the time comes to win.
I completely understand your question. But the fact that I do and that you asked it is kind of absurd, if you step back a bit. Just because things can be argued to be within the rules does not make them okay. I guess it hinges on: Are you refraining from crimes because they are against the law or because you think they are wrong?
I've always believed that hinges on your belief at the truth of your dispute.
If you truly believe you have not been treated correctly, and presumably that is the reason you are bring up the dispute, then the timing is just a tactic in dealing with the behavior of others. The timing might be the only way you can get your dispute resolved.
If you are pushing false claims then timing is just one more step in your unethical behavior. Liars aren't ethical in the first place.
> Wait until you have maximium leverage and then play your legal cards.
From the other version of events, in how Guillory presents it, there were no cards to play - he just assumed the entire time that he had a stake and when the acquisition came he got in touch to figure out how to collect his share.
I know it seems absurd that someone can sit back and not do any further work and expect to collect as much as the other co-founder, but it is a valid legal argument.
The onus was on the company to set out a legally sound and defensible separation.
If you owned a business and you thought you owned 100% of it- and worked on it for 2 years how would you feel if someone shows up at the end saying they actaully are 50% owners. And they never said a word about it the entire 2.5 years you were working on it?
You were marching along working your ass off thinking you owned X but someone else believed they owned half of X and didn't say anything?
Isn't that a bigger deception? I think under US law there is a concept where if you don't speak up and it leads people to bad assumptions it can be problematic suing later.
Well, in this case, someone isn't some random dude from the Internet who you were never aware of. I understand your sentiment, but it doesn't apply in this case.
He worked there a month and at no point after leaving made any claims to ownership despite an equity round and several years passing. If you pretend for 2.5 years you don't own something and others take action based on that belief, is that not a worse deception?
Would Kyle or investors taken the same actions if they had known they held half the shares they did? There is dishonesty in staying silent.
But, well, we can't assume that Kyle has totally forgotten about him, right? So he has quite a bit of responsibility for this as well.
While Jeremy's timing gives him the most leverage possible (and it's definitely not the most honest thing to do), we can't just treat him as the villain, especially without knowing the full story.
Jeremy filed a counter claim which was his very well written side of the story. Officially that's what a counter claim is.
Under the law if you knowingly allow people to proceed under false pretenses, it's harder to make a claim later. If it's true that Jermey never asserted the claim until now I think that's fairly damning - not just from an ethics standpoint but also legally.
Also I never said Kyle has no responsibility here. You are putting words in my mouth. I'm sure Kyle feels terrible and it's a sickening claim and counterclaim to read frankly but I do think it's sneaky to wait until the last second and I do think legally there are consequences for doing that if it's true for Jeremy.
Both sides have now told their stories in full and as well written as Jeremy's claim is- it's still a shakedown for cash for one months work. And a sneakily timed one at that.
> Also Sam seems really annoyed that this ghost-co-founder has turned up with this claim at the most inopportune time, and suggests that this is bad behaviour. I don't think so, it's the right way to play it. Wait until you have maximium leverage and then play your legal cards. The missing cofounder would have been a fool to play it any other way, thereby losing his leverage. The evidence that he has played it right is that so many people are running in circles desperate to resolve it - he has them against a barrel.
It's the most lucrative way to play it, that doesn't make it the right way. The right thing is to come out into the open early and negotiate an equitable settlement at that time, not to wait to gotcha your former business partner.
As a self-proclaimed expert on co-founder issues[0], I'm glad that we're hearing both sides of the story. As expected, they don't match at all. Hopefully, SamA will read both, try to find an honorable middle ground, and write another blog post.
Basically, One mistake seems to have been made: writing on the YC application that they are both founders, possibly stating a 50/50 split. That's one mistakes, two years of hard work, and one billion dollars.
[0] As the author of the co-founder equity calculator, I still receive about one email a week from founders asking for advice about co-founder issues. After several years, I think I have seen about every possible problem with co-founders.
According to Jeremy, he gave him. an exploding offer, tried to get him to fire his counsel. Then he wrote a public blog post, upvoted here, and read by pretty much anyone in Silicon Valley about how slimy and unreasonable this Jeremy guy is (when he clearly has a vested interest in how this plays out). Nope, I don't think we'll see a 'middle ground' anytime soon, Sam is clearly playing on one team. That's fine. He picked his team. But I still think a public blog was a wrong decision from all perspectives: legal, strategic, and moral. And it will for sure be brought up in court as an underhanded tactic.
Sam is obviously a very smart guy, but not a very wise one. He is, after all, only 30 years old. He let his emotional side (anger, frustration) get the better of him when he published that blog post. It's not how a competent leader would have acted.
"After Guillory engaged counsel, cross-defendants then precipitously filed and made public their lawsuit, accompanied by a public blog post by Cruise investor and Director Sam Altman that wrongly accuses Guillory of extortion and an attempt to disrupt General Motors (“GM) acquisition of Cruise."
