Ask HN: How to validate a startup idea whilst employed?
Everytime I read articles and consume all other content around attemping a startup, I see no consideration for those whom are employed under employement contract to assign both moral rights and intellectual property to their employer. I have read Lean Startup by Eric Ries and consumed a ton of Y combinator content.
Under these circumstances, how can one validate the market using a minimal vialable product, for something truly novel? Futhermore, the're contractually unable build an MVP as result of assigning their full intellectual property rights for anything loosely related to their job.
What can one do under these circumstances, and let's face it, its found in the majority of employment contracts within the tech industry?
Anyone any thoughts on this? Moreover, I'm considering leaving a very well paid software developer job to free myself of this obligation, with the intention of building a product to offer real value to both me and others alike.
152 comments
[ 2.9 ms ] story [ 241 ms ] threadThis is usually when you're on company time with company assets. If you're at home/coffee shop and off the clock and on your assets/pc its your IP.
Do you have a contract with current employer that has this specific language? I would understand a term for a non-compete agreement, but what you're saying does not sound right/legal from my perspective.
> I'm considering leaving a very well paid software developer job to free myself of this obligation
Do it!
It might take 6 months, a year or longer to make a profit. Can you afford that? Do you have other revenue streams? Does your current employer contract bind you to any terms if you quit?
Questions I don't need to know, but you should.
Good luck!
Below is an excerpt from my contract:
We understand that lots of our employees have tech related ideas that they work on outside of working hours. In a case where your idea overlaps or conflicts with the work of said company, you agree to the following:
1. You will promptly provide to said company, and otherwise keep confidential, full written details of all inventions, copyright works or designs originated, conceived, written or made by you, alone or with others (“Intellectual Property”), and work relating to Intellectual Property that you have worked on at any time during the course of your employment with said company which relate to, or are reasonably capable of being used in, the business of said company ("Employment IP"). Unless otherwise agreed in writing by the CEO, you are assigning said company absolutely all rights, title, benefits and interests in the Employment IP. The reason for this clause is to protect the Intellectual Property of the Company from infringement or misuse that may damage the position of said company in the market or our ability to serve our clients.
2. You hereby assign to said company with full title guarantee by way of assignment all present and future copyright, database and design rights and other proprietary rights (if any) for the full term of such rights throughout the world in respect of all Intellectual Property and you waive in favour of said company all moral rights conferred by Chapter 4 Part 1 of the Copyright Designs and Patents Act 1988 and all similar rights in other jurisdictions.
3. You irrevocably appoint said company as your attorney to execute any instrument and do any such thing for the purpose of giving to the Company the full benefit of clause 1.
----
I could probably last 3 years or so with no other revenue streams. There is no rent or mortgage payments needed as I bought a cheap property that is now paid in full. That was part and parcel of the preparation for leaving fulltime employment, to give the startup / product development an attempt on my own and ensure that my runway could go further if needed.
I do have a lengthy notice period, but that is priced in. Also if this venture fails, I will re-enter the market as freelancer to pick up where I left off. Also forget asking the CEO about it or personal assistent, the're far to busy to be concerned with a "tin pot / pie in the sky" idea / product.
I just don't understand why founders, and those advocating for the startup life don't provide advise in this thorny area as it affects so many of us?
Do folks go dark, build in secret, pretending they had executed their plan outside of the course/term of their employment?
I have advised others is to perform research round their ideas by upskilling in areas that they'll need to prove out their ideas. This I hope will minimise the time to build (once departed) without establishing real intellectual property whilst employed. Perform spikes and mini experiements with the technology, without building the final idea and upon departure begin the actual build.
Wondering if folks consider that a sensible strategy or could iterate on it?
Keen on your thoughts.
IANAL, but it seems pretty clear to me - as long as your idea isn't related to their work, you are in the clear. Keep in mind that the software you write is not the "work of said company" - it is just a tool. The solutions they solve in the markets to which they sell are their work. Do side gigs in other industries and you should be fine.
I was warned during onboarding of my last few jobs that most software side projects would fall under their umbrella of "related business" and that their lawyers regularly aggressively pursued side projects. Who knows, maybe they were bluffing but I'm not willing to go toe to toe with 2,000 corporate lawyers to find out.
> Do folks go dark, build in secret, pretending they had executed their plan outside of the course/term of their employment?
JIT does seem to be more common than AOT. People do the early work in secret and delay the hard decisions until they absolutely have to be made. Most of the time the whole thing unravels before that point anyway, and all the agonizing about quitting was pointless.
"Unless otherwise agreed in writing by the CEO"
This sounds like a conversation.
If they accept you go through the red tape of having your idea declared as exempt and you are fine.
If they don't accept you need to choose between your current employer and your ideas.
