
Cruise - sama
http://blog.samaltman.com/cruise
======
morgante
I cannot fathom why the majority of commentators here are automatically
agreeing with Sam that Jeremy is in the wrong.

If you look at the facts, it seems obvious that Jeremy is entitled to some
compensation. He worked for the company for 1 month, without compensation.
That would automatically entitle him to equity in the company. Now, they could
have (and should have) signed a stock agreement with a cliff in it, but the
_did not_. The cliff only exists _if_ they agree to it.

I have no idea what Jeremy is asking for, but it seems like he should
absolutely be entitled to some equity. He never agreed to give up the equity
he earned from working on it for a month.

I suppose this underscores the importance of having legal agreements with
anyone who works on your company, _especially_ anyone you jointly apply to
programs with.

~~~
flyosity
Can I ask why Jeremy would be entitled to anything since nothing was ever
signed? If Kyle had a verbal agreement with Jeremy to pay him X or give him Y
equity in exchange for the work he did, I don't see that in Sam's post or in
the complaint that was filed. Without a signed agreement nor a verbal
agreement, why would the courts give Jeremy anything?

~~~
morgante
You and I work on a company together for 10 years. We never sign a legal
document determining the equity structure.

You then incorporate and sell the company. Do you think I shouldn't be
entitled to a portion of those proceeds?

Stock agreements amongst founders largely exist to _limit_ your claim to
equity. Without them, everyone working on a project is essentially an equal
partner.

~~~
confiscate
There is a tree outside my house. I never signed anything with the owner of
the tree, but I took care of the tree watering it everyday for 10 years.

The owner of the tree now sells the tree. Am I now entitled to a portion of
those proceeds?

~~~
rmason
I worked for a guy once who had a piece of farmland. Right behind his land was
another piece of land that did not have road access. He had a farm lane
bisecting his land and he let kids use it freely to access the hills on the
other land with their bikes.

A real estate developer bought the other piece of land. He hired a lawyer who
filed a lawsuit saying that after a number of years of access that farm lane
had become a public road even though those kids were illegally accessing that
other piece of land.

The real estate developer won his case and had the farm lane paved and
declared a county road. The developer then started a subdivision and
eventually purchased my bosses land to extend it. If my boss had kept his farm
gate shut and padlocked none of it would have happened but he was trying to be
a nice guy and paid dearly for it.

~~~
lalalander
This was extremely scummy of the real estate developer and I'm surprised it
actually happened. Do you have any idea how the real estate developer and
their lawyers managed to win the case?

~~~
dboreham
Actually the law is often on their side, so it was likely not hard. Around
here this happens all the time and so people are aware that gates need to be
locked, signs posted etc, otherwise a Prescriptive Easement may be created :
[http://www.dirtlawyer.com/pe-summary.html](http://www.dirtlawyer.com/pe-
summary.html) IANAL but I have paid one in the past to get advice on this
subject. ymmv, laws vary by jurisdiction, etc.

------
not_that_noob
This has the potential to derail the merger, not just delay it, and would
explain Jeremy's position.

The reason is that any acquirer will ask for the consent of a very high
threshold of shareholders for an acquisition. We're talking sometimes as high
as 95% of shareholders. Note that this is not people with options, but those
who are actual shareholders. In practice, this isn't a problem because usually
you have the shareholders generally lined up before you start the process of
sale. And you also have drag-along provisions in the various stock agreements
where the stock holder agrees to vote with the majority of holders of that
class of stock, so large holders can pretty much make a merger happen if they
wish.

In this case, Jeremy can claim that he is owed a huge percentage of the
equity. Because there are no written agreements where his rights to the equity
lapse, regardless of how long he worked, that putative equity is his. And in
that case, more than enough for him to veto the merger.

Tough spot for Kyle to be in, but I'm shocked with his prior startup
experience that he didn't get this resolved earlier. It would have been easy
to have something be written up and signed for next to nothing right as Jeremy
left.