This is why you don't speak publicly about a court case you're involved with. Now every single word Sam wrote will be put under the microscope and whether or not he "meant" something won't matter. All that will matter is what the jury believes he meant by it.
That's the downside. It's certainly a real one and exactly why a lawyer would have advised him not to say anything. But there were also upsides, or at least potential upsides. Both in this specific case and influencing those involved current and future yc companies.
The reason general counsels make much less than CEOs is that it's a heck of a lot easier to always point out the risks than to weigh them against the rewards.
It's one thing to hear your lawyer's counsel and then decide to do it anyway, because the potential reward is worth the risk.
It's another thing to rush something through before your lawyer has a chance to provide counsel--which is essentially what Sam Altman claims he did, in his post.
CEOs make more than GCs, but they employ GCs for a reason.
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[ 3.0 ms ] story [ 285 ms ] threadCan someone shed light on this paragraph? Twitch sold for $1B, so it's probably a bit disingenuous to take so many digs at Kyle's expertise & accomplishments... If anything, Kyle's software expertise is just as (if not more!) valuable than Jeremy's MechE skills for the early Cruise product.
EDIT: Also, I'm pretty sure Kyle worked on MIT's DARPA entry [1]. At the very least, I know he was working with laser rangefinders -- I wrote an article back in 2008 using photos of his SICK LRF teardown [2]. If anything, after reading this "he stole my expertise/idea" claim, I'm more inclined to side w/ Kyle & sama.
[1] http://web.mit.edu/6.111/www/s2005/PROJECT/Groups/15/main.ht...
[2] http://www.hizook.com/blog/2008/12/15/sick-laser-rangefinder...
Is he trying to imply that Vogt never attended MIT and is making himself look cool that he dropped out?
It does seem harshly written, but the same could be said of the complaint and sama's post.
if true of course... but cant deny that he was a founder and has somewhat of a claim. do i think he deserves 50% in any possible scenario? no... but he was being strong-armed into taking the deal (which is just business as usual).
if this goes to Jury trial he has a case for more than the measly 4.5million
edit: "deserves" was a bad choice of words, i meant entitled.
Loads of people own huge stakes in companies without doing things with them (see most public stocks), that doesn't mean they lose ownership of them.
Sucks but that's how the private ownership cookie crumbles.
Jeremy acknowledges previous robotics and technical competency of Kyle, and Kyle describes both of them having a fairly developed plan involving commodity components, a plan to bring to market quickly, and "constraining the problem".
Nothing in the video is a silver bullet, and I have no idea what the final legal implications are. But it seems complicated. It certainly doesn't sound like you can write off the short 1-month period in which Guillory worked on it, and it suggests he may have contributed to patentable items or significant architectural designs, which if then used to carry out Cruise's products, would really raise questions if Guillory's degree of ownership (yes, 1-month of architectural designs really are that big of a deal).
But it also absolutely does not seem like Kyle is so devoid of technical expertise that he couldn't have advanced the company without critical work from Jeremy.
Whatever the outcome, I think it will be contentious and drawn out.
I assume the attorney would only make that statement if they had supportable documentation.
Given that Guillory appears to be a "needs a paycheck" guy that's an awful lot of money to walk away from without a damn good case.
the application that Vogt himself submitted to Y Combinator described repeatedly that Guillory was a founder of Cruise Automation and states unequivocally in response to a question asking “who are the shareholders and what percent does each own?” that “Cruise Automation is a Delaware C Corporation created in September 2013. 50/50 split between Kyle and Jeremy."
If true, that could be worth hundreds of millions, which is an even larger amount of money to walk away from.
That could very well be the nuisance value of the suit for them in their situation. Trying to judge a case from just the initial complaint is far too incomplete a picture to go on. I'd withhold judgement until there are more facts established that both sides have had a chance to argue over.
Almost everything you read in the media is ill-informed analysis of non-lawyers. Haven't had much good coverage since Groklaw.
This is California. Frivolous lawsuits make up a meaningful portion of our GDP.
It's always better to wait for all the facts first. We have no reason to rush to judgement, nor is it a good idea. It simply makes one easier to manipulate, as the truth is most often the last thing to be heard. It's always easier to toss out a few quick lies than to painstakingly document the truth, especially in court.
So I'm going to stick with no opinion either way and wait for the hard evidence, rather than trying to read the behavior of people I don't know, who may or may not conform to my ideas of rational behavior, which is something we've yet to establish.
This is very important given that flat-out crazy parties (see also: SCO) have tied up the courts for, well, decades based on stuff and nonsense (and mostly the latter). As I can't prove whether plaintiff or defendant are rational until I see evidence, we're stuck with "stay neutral until you get the facts."
I've read plenty of cases and I've yet to see a case where prejudging the parties was a good idea. Contrarily, I've seen plenty of people get excited about nonsense that was laughed out of court later.
So no, there just isn't a good reason to rush to judgement on this or any other case. Whether the plaintiff or defendant is right is something we should wait to decide later, once we have a more complete set of facts.