I tend to choose employers and contracts based on whether this is doable or not.
Usually there is a business process to declare outside interests that involves approvals from your direct manager and his manager and doesn't require you to talk to the CEO directly.
They keep a central register of declarations that the CEO rubber stamps.
Maybe you can ask HR/Legal about getting that instituted.
If this doesn't work it might be a clear signal that your current employer might not be aligned with your long term goals.
Employers need to know what their assets are, what they own. It greatly simplifies things for them if you have a contract that assigns them ownership of any invention you come up with while you’re their employee. This is especially true in early stage companies, where the business model might be evolving, and employees are working all hours from all over the place. Contracts like this are very common.
The best approach in this situation is to use your own computer and network to develop the core ideas for your business, but delay any formal business activities until you’ve left your job.
IANAL either. But I do know that in most states it doesn’t matter if it’s your own time and your own PC. In California there are exceptions, I if your work has nothing to do with your employers business. Washington State has fewer exceptions but there are some, IIRC (but remember IANAL).
Also, if this project does relate to your employers business then quitting won’t solve your problems. You will need to quit and then do no work on it for six months, typically, to be free of the their legal ability to claim they own it. And regardless, they can still sue you: the six months break just gives you a better negotiating position.
If this project has any value, consult with a lawyer.
Just be very clear when you interview that you have multiple hobbies outside of work (and show them!) and refuse to sign any non-competes or IP assignment clauses.
If you’ve already signed one it’s probably time to change jobs, that’s the only safe option.
List existing side projects and hustles, in generic terms, on the paperwork when you start a new job.
Use your own time and equipment for all side projects.
Don’t be a jerk about things — keep up your obligations at your day job and work on truly unrelated things for your side hustle. Or quit.
Your job doesn’t actually want to sue you. They want to retain you as a productive employee and move on when you’ve found something new to do.
Yes, if your employer is a reasonable one. Not all are.
I’m not saying this to discourage you. What I mean is, maybe move the bar to create something that’s already been validated, or semi-validated. For example, a problem that you need solving that someone else hasn’t solved yet is semi-validated.
I’m wishing you the best, coming from someone who’s validating a niche product myself after building it and raising a seed while working a full-time job.
The law and jurisprudence in each country covers what (intellectual property or other rights) belongs to your employer and if you are allowed to work on anything outside of an employment contract. They default is usually that every activity and thought belongs to your employer. Sometimes a well crafted non-compete, non-disclosure or employment contract can override a law, but that is never certain.
Be especially careful with preparations for starting a business or defining a business idea.
So what you can do as an employee is decided by a judge and nothing else is legally sure.
For some ideas the biggest risk is the market, does anyone want this? For others it might be the technology, is this even possible?
In a lot of cases you can do things to reduce those risks and give yourself more confidence to jump ship and go all in. That might be talking to people, it might be reading academic papers. In some cases, but honestly pretty rarely, it will be building something. Most of the time that can come later.
Not dismissing any of the great advice in here already around non-compete, company IP etc. most of this kind of work (research, conversations etc) isn't something your employer can "lock down" as concretely as an MVP. Plus if it is tangential to your current job and your idea doesn't work it, you may still end up better off from having learned something new.
Lean Customer Development by Cindy Alavrez is a book that has details.
Edit: some jurisdiction these restrictions don't apply. That is: your off clock works cannot be claimed.
Not a Lawyer.
This highly depends on where you live, what you've signed, and the precedent that exists in your locale.
In California, for example, non-competes are unenforceable whereas in other states they are. However, you may be sued for other reasons.
If you're well paid, go pay a lawyer to look through your employment contracts to learn how you could go about doing it.
Make sure you put in a carveout for every repo you have in GitHub. It helps to have a lot of public ones, then roll in your private ones into the list. Even if you have to pivot one of your private accounts, you get legal cover for working on it. Odds are the legal team won't bother checking on the contents of every single enumerated repo, and it would be insane to not hire you when you have those repos. I recommend claiming that you might have to do some work on any of these repos because other people might ask for support for those libraries. You can also make that claim for a private repo, too.
Insist that your employer provide a work only laptop. Obviously, never put any of your private repo code on your work laptop.
> it would be insane to not hire you when you have those repos.
My hiring at a large software company was delayed for weeks because of two enumerated carveouts related to software that had nothing to do with the company's business. And this was when I was being hired as a lawyer! I can imagine for devs or PMs they would be even more sensitive.
> And this was when I was being hired as a lawyer! I can imagine for devs or PMs they would be even more sensitive.