I sympathize with Sam and Kyle over this, but unfortunately the legal world is
an alternative universe, and they need Jeremy to close the deal.

~~~
delinka
Assuming Sam's story is accurate, and given your comments: "In this case,
Jeremy can claim that he is owed a huge percentage of the equity. Because
there are no written agreements where his rights to the equity lapse..."

This sounds like anyone can make the claim. If they set foot in the office,
they have a claim. Perhaps someone substituted for the usual janitor one
night; then he shows up with a claim. Maybe someone had lunch in the same
restaurant nearby, chimed in with a sarcastic comment about anything, and
shows up over two years later with a claim.

I cannot fathom the situation being tenable.

"It would have been easy to have something be written up and signed for next
to nothing right as Jeremy left." And if Jeremy refused to sign? Would that
have been further evidence (e.g. of Kyle trying to push Jeremy out) Jeremy can
use against Kyle in this situation to say he's owed more?

~~~
CPLX
> someone had lunch in the same restaurant nearby, chimed in with a sarcastic
> comment about anything, and shows up over two years later with a claim.

There's a substantive difference between this sentence, and someone who is
listed on a written, successful, YC application as a founder of the company.
As such your comment is disingenuous.

~~~
Idontagree
I don't really have alot of experience in this, but sam says there that Jeremy
left the YC interview, doesn't that mean he wouldn't be on the application?
I'm sure there's more to it, thus why I'm asking.

~~~
fudged71
With YC, the applications are closed from editing and locked down before the
interviews. The application can't change at/after the interview. Also the
interview is only 10-20 minutes so you don't have a lot of time to talk about
legal issues etc.

~~~
niccolop
Was that always the case?

------
Tarrosion
sama: can you comment on the various personal and financial interests you have
in this case? Would you name and shame for a YC company in which you had not
invested as an individual? One not run by a personal friend? One not about to
be acquired for huge money and become another home run for YC?

Or similarly, you note in this post that you spent a whole day dealing with
this issue. Hanging around HN we frequently read about how YC partners' time
is in high demand, many applications to YC are viewed for literally only
seconds, office hours are in fact not hours, etc. Would any YC company get
such a chunk of your time?

I certainly don't mean to be some jerk on the internet telling you how you may
or may not spend your hours. That's a) not my place and b) a topic I'm not
qualified to philosophize on.

Nonetheless, it's more than a bit disconcerting to read a blog post which
starts out with "here are some of my various connections to an interests in
this company" followed by "and I'm doing them special favors, apparently at
risk to myself, including writing this blog post."

This blog post gave me quite a sense of "well, sama and YC have a solid moral
compass and plenty of self confidence but don't always follow the rules." The
"I'm making an exception of my usual don't-be-on-YC-company-boards policy to
be chairman of two YC companies" post from a year ago [1] had a similar vibe.
Both posts made me wary of YC.

[1] [http://blog.samaltman.com/energy](http://blog.samaltman.com/energy) Maybe
I should clarify that I'm rooting for Helion and UPower and hope they go far
with Sam. But a policy of I won't be on YC boards unless it's for my favorite
company in one of my favorite application areas sounds a lot like I've given
up desserts and other refined sugars (except warm brownie sundaes with ice
cream and chocolate sauce).

~~~
sama
Sometimes you have to be willing to risk your personal reputation to stand up
for what you believe in.

Yes all day every day I do things for YC companies I'm not close to, but our
biggest exit ever for sure gets extra attention. In any case, I think you'd be
surprised to see my calendar. We paradoxically spend the most of our time on
the least successful companies, and trust that doing so will help us get to
fund the next Airbnb.

I do try to always disclose conflicts. And it's definitely true that areas
like nuclear energy that I'm personally passionate about and believe I can
contribute to will get extra attention from me.

~~~
tikhon
I can personally attest that Sam helps out all the companies I've seen that
ask, whether or not it helps him in any way. That sort of person is rare in
the ecosystem and should be celebrated, not questioned like this. We're
attacking him for being honest and giving full disclosure? Really?

The obvious parallel one could draw here is Ron Conway -- these folks help
startups because they can, not because they're profiteering. The suggestion is
almost offensive given what Sam has done here, which I don't think most people
would have had the guts to do. I doubt any legal counsel would have suggested
he post this, anyway.

Few folks put in more time, energy, and effort than Sam does to help startup
founders, and I think that's partially how he's built up such a world-class
reputation.

Sam is making a bold move here with this blog post, given the case. We should
be celebrating him doing the right thing here. A lot of folks wouldn't want to
publicly touch a topic like this given the legal case.

Any startup would be lucky to have his help, and he's probably the most
gracious and helpful person in the startup ecosystem you'll be lucky enough to
meet. The fact he's been an investor in the past is, I suspect, more a
byproduct of the fact he meets with so many startups as he does. If you spent
all day meeting with hedge fund managers, for instance, you'd likely end up
being an LP or advisor for at least a couple of them. That doesn't affect the
quality of your hedge fund decisions or advice.

Sam has helped me when he had no vested interest in doing so, and I'll always
be grateful for that.

------
_sentient
We obviously only know one side here, and this issue will doubtless bring all
the contrarians and tinfoil-types to the yard.

However, even if we entertain the notion that Jeremy had some sort of de-facto
equity interest in the company (a claim for which there is seemingly zero
present evidence); can we at least agree that is _uniquely_ shitty to suddenly
level these claims days after the acquisition is announced?

One does wonder why this moral injustice wasn't righted promptly in the days,
weeks, months, or years following his involvement in the company. More facts
will likely emerge, but the timing alone seems like prima facie evidence of
rank opportunism on his part.