He claimed to own 80% of Facebook after reaching a written agreement with Mark Zuckerberg and filed a lawsuit[1]. He managed to retain some very high profile law firms to pursuit the case on his behalf.
It was only discovered later, by his own representatives, that he had forged the evidence (he had hired Zuckerberg to do some work, but not on Facebook) and the case was dismissed[2].
Facebook went on to sue the lawfirms, Ceglia was charged with fraud and last anybody heard from him he escaped house detention awaiting sentencing and is now a fugitive[3].
The entire case is fascinating
[0] https://en.wikipedia.org/wiki/Paul_Ceglia
[1] http://money.cnn.com/2010/07/20/technology/facebook_ownershi...
[2] http://money.cnn.com/2012/11/30/technology/social/paul-cegli...
[3] http://www.americanlawyer.com/id=1202736579636/Where-in-the-...
"Altman, also said he was authorized to negotiate on Cruise’s behalf and offered Guillory triple the amount of Vogt’s previous offer, but only if Guillory would agree to sign a formal settlement agreement that same day. Cruise’s attorneys then sent Guillory a lengthy settlement demand and Altman told him he could have only two hours to propose any changes. When Guillory told Altman he would not be able to meet that deadline because he needed to review the proposed terms of the agreement with legal counsel, Altman told Guillory he should fire his lawyer if he had already retained one, and offered to send him a list of lawyers to consult. Guillory could not comply with Cruise’s unreasonable deadline, and as a result, it passed on Friday, April 8, 2016."
http://blog.ycombinator.com/exploding-offers-suck
Even characterizing them as "terrible behavior"
> Given the time pressure because of the pending merger, we had to set a Friday at 5 pm deadline for Kyle’s offer, which Jeremy let expire.
"Given the time pressure because of other deals we're looking at"
Employer exploding offer:
"Given the time pressure because of other candidates"
Everybody has a way of dressing up an exploding offer. And FTR, I still don't believe that this is exactly what happen.
He knows exploding offers suck[0] and he knows they are used to exert time pressure on people rather than letting them make informed decisions.
I know he said in his Cruise post they had no choice because they were under time pressure themselves from the merger, but to not give him sufficient time to consult his own lawyer and to suggest instead to choose one from a list he provided, doesn't really seem like someone acting in good faith.
Whatever time pressure they are under due to the merger is only going to be intensified due to this matter and I can't help but wonder if it's made things worse.
[0]https://blog.ycombinator.com/exploding-offers-suck
sama really wants this deal to go through and he is pulling out all the stops to try to make it happen, including pressuring Jeremy in a way that he's already stated is unfair (though it's unclear how sincerely-held this belief is and how much is just an attempt to court more founders; sama's employment of this technique seems to imply he doesn't really think it's that bad) and then publicly shaming Jeremy to try to get control of the story's narrative and make it "lazy nerd tries to defraud noble investors who push the boundaries of tech" instead of "mega-rich investors won't let a founder get his share of a massive buyout".
Every action is a tradeoff. If I'm being honest, I would probably do a similar thing if I were in sama's shoes, and do everything I could to spin the situation in my favor, since I had already convinced myself that my position was fundamentally correct and that this guy really was trying to rip everyone off. I think most of us would, even if we're not willing to admit it on HN.
I still hold however that if true it would lower my opinion of sama - not because he used an exploding offer, but because it would mean he set a bar he is only willing to meet when there's no disadvantage to him (everyone wants to apply to y-combinator) rather than because the bar is a worthwhile thing to aim for.
P.R. or not, he's on record as saying these types of offers are a poor way of treating people, ergo, if he used one, then by his own definition he is engaging in 'terrible behaviour'.
$4.5 million seems to me to be a very generous offer based on actual work performed, but I don't know how many people would consider 2 hours (as alleged in the complaint) to be sufficient time to assess an offer worth $4.5 million (and potentially much more).
Jeremy was "waiting", while Cruise raised seed, Series A then B, and congratulated them assuming that he still had 50% and was happy to see his work grow?
He never thought to protest, or sign any documents at each round giving his consent. If this isn't extortion I don't know what is.
It will be pretty easy for Cruise to prove he wrote no code/prototyped nothing. All he has is association with Kyle and Cruise for 4 weeks before they parted ways.
Sad to think all the engineers at Cruise, working their ass off, getting fucked over by this guy. He'll probably end up with more than all of them.
1. Deal falls through (unlikely) 2a. Deal goes through, and engineers amount are held in a reserve fund for 18 months to 2 years until the lawsuit is settled or the after the above timeframe. This is standard in situations like this. 2b. GM may reneogotiate to have this come out pro rata. Also unlikely (this may be incorrect if dillution only impact Kyle. Jeremy does claim he wants 50% of the whole pie)
So in all scenarios, this does not bode well for them at all. Kyle must be furious, but for the engineers who had no part in this, who there is no question have both ownership and actually wrote code, I feel very sorry for.
