The managers that forbid their employees to work on side projects are plain dumb.
The most important gain for the employer is the fact that the employee trains himself on new technologies, for free, in his own spare time.
The risk would be that the employee might leave if his side project is a success. With around 4% rate of high success in the startup world, the risk of leaving is quite small.
As I wrote at the time, quoting the head of development: "outside work activities create a conflict of interest. [...] [we don't want that] you use your spare time to work on your app, and once it takes off you quit your job".
I remember replying that in that case kickboxing also creates a conflict of interest.
The result: lots of developers started to leave that company.
The most important gain for the employer is the fact that the employee trains himself on new technologies, for free, in his own spare time.
The risk would be that the employee might leave if his side project is a success. With around 4% rate of high success in the startup world, the risk of leaving is quite small.