~~~
downandout
_> can we at least agree that is uniquely shitty to suddenly level these
claims days after the acquisition is announced?_

Would you prefer that he wait until after the acquisition closes and then have
to fight a multi-billion dollar corporation and a newly minted billionaire
cofounder? He obviously feels he is owed something, and strategically, it was
now or never.

I cofounded a company, named it, was listed as the inventor on the company's
patents, wrote its first product, had a written equity deal, and still got
screwed on an acquisition like this. It wasn't for billions, but it was for
more than $60 million. The acquirer was a multi-billion dollar company and
once the deal was done (I didn't find out about the acquisition until after
the fact) it was impossible for me to fight them.

I don't know what the merits of his case are, but looking at this from
Jeremy's side, having been similarly positioned, he had no choice but to do
this right now. Once GM has the company, unless Jeremy has some insanely
wealthy backers willing to fund a very expensive legal fight for many years,
all bets are off.

~~~
pj_mukh
"He obviously feels he is owed something" Does he feel he is owed something
just now? Why didn't he feel he was owed something at their sizable Series A
[1]? It all just seems Opportunistic, someone just waiting to maximize their
returns.

[1]
[http://techcrunch.com/2015/09/18/cruise-2/](http://techcrunch.com/2015/09/18/cruise-2/)

~~~
bhouston
I find that business is opportunistic in general, and those who are successful
are generally opportunistic. To constrain oneself and to not take advantage of
opportunities likely means your going to get beat by those that do.

~~~
pj_mukh
I meant opportunistic in the "You knew you had no leg to stand on but are now
trying anyway because the stakes are higher", sort of way,

not the "This is the right time to start a certain business" kind of way

~~~
madgar
> I meant opportunistic in the "You knew you had no leg to stand on but are
> now trying anyway because the stakes are higher", sort of way,

This fully describes most of the VC-backed startup world. 95+% of the
businesses fail and a few get lucky. Part of making that happen is trying just
about anything and shooting for the moon.

~~~
Idontagree
What exactly was he waiting for? Hedging his bets? I get that this may be
legal, but he seems to have only become interested in his stake because it
might suddenly be worth something (alot). I'm actually surprised he's not
worried that his sudden claim might not cause enough problems to lower it's
value, i.e. scaring off GM.

------
zekevermillion
I am curious whether Jeremy reached out to ask for money first, or whether
instead what happened is Cruise asked Jeremy to sign a waiver of rights and
Jeremy wanted money to sign. I suspect it is somewhere between these variants.
It does not make sense to me that Jeremy would just reach out "from the
shadows" to demand a vig from this acquisition. If he did, and the alleged
facts are true, shame on him.

But I wonder, how is Cruise concerned about Jeremy using their trade secrets
if he never signed anything with the company? If they disclosed something to
him when he was not an employee, and there was no NDA, then how is it a trade
secret? Seems more likely that the acquirer saw Jeremy's name in diligence but
without any signed NDA/Invention Assignment Agreement, and asked Cruise to
close the gap by getting Jeremy to sign a waiver; then Jeremy asked for money
to sign that (just speculating here). If this is how it went down, it's within
normal bounds for Jeremy to request a payout. Maybe he asked for too much, but
that is something that is purely a commercial dispute and I don't think
deserves any moral outrage.

I may be missing something -- and probably am, having seen only this article
and Cruise's complaint. But there is something that smells a bit off, when
there's a rush to smear this guy using all the power of sama's fame, and the $
to hire a big lawfirm to terrorize the defendant into submission.