Really? Doing this as a dev is pretty normalized, I would have guessed a lawyer asking for it would be more scrutinized (do you notice a dog in the room if it's brown or if it's purple)
Once you're convinced and ready to start building I think you just have to quit like you're saying. I did exactly that about 6 months ago because I had the exact same type of contract (despite what other folks are saying, they're EXTREMELY common, pretty sure all FAANG has them).
Good luck!!
This is true, but it's possible that even this act could indicate that the founder has developed valuable IP that his employer could claim. It would seem ridiculous to think that even just having an idea could make it assignable to your employer, despite not having actually written any of the code.
However, there are some circumstances where it could seem reasonable. For example, if you work in Industry X and come up with an idea related to Industry X and your employer's specific niche in that industry, it seems less unreasonable that your employer would care if you struck out on your own and started a startup in that niche. They would argue that your knowledge of that niche derived from your work as an employee, and they would try to tie your creation to proprietary information that you were privy to as an employee.
This isn't to say they would win — but they could cause you quite a headache if you built a successful company.
FWIW, IIAL and have seen folks argue over less!
Some communities are too nice, so what they say will be biased and inaccurate. Especially the most vital question of whether they will be willing to pay for it.
The need might be real, your solution might be an excellent fit and it would clearly save the target audience a headache or two. And the audience would agree. They will like what you do, they will want to be supportive and encouraging. Up until the point they need to start using it. And then they all will ghost you. Whoops.
That said, everything is manageable. If you really believe in the effort, I would hedge by finding a well enough paying contracting gig (without any legal entanglements), then leave your current job and start marketing your offering.
At some point you have to start. It never happens if you don't. But always cover risk. Good luck
Whether or not you're in CA, you should consider speaking to an employment lawyer in your jurisdiction to find out the relevant details.
1: https://law.justia.com/codes/california/2011/lab/division-3/...
In addition to regulatory exceptions, some companies have policies where you can check in with the company to see if they would like to assert their IP rights over your work.
If you work at a computer chip manufacturer and you decide you'd like to moonlight developing robots that make nacho-cheese chips, there's a pretty good chance that HR will be willing to give you a written document waiving their IP assignment in a narrowly-tailored way.
I have successfully taken that approach in order to preserve my IP rights to continue my academic work and collaborations as I entered industry in an unrelated field.
I've developed the product until it had a certain maturity. I've then onboarded two co-founders who also helped part-time. One helped with marketing, one with develoent. I've found them through YC cofounder match and the dev from GitHub OSS projects. Together, we've landed our first paying customer. With a few more leads in the pipeline, we were able to start the fundraising process.
We then slowly transitioned from side project to full time. The complete team is now full time for 2 months and we're very happy how things are going.
I can say that it was a damn struggle to get all this up and running with 2 young kids and without ruining the family. I'm thankful that my wife is very supportive. It's weird when your partner accepts that you work 3 hours per day on the weekend while the kids sleep. But there was no other way. It needed to be done. Of you really believe in what you do, it's possible, even with a family. If you have questions, please ask.
[1] https://github.blog/2017-03-21-work-life-balance-in-employee... [2] https://github.com/github/balanced-employee-ip-agreement/blo...
I'm thinking out loud from an employer's perspective: Will this employee leave for his side project, if we not let him work on it? Probably not. Will they leave if this side project succeeds? Probably yes. Will they be less interested and more distracted in our job? Probably yes. So, why risk it.
Will they leave if it succeeds? Maybe. If it's the case for one of my employees, I will help them, be their Angel, invest into them and help them with my network. I started with a side project myself. It was so hard. We need more smart entrepreneurs and I want to support them.
Will they be less interested? It's possible. At the same time, it's the employers job to offer interesting work.
That said, I don't disagree with you. It always depends. But don't worry so much about the success of side projects. Less than 1% of your employees can turn a side project into something successful.
Forgive my ignorance, but is this statement required in any of the jurisdictions in the world? In a post-slavery world, an employer cannot own what I choose to do with my own resources outside the scope of my employment.
From this: https://www.russell-cooke.co.uk/insight/briefings/2020/intel...
"The general position under English law is that IP rights created by an employee within the course of employment automatically belong to the employer; where there is any doubt as to whether an employee or their employer owns IP rights, the relevant legislation largely favours employers."
"If material which includes IP rights is created outside office hours and/or using the employee’s private resources this may give rise to arguments that the rights belong to the employee rather than their employer, but that is not decisive. The fact that work is done outside normal working hours does not necessarily mean that the work is not done in the course of employment as, for many employees, there is often no clear demarcation of the hours of work."
"The key question to be asked is whether the work was the kind of work which the employee was employed to do i.e. whether it was within the scope of their employment. Could the employee have been ordered to do the work and would it have been a breach of contract for the employee to not do it? The terms of any contract of employment and job description will be relevant, however, these (and duties more generally) often evolve in the course of time and it may therefore not be appropriate to rely on them exclusively."