The lawyers will make out better then them too :/
Please explain how GM would renegotiate their equity stakes pro rata? I've never come across this.
Never forget, your equity is a lottery ticket.
But there is one serious issue here I don't understand (devil's advocate mode) ....
If Kyle and Jeremy actually founded a Delaware C-corp in Sept 2013 (claim #11), then both their names would be on the officer's list. If that charter specifies a 50/50 split of corporate control, then legally Kyle has no ability to simply tell Jeremey that he's "fired" (claim #14). In fact, I don't think it's legal to fire a significant shareholder outright, unless you have an official company meeting and hold a vote. In this case, it's just 2 guys, so theoretically some impromptu meetup counts as a shareholder meeting. Also note here that the courts don't like having shareholder meetings without records, and in such cases leads the courts to treat such activities as non-corporate events (aka unofficial). In any case, it boils down to what ownership was declared when the C-corp was incorporated.
If someone controls the majority voting rights (or a collection of voters), then they can vote to remove someone from the shareholder's group. However, as far as I know you cannot simply seize ownership from the person you remove from the shareholder's group. The company must then be valued, and the person being ousted must be compensated for the value of his share. Furthermore, you can't simply revise arbitrarily future ownership. Jeremy's holdings would be appropriately diluted whenever fundraising events occur. Weirdly, Jeremy expected to receive his "50%", which as any person should know would have been diluted by investment rounds. Major investors are always involved during these events, and everyone knows exactly what they are getting. The fact that he thought at the end he would "get his 50%" leads me to believe he never cared about asserting ownership until the final big payday arrived.
I think Cruise as a company has a serious problem. If the documentation exists to prove this 50/50 ownership in Sept 2013, there is no way this lawsuit will be smooth sailing.
Edit: tense
This also sounds like he was around for a lot longer than Sam implied in his blog.
I have a lot of mixed feelings about this whole thing; parties on both sides have been rolling around in mud it seems.
Of course hindsight is 20/20, hence this whole ordeal.
"“Cruise Automation is a Delaware C Corporation created in September
2013. 50/50 split between Kyle and Jeremy.”"
"Vogt, as the sole Director of Cruise Automation, Inc., authorized the issuance of 50% of the Company’s stock to Guillory;"
That seems like a very clear statement. It's either true, in which case Guillory has a very strong case, or it's false and he doesn't.
On the other hand, I know how normal it can feel to trust each other, procrastinate on docs, and just get all over the tech.
"Cruise Automation is a Delaware C Corporation created in September 2013. 50/50 split between Kyle and Jeremy."
Edit: Added quote.
[1] https://icis.corp.delaware.gov/Ecorp/EntitySearch/NameSearch...
Just searching for Cruise Automation reveals Incorporation date as 24/09/2013
Without looking at the incorporation documents on file, I'm sure they don't say that Jeremy gets 50% of the stock. If they did, there wouldn't be a lawsuit. It would be cut and dry.
I think what Jeremy is arguing is that he and Kyle had an agreement in the early days before paperwork, and that that agreement was not properly documented when the paperwork was written up. This is an extremely difficult thing to prove, and Kyle and his investors will no doubt lean heavily on the actual paperwork to sway the court.
Anyway, my main point above was that giving Delaware $20 to download the incorporation documents is not likely to resolve the case. Thanks.
>If you are requesting the $20 detailed information option, this application will not return actual images of the documents on record. This application will return a page listing the 5 most recent filings, franchise tax assessment, total authorized shares if applicable and tax due. Officer and Director names and addresses are maintained on the images of the annual reports and are not available through this application. If you wish to order a copy of an annual report please call 302-739-3073 for more information
And (my guess) is that the real reason they care about the split is that they're looking for red flags. i.e. is the cap table already messy with lots of people on it? Is the split NOT 50/50 signalling the founders don't consider each other equals which is a bad sign, etc.
Of course it is. All documents are legal documents.
Also interesting because it makes reference to the earliest prototype.
Talk to your lawyer before posting on social media.
It amazes me from the other HN replies comments how much debate and confusion there is, about something so obvious.
If Jeremy's MechE experience and background in self-driving cars was so valuable how did Cruise manage to pivot from just offering an autonomous driving add-on that only worked on the highway to building a fully-autonomous city-based driving solution without him. How did they manage to raise millions of dollars, write all the code, and build all the hardware without him. It just doesn't add up.
I really don't understand your view here. If the value of the business plan didn't merit equal percentage, that should've been made clear at the onset. At the time, according to Jeremy's complaint it was valued at 50% of the company:
If the business plan and some ideas didn't merit 50% ownership, Vogt shouldn't have agreed that Guillery should be a 50% equity owner of Cruise. Simple as that.I've filled out my own (successful) YC application which stated that I owned 50% of my company. My own equity was still subject to a vesting agreement requiring that I continue to be employed at the company.