~~~
tlogan
If GM legal team is like legal teams I worked with in big companies then
Jeremy name will definitely surface. And GM will ask guarantees that Jeremy
will not pop up after acquisition is finished.

Depending on the situation some lawyer might even suggest to Jeremy to be
quiet till acquisition is finished and then the law firm will hit GM with
lawsuit.

So I think Jeremy signature is needed for acquisition to go thru and he
probably asks a little more $$ for his signature than Cruise investors are
willing to fork.

------
borski
So here's the thing: I actually think some of this is Kyle's fault, even if
that doesn't feel "great" to say. We had a similar situation with a third
cofounder for a few weeks (who is still one of my closest friends, though
admittedly it's been a while since we caught up). Our lawyers recommended
having us (and him) sign a document when we incorporated and receive
compensation (it was like $25 each) for the IP created prior to incorporation.

That would have resolved this whole issue, if they had thought about it before
it really became a problem, no?

~~~
bosdev
It doesn't seem like any IP was created by the guy in question.

~~~
borski
We don't know that. We know that Kyle says that's true. Did Jeremy create the
original logo? Did he come up with a particular idea? I'm sure these will all
be things that come out in the case, but I hesitate to take one particular
side's 'truth' as the whole truth.

Anyway, I'm just trying to inform folks that this is a possibility, and that
they should take care of this sort of stuff early. It doesn't take long, and
it isn't expensive.

~~~
sbisker
I did make you a beautiful logo, didn't I ;) Yes, it's been a while.

One of the reasons I signed and took your $25 offer was because I wanted to
live in a future where I _didn 't_ feel massively entitled to someone else's
successes. At some point it makes sense to lock in your friendship with your
friend-who-you-decided-to-maybe-cofound-with-but-stayed-in-Boston-instead and
move on with your life, before money gets in the way.

That said, every story is different. Just because all I made for borski was a
silly logo, doesn't mean that this Cruise fellow didn't make a more
significant contribution. For better or worse, it looks like that story will
play out rather publicly now.

~~~
borski
I do kinda miss the rivets ;)

It will be very interesting to watch this play out.

------
naveenspark
From personal experience, the moment someone does _any_ work on a project they
have a claim. The state of CA is extremely worker friendly in this regard.
I've made this stupid mistake twice in two different startups unrelated to
Immunity Project. The first time, we had someone interview for a job and
attend a few meetings. We ended up not offering them the job and they filed a
complaint. We fought it and ended up spending nearly six figures on legal +
more then you can possibly imagine to settle. It know this sounds insane, but
its true.

The second circumstance was a co-founder who stole cash from the company and
was booted. Similar end result. In both cases we had no documentation (classic
startup excuse), and strongly believed in the premise that if you didn't do
the work, you don't deserve to be paid. We lost in both cases. One of the
primary drivers in both cases was the dreaded contingency attorney. Anytime
someone is able to get an attorney to take a case on contingency with minimal
out of pocket cost, they have little reason to be reasonable. And because
filing is the nuclear option in the first place, they don't care about
fallout. Contingency attorneys are paid a % of the resulting settlement so
they will drive the case as hard as needed to extract the maximum outcome. In
some cases the attorney will manipulate their client in pursuit of this
outcome even if its not in their clients best interest long term. It was smart
for Kyle to file first because it makes it harder for the other party to
retain a contingency attorney who will cover defense in the deal. This will
dramatically increase the other parties cost to litigate the case.

Lessons learned:

1\. ALWAYS put stuff in writing.

2\. NEVER have anyone do any "work" without some written agreement on
compensation.

3\. The only winners in litigation are the lawyers.

4\. 3pt14159 makes a great point: ALWAYS settle early. The longer you let
something drag, the more it will cost. Its always best to try to settle prior
to either party filing a lawsuit. In this case it sounds like Kyle tried to
settle first but was unsuccessful.

~~~
3pt14159
ALWAYS settle early. By leaving it be you're exposing yourself. Eyes get wider
and wider as you raise more and more. When that $2m wire clears, if it means
writing a $300k cheque or agreeing to a $1m payout over 5 years, just do it.
Don't be idealistic when there are real stakes on the line. True, they can
still bring you to court later, but you'll be in a _much_ better position.

