[overfeed]

> Must be a pretty nice sum for them to agree to it

Not necessarily: if the investors don't agree to a reasonable amount, the wanna-be acquirer will simply hire the entire team with generous sign-on bonuses, and the investors will be left with a shell of a company.

In this case, the core product is MIT-licensed, the team can quit on a Friday and pick up exactly where they left off under a new org on Monday.

[bix6]

Not necessarily. There are likely key person clauses in the prior round docs.

[overfeed]

It has happened in the recent past (2-4 years ago?); I can't remember both the acquirer and the hollowed-out startup, and searches are returning chaff, but it got to the HN frontpage.

IANAL, but at-will employment cuts both ways- thr best an employer can do on behalf of investors, are golden handcuffs - and people can be bought out of those.

[borski]

That’s not quite actually true and it is a bit more nuanced than that. For example, while non-competes and non-solicits are unenforceable in CA for employment agreements, they absolutely are enforceable for mergers and acquisitions.

The laws governing employment are a subset of the laws governing M&A.

[overfeed]

VC funding rounds don't quality as an acquisition, AFAIK.

[borski]

I agree, but I'm not sure how that's relevant?

[overfeed]

The context at the root of the discussion, where potential acquirer's plan b is to hire the team instead.

[misterinfo]

In M&A's you usually sign non-competes.

[overfeed]

The husk of a company would still be bound by whatever contacts were signed by its officers. However, non-compete enforcement against individuals have been declawed in California, where VoidZero is headquartered, and (I assume) where its investors are, and whose courts they've likely agreed to adjudicate disagreements.

This is an extreme measure not usually taken, but it's a nuclear option that sets a ceiling on how much investors may play hardball.

[borski]

> However, non-compete enforcement against individuals have been declawed in California, where VoidZero is headquartered

Not in M&A.

https://www.freshfields.com/en/our-thinking/blogs/a-fresh-ta...

[overfeed]

Thanks - I wasn't aware about the M&A carve-out, which makes sense. It reads to me like clause (c) is the most relevant:

(c) all of the ownership interest of any subsidiary, may agree with the buyer to refrain from carrying on a similar business within a specified geographic area in which the business so sold... has been carried on, so long as the buyer... carries on a like business therein.

and it prohibits competition "on a similar business". The Vite team would be blocked from competing against VoidZero, but Cloudfare isn't a similar business IMO, and they would be free to work on a private "Pronto" fork within Cloudflare (which is unlike the real-life Cloudflare/Vite scenario where they will continue public releases)

[borski]

Maybe. It would require courts and nuance; cloudflare is in a lot of businesses nowadays. It rarely comes into effect regardless because people rarely spend less than a couple years at the acquirer, but regardless.

[overfeed]

There's also the issue of participating in a funding round is neither a merger nor an acquisition. VC investors are not covereed