A proposed (or even stated) equity split doesn't grant outright ownership. It would be impossible to raise investment from any professional Series A/B investor (anything involving a priced round) without founder and employee vesting, typically on a 4 year vesting schedule with a 1 year cliff at the very least.
An ownership agreement doesn't require vesting, unless one was agreed to. An implication is worthless.
> A proposed (or even stated) equity split doesn't grant outright ownership.
In a YC boilerplate stock vesting agreement, perhaps. Doesn't apply to contract law as a whole.
EDIT:
> It would be impossible to raise investment from any professional Series A/B investor (anything involving a priced round) without founder and employee vesting, typically on a 4 year vesting schedule with a 1 year cliff at the very least.
You can raise investment from someone if they never know of an outstanding ownership claim until an event occurs.
There has to be a definitive and clearly stated offer to do something in exchange for valuable consideration to make a valid contract. A document that simply says what the proposed ownership is doesn't make said ownership legally valid.
Now, maybe that's a lie, but taken on face value, it reads to me like there was exchange of value between the company and each founder.
[0] https://en.wikipedia.org/wiki/Peppercorn_(legal)
The point is that the law doesn't attempt to make everyone "be nice", nor does it protect you from making a bad business decision. It's really just ensuring that there was _some_ business (ie, some exchange of nonzero value) occurring at all.
Secondly, it's important to note that a written contract is not absolutely needed to enact shared ownership; a written contract (or a deed, or a shareholder's agreement) is just to formalize the agreement in writing to avoid disagreement later.
If you start working together, shared ownership is the _default_ in the absence of any mode-changing agreements. Were they working together? A recorded video, in which they take turns looking into the camera and effectively saying "We are working together" [1] is a pretty strong evidence that, at one point, they were working together.
[1] https://m.youtube.com/watch?v=_P6oXe1YI90
Thirdly, in the absence of formal documents saying "We are officially working together" or "We are officially not working together", the court has to fall back on attempting to determine the intention. It will have to fall back on looking for any evidence (like that video) that suggests they were in agreement about working together at some point.
Anyways, this is irrelevant because the fact is Facebook initially did not have founder vesting.
I'm not arguing that having immediate vesting is a smart way to organize a company. But, to claim that a YC application 100% of the time implies anything is a stretch.
If there is evidence of an agreement (whether written or oral) between the parties to apply a vesting schedule, then that will override the default mode; otherwise the default mode (no vesting) prevails.
This is a filter bubble that startup founders need to snap out of...in the real world, two people can agree to anything, and general startup best practices dont dictate or say anything about the past, they can just guide you in the future.
That startup advice about how to split equity is sound advice and it is arguably outlandish to not follow it...but that in no way shape or form makes it the reality of what actually happened. People agree to all sorts of things all the time.
He submitted a YC application that listed them as co-founders, and has no paperwork showing the Jeremy gave up his share (whatever it might have been).
So, the only explanation I can come up with is that " An experienced & successful entrepreneur" took on "an unknown cofounder" without proper paperwork.
That's a pretty surprising set of circumstances, but it seems pretty clear that it happened.
This is interesting, as the YC Application does require breakdown. ["If you have not formed the company yet, describe the planned equity ownership breakdown among the founders, employees and any other proposed stockholders. (This question is as much for you as us.)"]
"According to Kyle, Jeremy did not write any code or build any hardware during this exploratory period. He did help find an office for the company. At the point of Jeremy’s departure, neither he nor Kyle had signed employment agreements, stock agreements, or any documents of any sort with the company. Even if Jeremy had signed a stock agreement, he wouldn’t have reached the standard 1-year cliff for founders to vest any equity."[1]
[1]http://blog.samaltman.com/cruise
It sounds like there's documentation that this was the original agreed upon split. If there's no documentation of some sort of "vesting" or "minimum effort required", I don't see the legal argument for this person to not have this split.
Contracts are documentation of agreements, but the agreements themselves are what hold legal strength. The contracts just help when there's a dispute over the facts.
edit: (I'm not saying anything as to whether Jeremy did so).
Edit: reading further I guess they are arguing that none of his IP is in what GM is buying. So I guess that will be the real point of contention.
In any event, breach of contract isn't the only claim being made.
So while 1 month probably shouldn't be worth 50% of the company, you also can't just decide that you don't want your co-founder to have a stake in your company any more, and push them out.
At the end of that 1 month, they had both done equal work (about a month's worth) and had equal share (50% each). It sounds like (according to Jeremy's story) he still owns that because no one agreed to a formal change in ownership.
From this paragraph, it sounds like Jeremy could have been any dork off the street who can find some office space. The question then is why Kyle worked with Jeremy at all, and in particular, why he proposed to Ycombinator to found a self-driving car company with Jeremy as an equal partner.
That's all just plainly in the YC application video.
That doesn't seem compatible with what Sam Altman says, so either the video does not depict Jeremy's contributions up to that point in time, or else Sam is incorrect and has omitted many contributions from Jeremy. Those contributions may or may not justify Jeremy's claim, but they certainly complicate the issue and present a very legitimate position for Jeremy to at least make the claim.