~~~
naveenspark
Great point. Editing my post to include this.

------
sama
Ok, I tried to answer questions here for awhile. I've got to head into other
meetings for the rest of the afternoon.

BTW, my working assumption here is that Jeremy is a good person getting bad
advice. I'm certainly not out to destroy his career, and I would talk to him
about his next thing. We tried hard to keep this from being a public matter,
but one things about YC good or bad is that we will do everything in our power
to defend the people we fund if we think they're in the right. Since this was
going to become public anyway, and Kyle can't say much, I wanted to clarify
how hard Kyle worked to solve this privately.

And as a takeaway--put stuff in writing!!

~~~
wkoszek
I think you guys are impacted by the US law allowing anybody sue anyone for
anything, always. In EU if someone has no contract/shares/employment in some
sort of a paperwork, I feel like there'd be no problem whatsoever. I doubt one
could even sue at all. If someone without % of the company can request
anything, that's slightly worrying.

~~~
jacalata
The EU absolutely allows for verbal contracts, it's just recommended against
(like in the US) since it's so hard to prove.

------
zxcvvcxz
Knowing very little about the case, it's hard to take a side without legal due
process. Statistically, from other similar cases, there's a good chance this
Jeremy guy is probably full of shit. But this rubbed me the wrong way:

> Still, it’s important to the way Silicon Valley works that such behavior not
> be tolerated.

You're not above the law, nor should you have more say than any other resident
in Silicon Valley (but by all means, vote in elections and write your
congressman). If someone makes a legal claim, that's up for the courts to
decide. They have every right to make such a legal claim. And investors have
the right to fire back publicly, sure.

But this attitude is now starting to make me think that there's more to this:

> Kyle made an extremely generous offer to settle this claim by offering to
> give Jeremy a lot of his own money.

Smart people don't settle if a claim is baseless. Baseless claims get thrown
out quickly and easily.

Edit: from another top-level comment,

>To that point, the fourth cause of action is regarding "Trade Secrets" in the
possession of the Defendant and states that "Plaintiffs have reason to be
concerned that Defendant may attempt to use such trade secrets in his further
endeavors" Which does prompt a question of how a person who never had any
involvement in the company and its technology came to be in possession of its
trade secrets.

And now I already have some reasonable doubt that makes me want to think a bit
harder.

To re-iterate, I still think this Jeremy guy is most likely full of crap. But
I am not a big fan of the attitude and public shaming of YC here. What this
tells me is as follows: if I have anything to do with a successful YC company
in the future and I get involved in a legal claim that looks unfavorable, some
popular top investor could write a blog post shaming me and ruining my
reputation for other startups. Not professional if you ask me.

~~~
sama
> Still, it’s important to the way Silicon Valley works that such behavior not
> be tolerated.

All I meant was to express my view there, but you're right, I don't like the
way that reads either. I'm going to update it.

> Kyle made an extremely generous offer to settle this claim by offering to
> give Jeremy a lot of his own money.

I think that happens in nearly all of these cases, which is part of why I find
them so upsetting. People know that you can pressure people under
extraordinary circumstances, like an acquisition closing, to give you
something.

>To re-iterate, I still think this Jeremy guy is most likely full of crap. But
I am not a big fan of the attitude and public shaming of YC here. What this
tells me is as follows: if I have anything to do with a successful YC company
in the future and I get involved in a legal claim that looks unfavorable, some
popular top investor could write a blog post shaming me and ruining my
reputation for other startups. Not professional if you ask me.

We tried every non-public method we knew of first. When it came time for the
seal to be lifted, I wanted people to know how hard Kyle tried to settle. My
original plan was to write a general post about this problem with no specifics
after this settled, which I didn't like but thought was 95% likely to happen.

~~~
zxcvvcxz
The frustration is understandable, it's a shitty situation and I've also had a
"useless" "co-founder" try and hold onto equity that didn't vest, after he
left and contributed little.

> I think that happens in nearly all of these cases, which is part of why I
> find them so upsetting. People know that you can pressure people under
> extraordinary circumstances, like an acquisition closing, to give you
> something.

Yeah, this is a topic that deserves its own post for sure. Timing-wise though,
if Jeremy has any claim at all, he needs to make it now before facing the
acquirer's lawyers, so there's that angle too. I definitely think there's some
nuance here, and am not sure what a superior system would look like.