IANAL, but my reading of that is that if I wrote a novel about unicorns and rainbows, that wouldn't be owned by the company, but if I wrote software, it would.
Makes more sense now. Even in that case, I have many questions regarding the quoted parts in the article. Especially regarding the “demarcation of hours of work”, why would the burden of proof be on the employee? Employer is supposed to keep track of hours of work. If they cannot prove that employee developed the IP during company time, then it shouldn't belong to the company. But then, law and justice are very different things.
> if I wrote a novel about unicorns and rainbows, that wouldn't be owned by the company, but if I wrote software, it would.
I would say that software is too general to be applicable, and yet there's this anecdote somewhere else on this thread [0].
[0] https://news.ycombinator.com/context?id=32885772
Imagine you work in cold fusion research and you spend your days performing tests and reading papers. If you have a dream and wake up with a solution, this is part of what your employer has been paying you for, and the time of day is irrelevant.
> your employer is paying you for the ideas you generate, and this could happen at home.
If employer's idea is about company's business, then yes, I would say that the company owns the rights. If not, employer owns the rights.
I'm not sure if ideas count as IP though. If I had an idea at work about a business that is outside the scope of my company's, to whom the rights belong?
(I am *not* a lawyer. I'm not even American.)
Can you set up any intellectual property through a trust? If the trust owns the IP, and the trust does not have a contract with your employer, can you write code for the trust, thus protecting it?
Just a thought.
My understanding of this, even in states that aren't as protective of California, is that: 1. Companies aren't interested in your IP, unless it is very closely related to their core business 2. The burden of proof is on them 3. Courts are sympathetic with the individual over the company for this kind of thing
Because of these points, companies try to paint the picture like they own all things you do, as a deterrent, or so that you give them your ideas for free. In practice, their position is at best tenuous / hard to prove, and at worst simply invalid (e.g. in states like California).
Lawsuits are expensive and will probably kill your business or time to work on your business either way.
I'm assuming you're not competing with your employer, nor are you building your startup on your employer's time or with your employer's resources, in which case there's nothing wrong with this approach ethically.
In exchange they take a heftier cut than what you'd get if you used a service like Stripe.
Also, once upon a time, I checked with FastSpring (another alternative) if they could just withhold payouts until incorporation and they told me they can do that.
"Business type" options include Individual, Company, Partnership, and Non-Profit.
This may make it less likely that your employer will take you to court, but if you do this and your employer does choose to pursue a case against you after you leave the court will see it as intentionally deceptive and it definitely won't help your argument.
Above reasoning is in line with why companies don't search for existing patents when developing new technologies. If they search for prior work and are found guilty of infringement, that's considered willful infringement, in which case damages are tripled.
The (US) patent system is so fucked up (granted you're talking about the US), where if you try to lookup patents, you might be fucked. If you don't try to lookup patents, you might be fucked as well. Damned if you do, damned if you don't
Paypal has supported personal accounts since the 90s. Stripe supports personal accounts. Google/Apple/Amazon/MS/Steam/Gumroad and others will all work individuals as well as businesses.
Where I'm from, you're required to incorporate upfront and deal with the legal, accounting, VAT and social security hassle before selling anything to anyone - few days to a week of stress added.
This is likely by design and is both a prerequisite and consequence of America's lax attitude towards businesses. It is likely one of the pivotal reasons why America has many more businesspeople (even just counting Silicon Valley companies) than Europe.
I did start a house painting business in America when I was 19, though. Due to liability concerns and the fact that I franchised through a chain, I did have to form a company for that. It cost about $150 in fees and took a week.
It was a bit of a pain but ultimately not that hard compared to getting a loan, buying a truck, buying ladders, getting volume deals on paint, marketing and selling to customers, etc.
Online businesses are definitely quicker and simpler to start, but I’ve never felt that big of a difference in terms of jurisdiction-induced hassle. Maybe Europe is an exceptionally difficult place, but I can’t speak to that. I’ve never done business from there.
Another thing to keep in mind is than many, many non-US residents open US LLCs for online businesses. Most my friends in Taiwan starting international-facing tech-related businesses start under their own names and then either transition to US or Singapore-based entities. Mostly this is so they can use Stripe (which isn’t available to TW-based companies).
I’d embrace the language for what it is and try to discover why it is so many people who generally prefer typed languages still use Erlang/Elixir. After getting to that point, maybe try Gleam if you still feel the need.
You don’t tell them.
Monish Pabrai used to be a software engineer and launched a company while he was working. This company grew to a few million in annual revenue. He‘s also the author of two investing books and sat down for a lunch with Warren Buffet and regularly has dinner with Carlie Munger.