Jeremy's claim may ultimately not be considered or may not be upheld, but either way the degree to which Altman seems to think it should be categorically ignored does not seem to match the facts regarding the initial formation of Cruise at all.
"You see, your honor, I meant to pay my bill at the restaurant, but they threw me out on the sidewalk before I had a chance to pay it."
As in, one of the two parties might have been genuinely interested in signing such documents, and one of the two parties might have had reasons to want to avoid letting the other one sign those documents.
The question is whether having explored (and subsequently abandoned) a potential co-founder relationship constitutes sufficient basis for an equity claim.
Regardless of the outcome of this incident, if you apply to Y Combinator with someone who knows the YC partners better than you, and your cofounder decides to push you out, your cofounder will be supported by YC against you. This is now something that every team of founders will have to think harder about now. It will harm founder cohesion which will reduce the success percentage in each batch.
On the other hand, this is a positive signal to people who want to exploit a cofounder to get past the YC application process and then push them out of the company.
What? One founder worked on the company for almost 3 years and the other party in question worked on the company for one month, yet this is a huge YC conspiracy? How do you get this crap out of the written complaints in any way?
Even if he was forced out how does this involve YC in any way. Everything in both timelines With regard to Jeremy and Kyle ceasing to work together happened prior to YC even agreeing to invest in the company.
A couple of years later, just as it is on the verge of sharing in a big payday, only now does YC take an interest in saying that Guillory is an extortionist who shouldn't get a co-founder's due. If you're someone who believes Guillory's side of the story -- that he was forced out -- then yes, you might see YC and Vogt conspiring against Guillory.
Well, his counter-complaint claims that he was integral to the development of the company. To back that claim, he has actual paperwork, the existence of which has not been disputed by Vogt. Of course, there's plenty of time for Vogt to produce documentation showing that Guillory's stake was rescinded, but we haven't seen it yet, not even in Altman's principled "screw the lawyers" blog post yesterday.
Further I would dispute the notion that the value is in the hard work, long nights, etc. Value definitely does lie there and that's definitely measurable. But there's TONS of value in outlining the correct approach, dividing the problem correctly, etc. That's called architecture and I've worked on projects with none of it and it's a disaster.
For the starkest example of how this plays out, I would invite you to watch the NOVA special "The Great Robot Race" which outlines how all the competitors worked on getting "the best X hardware" where X was the piece that they thought was the most crucial to success including now giants like CMU. In the end it was folks from Stanford who recognized that the exact car, exact LIDAR, etc weren't the crucial missing link, but rather that the software was the problem. And they won based primarily on that insight and then successfully executing.
You seem to be very dismissive of turning-point ideas and crucial features that make or break companies. Archimedes' principle, the foundation of modern naval history, was a Eureka moment thought up in a bathtub. Should we ignore this contribution because it took moments to come upon this insight?
I am not taking sides here and wish to let the courts work through this complaint without casting aspersions on either side.
Jeremy isn't claiming 50% of the company, he is claiming 50% of Kyle's share, minus whatever Kyle would be given in exchange for the $100k he put in.
Noone is saying that Jeremy is entitled to that share because of a month of work. Jeremy is claiming that Kyle promised him a 50/50 split, and that their YC application video is a writing of this promise. And if that's the case, then the magnitude of Jeremy's effort doesn't matter legally.
If you have 50% of equity, therefor 50% of the vote in corporate decisions, how can the decision be made to "fire" you without your active consent?
"Fire" seems to apply to someone compensated under the normal "right to work" ("right to fire") legal framework in the US, not a founder. So the terminology seems very odd to me.
(Maybe this just reflects my lack of understanding of business law?)
The fact that you find it unfathomable that maybe, possibly, some rich SV-types could be the bad guys here is delusional.
Put another way, if Jeremy didn't contribute anything, then why did Kyle start working with him in the first place? Put him in the YC video? List a planned 50/50 equity split in the YC application?
These seem to be at least reasonable questions IMO.
All that said, I think the issue here is that Sam Altman personally invested in Cruise, which creates a subtle conflict of interest. It's in Sam's best interest as a Cruise director to crush Jeremy, but perhaps (as the parent suggests) it would be in YC's best interest to just stay out of it (above the fray).
Given Kyle's background... The answer is yes.
Are you seriously asking if YC would have accepted the former co-founder of a company that sold for over a billion dollars? Isn't the answer to that question obvious?
Granting 50% of equity is a lot, and as an experienced entrepreneur, Kyle would know that. But he wrote it down as the plan. Why?
These are the sorts of questions a court will be asked to ponder.
And so no, the answer is not obvious.
Please don't, that is a completely different question. I'm honestly not sure how you managed to conflate the two.
Yes, without a doubt. He's previously YC by way of Justin.tv / Socialcam / Twitch. If you're good enough to go through YC once and have a track record of success you're a shoe-in for your next venture.