> We tried every non-public method we knew of first. When it came time for the
> seal to be lifted, I wanted people to know how hard Kyle tried to settle.

Do you see the logic of my last point though, why people would perhaps not
look favourably of your public disclosure of this topic, even if you're right?
Moreover, what was going public on the individual supposed to accomplish?
Because it could sort of look like someone in power trying to strong-arm
someone not.

Regardless, I wish the Cruise team and yourself the best, and a speedy
departure from this issue. It looks like technology and legal claims are going
to continue to interact in increasingly complex ways down the road.

~~~
davemel37
> I've also had a "useless" "co-founder" try and hold onto equity that didn't
> vest, after he left and contributed little.

What I am about write is blasphemy in this community, but needs to be said.

Contributions to a startup are not quantifiable. There are truism that float
around the startup community like, "Ideas are worthless, execution is
everything." these are helpful motivation tools but they create a black and
white world, in a universe that is multi-dimensional.

When someone has an idea and someone else executes and the guy with the idea
wants his "fair share" or in less extreme cases, like leaving before shares
vest, there is this belief that one side is entitled to all equity and the
other side didn't contribute anything.

In truth, the other side sees things differently, and that doesn't make one
side right and the other wrong. It is never that black and white and general
ideas like, "execution is everything" are great as general ideas but don't
translate to every situation and each case needs to be evaluated
independently.

If someone contributed to a startup and the other side has a different opinion
about the value of that contribution. This is what the courts are for. Their
job is to help decide, in this specific instance the value of that
contribution was and how it relates to the nature of the agreement made
between the parties.

Truism are not legal arguments and it's a mistake to assume that situations
about contribution levels can be settled with them. Both sides believe they
are in the right and are being wronged by the other party.

There are two ways to proceed from there. You can dig your heels in the ground
on your position and try to pay to make the problem go away...Or you can
accept that the other side also has a leg to stand on... try to understand
their position and come to terms that leaves no one happy, but everyone
satisified. Thats what compromise is about.

I think the startup community and this post is evidence of it believes that
what they know is above the law.

This is a simple case of a dispute about money. Pretending it is about good
guys and bad guys is being dishonest to yourself and others.

Edit: spelling

~~~
zxcvvcxz
I agree with most of your post. I was trying my best to find common ground
with sama's perspective in his. Because I have had similarly crappy situations
that did make me incredibly frustrated. You bring up good points though:

> What I am about write is blasphemy in this community, but needs to be said.
> > Contributions to a startup are not quantifiable. There are truism that
> float around the startup community like, "Ideas are worthless, execution is
> everything." these are helpful motivation tools but they create a black and
> white world, in a universe that is multi-dimensional.

Amen, who gives a damn how fast you clmb the ladder if it's placed in the
wrong spot? And it's such a simplistic point; often times the whole point of
execution is to find a better idea. These ideas could be discovered through a
combination of mental reflection, talking to customers, building prototype,
...

> I think the startup community and this post is evidence of it believes that
> what they know is above the law. > This is a simple case of a dispute about
> money. Pretending it is about good guys and bad guys is being dishonest to
> yourself and others.

Yep. I don't care how many Airbnb's and Dropbox's you fund, you don't get to
say what constitutes good and bad in a community.

At the end of the day, I think Sam got frustrated, acted a bit impulsively,
and probably regrets how things turned out with the original post. But hey,
mistakes build leaders, so if someone as public as him can reflect on it then
all the better.

~~~
davemel37
> so if someone as public as him can reflect on it then all the better.

I eagerly await this much anticipated reflection. For what I can tell he is a
sincere, integrity driven, human being. Money has a way to messing with us and
causing us to do all sorts of things we regret. I just hope he can see past
his blind spots once the initial frustration wears off.

------
doh
This show the incredible value of YC in general. Two of my friends ended up in
a similar situation when were selling their companies and their VCs
essentially told them something like: "Don't you dare to fucked up this
merger, give them the money they're asking for."

Having a VC that stands behind you during time like this has an incredible
value and should be considered by any founder(s) when thinking about applying
to YC.