Realistically Kyle would have been accepted to YC without any idea and he would have been wildly successful with Cruise even without YC.
there's no WAY an experienced founder like kyle would have given 50% of the company away, especially without a vesting schedule.
Sam alludes to it in his blogpost...
here's a direct quote from sam's post (http://blog.samaltman.com/cruise) : "Even if Jeremy had signed a stock agreement, he wouldn’t have reached the standard 1-year cliff for founders to vest any equity."
but as he alludes to no agreement exists, there is no "standard" in contract terms to rely on.
unless it was assumed in the YC application. Thus not mentioned. Thus no evidence of a verbal agreement. Ergo it doesn't exist.
Therein lies the danger of assumptions.
Given that the plaintiff has turned down multi-million settlement offers, and given that there's two quite reputable law firms working for the plaintiff who aren't in the habit of taking no-hoper cases, what's more likely - that the case is 'total bullshit', or that something actually was missed and overlooked in the early days that's now going to cost the company dearly?
If they initially agreed to a 50-50 split and then never nailed down the vesting paperwork or resolved the ownership issue after the plaintiff's departure - well, that's unfortunate, but that's on them.
As a side note, Sam Altman's recent blog post [1] vilifying Jeremy really rubbed me the wrong way. Sam is hardly a neutral player in this, and his post really felt like an attempt to ruin Jeremy's reputation in Silicon Valley. Sam really should have kept his mouth shut here, because depending on how this case plays out, it may be his own reputation that may be endangered.
[1]http://blog.samaltman.com/cruise
That alone speaks volumes.
But if there's any anger from screwed employees, it should be directed at the criminals who did the bullshit crime instead of the detectives who failed to identify the crime sooner, no?
And yes, in many cases when detectives or investigators in law enforcement are lazy with their work and miss something obvious, they often pay for it with their jobs.
YC on the other hand was clearly informed that there was an individual who was considered a founder at some point in time. Despite knowledge of this risk, they invested and they facilitated follow-on financing. Now there's a big, dumb, expensive problem. YC dropped the ball, big-time.
The fact that Sam Altman is turning this into a public spectacle is further evidence that he knows YC fucked up badly, and probably doesn't have a legal case. The only reason to write what he wrote is if you're out of actual ammo.
So yes, the fact that this situation has become known at this terribly late stage reflects badly on all the investors in previous rounds.
This is really astute. In my experience, more often than not, when someone becomes angry at someone else, deep down they are really angry at themselves for letting something happen.
This. That post was a huge red flag and after reading the claim it's very clear why he posted it.
Between this incident and pg's "startups must be allowed to break the law whenever they want or else civilization might collapse" essay a few months ago, it's getting hard to take anything the higher-ups at YC say seriously.
Move fast, break things.
I bet this is one thing that will be fixed for all future applications.
If Jeremy never said a word about it since it would never come up. If I owned 50% of a company and it did a financing- I'd certainly inquire about my shares. Sounds like he never even did that.
Kyle probably feels like shit I am sure- it's a sickening case to read but to be honest I could see it going down exactly like that.
It's also pretty scary that YC are willing to railroad a co-founder in favour of a SV insider.
can you imagine otherwise, i.e the size of their retainer and rates :)
The law doesn't work like that.
It's exceedingly strange to have had the initial cofounder depart and nothing was done to formalise the terms of that separation.
Also Sam seems really annoyed that this ghost-co-founder has turned up with this claim at the most inopportune time, and suggests that this is bad behaviour. I don't think so, it's the right way to play it. Wait until you have maximium leverage and then play your legal cards. The missing cofounder would have been a fool to play it any other way, thereby losing his leverage. The evidence that he has played it right is that so many people are running in circles desperate to resolve it - he has them against a barrel.
It appears the due diligence was pretty loose. Heads will roll.....
Not sure why pointing this out makes me not a good person to found a company with.
I have separated from a co-founder and I made damn sure we had an agreement in writing defining the terms of the separation. Didn't take much, no lawyers, just a one page agreement, three people each with a copy, all with signatures. All still good friends.
Obviously, one should act in their own self interest and use the law to it's fullest extent, not consider the social consequences of being a dick.
Good luck sir.
I'd want my cofounder to think through how somebody with legal leverage over our company would act. You should want that too.
That sounds like condoning exploitative behaviour to me. Is that the sentence we are both talking about?
You seem to be certain one side is looking out for their self interest much more than the other, which you have no way of really knowing because you are just another person commenting on a discussion on the Internet.
Unless you are personally involved in this matter, and know more than what has been publicly reported so far? And even then, how would we know you are not being biased in your judgments by your involvement?
Ya'alls notion of "rights" is pretty disturbing to me.
Which is a coherent, defensible position. Sounded like you were selectively accusing one actor in this dispute as the "greedy" one, which I think is why you got so much push back on your comments.
If money is your goal great, more power to ya, but I'm gonna call you a dick and not want to work with you.
What do you need a reward for at all?
Why are you trying to build something?
By my standards, your motivation matters a lot, it sounds like you think people deserve rewards for doing things, I don't think that makes very much sense. Gold star you did the right thing, bullshit.
But, since we don't really know all the facts, if this was a mutual parting of ways, then I agree that it's a terrible thing to do.
The bottom line is we really don't know what happened. I can at least see how a reasonable person could walk this path if they feel they've been maligned.
It's that "rightfully yours" bit that really bothers me. Where does that come from and why is it so obviously rightfully yours? It takes some gumption to assume you're in the right. This land is rightfully mine because I bought it from someone else who genocided a people, but okay great, it's rightfully mine, I feel super great about it.
The one's filing them and demanding what's rightfully theirs are selfish, the one's not filing patents are less selfish.
I don't think it's fair to judge the ethics of a person by how nicely they respond to being screwed over.
And if you're the disgruntled co founder, this is your most opportune moment to extract maximum equity value for yourself.
What I don't understand is, if a company did this to another company, people are all like 'yeah, that's how the market works', but when a person does it to a person, they're all like 'you're heartless and not playing nice'. Why the hypocrisy?
Because you favor the legal specifics over the "moral" thing.
Please don't do this on HN. Personal attacks aren't allowed here, regardless of how much of a dick someone seems.
And, this seems a specious argument if we're to take the assertions in the complaint at face value (that he was forced out). At the very least, he was deprived of his opportunity to continue to participate in the company.
Exactly. The founding documents are controlling, unless later modified by a contract signed by the parties.
This counter-complaint conveniently breezes past that fact, and moves directly on to allusions of a verbal contract, as memorialized in the YC app.
Most types of contracts do not need to be signed.
The Art of War highly recommends this approach:
I find it funny that people seem uncomfortable with facts like this. It's not emotional or bad behaviour, it's simply the rules. Everyone has to work within the law and the rules and it turns out that the law and the rules provide an ideal time for resolving such disputes - pre IPO or pre acquisition.
I'd be pretty uncomfortable with a senior manager or CEO who didn;t understand things like that - it means either that they will get caught out, or will not know how to win when the time comes to win.
If you truly believe you have not been treated correctly, and presumably that is the reason you are bring up the dispute, then the timing is just a tactic in dealing with the behavior of others. The timing might be the only way you can get your dispute resolved.
If you are pushing false claims then timing is just one more step in your unethical behavior. Liars aren't ethical in the first place.
From the other version of events, in how Guillory presents it, there were no cards to play - he just assumed the entire time that he had a stake and when the acquisition came he got in touch to figure out how to collect his share.
I know it seems absurd that someone can sit back and not do any further work and expect to collect as much as the other co-founder, but it is a valid legal argument.
The onus was on the company to set out a legally sound and defensible separation.
You were marching along working your ass off thinking you owned X but someone else believed they owned half of X and didn't say anything?
Isn't that a bigger deception? I think under US law there is a concept where if you don't speak up and it leads people to bad assumptions it can be problematic suing later.
Well, in this case, someone isn't some random dude from the Internet who you were never aware of. I understand your sentiment, but it doesn't apply in this case.
While Jeremy's timing gives him the most leverage possible (and it's definitely not the most honest thing to do), we can't just treat him as the villain, especially without knowing the full story.
Under the law if you knowingly allow people to proceed under false pretenses, it's harder to make a claim later. If it's true that Jermey never asserted the claim until now I think that's fairly damning - not just from an ethics standpoint but also legally.
Also I never said Kyle has no responsibility here. You are putting words in my mouth. I'm sure Kyle feels terrible and it's a sickening claim and counterclaim to read frankly but I do think it's sneaky to wait until the last second and I do think legally there are consequences for doing that if it's true for Jeremy.
Both sides have now told their stories in full and as well written as Jeremy's claim is- it's still a shakedown for cash for one months work. And a sneakily timed one at that.
It's the most lucrative way to play it, that doesn't make it the right way. The right thing is to come out into the open early and negotiate an equitable settlement at that time, not to wait to gotcha your former business partner.
I now have a new fear which trumps "failure to file 83b in time". I am so incredibly paranoid about doing 83b, already.
Basically, One mistake seems to have been made: writing on the YC application that they are both founders, possibly stating a 50/50 split. That's one mistakes, two years of hard work, and one billion dollars.
[0] As the author of the co-founder equity calculator, I still receive about one email a week from founders asking for advice about co-founder issues. After several years, I think I have seen about every possible problem with co-founders.
This is why you don't speak publicly about a court case you're involved with. Now every single word Sam wrote will be put under the microscope and whether or not he "meant" something won't matter. All that will matter is what the jury believes he meant by it.
The reason general counsels make much less than CEOs is that it's a heck of a lot easier to always point out the risks than to weigh them against the rewards.
It's another thing to rush something through before your lawyer has a chance to provide counsel--which is essentially what Sam Altman claims he did, in his post.
CEOs make more than GCs, but they employ GCs for a reason.