~~~
underwater
An alternative viewpoint (with the caveat that I know about the specifics of
this case) is that if you leave a YC company, then not only can you be denied
compensation for your work, but you may be sued for trying to make a claim for
it.

~~~
paul
Read the post. Jeremy was never a part of YC, and did not make any meaningful
contributions to the company.

If this action scares other people like Jeremy away from YC companies, that
would be wonderful :)

~~~
underwater
I did. He was involved in the company prior to YC, and initially applied as a
cofounder.

------
jl87
"Still, it’s important to the way Silicon Valley works that such behavior not
be tolerated."

Who are you to say what is or is not tolerated in SV?

Sam, you and YC seem like good people, but language like that makes me not
want to be your fans.

It sounds very elitist.

~~~
sama
Fair point, I don't like the way that reads either. I deleted it until I have
time to rephrase it.

------
alain94040
I have seen my fair share of co-founder disagreements, and I have issues with
several parts of Sam's comments:

 _Even if Jeremy had signed a stock agreement, he wouldn’t have reached the
standard 1-year cliff for founders to vest any equity_

Sam, are you recommending that co-founders with no salary be subject to a
1-year cliff? I have always argued that it's a bad idea, and today's case is
the perfect example: if someone who is not paid leaves before 1 year, they
receive absolutely nothing for their work. That's not right. I'm fine with a
1-year cliff for early employees who get a salary (see FAQ section of
[http://foundrs.com](http://foundrs.com))

To play devil's advocate, you need to hear both sides of that story. Of course
one month is not much time. But if I'm the one who said the one magic sentence
that made Elon Musk fall in love with Mars and told him how to get there, and
I can truly claim that without me, SpaceX wouldn't exist, do I deserve
something? Hard to tell. By default, if two people start working on something,
they are partners, 50/50\. That wouldn't be right either, but maybe the truth
is not a 100/0 split.

EDIT: after having read the legal complaint, it sounds like that person was
not an original co-founder, but someone who had some discussions _after_ the
startup was incorporated. The only "oops" moment is having listed him as a co-
founder on YC's application. You can imagine the scene in the courtroom: "did
you or did you not list Mr X as a co-founder in the company's YC application?
If so, are you lying to us now when you say he is not a co-founder or were you
lying then?"

------
pmorici
Did anyone else read the linked complaint that was filed with the court? What
I found interesting is it spends seven pages essentially painting the guy as a
villain and claiming he had nothing to do with anything the company did then
in prayer for relief it says they are worried he is going to take Cruise's
trade secrets and use them in his own venture.

How can anyone claim that someone simultaneously had no involvement in your
business and yet you are worried they have knowledge of and are going to use
your trade secrets?

The whole complaint is very light on specific facts and contains a good dose
of ad hominem language assailing the defendants character w/o alleging any
specific actions taken by the guy to support the claim. It also alleges that
the guy is interfering in the acquisition but doesn't specify how.

It seems like there is more to this story, unless they just managed to hire
the world's worst lawyer.

~~~
j_s
Thanks for taking the time to read the linked complaint and share your
impression!

------
edw519
Sorry to hear about all of this.

As a repeat solo founder and bootstrapper, I have an intense desire to spend
the maximum amount of time satisifying my customers by helping them solve
their problems. Sure, this approach often leaves a bundle on the table, but so
what; lots of us just want to accomplish a lot and have fun building stuff and
helping others, regardless of the payback.

I'm so glad I chose this way when I read stuff like this:

 _...long and sordid history..._

 _...should own a substantial amount of Cruise’s equity..._

 _...interfering with the pending Cruise /GM merger..._

 _...offering to give Jeremy a lot of his own money..._

 _...avoid a protracted litigation..._

 _...worked incredibly hard to settle this claim amicably..._

 _...obvious ridiculousness of it..._

 _...incredible bummer these situations have to happen..._

 _...least sensible professional situations..._

 _...unfortunately these situations are not uncommon..._

 _...I place myself at risk talking about this..._

 _...say something before the lawyers can stop me..._

 _...such behavior not be tolerated..._

 _...personally involved all day on Friday..._

 _...time pressure because of the pending merger..._

~~~
MattyMc
Soliciting the levels of financial investment needed for Cruise to be
successful would be difficult if the founders expressed the same sentiment,
that they're trying to solve a problem regardless of the payback.

I don't think any business is immune to legal trouble. I sincerely hope you
don't experience any yourself (ever), but if you do you may find yourself
using similar language.

------
pron
Knowing absolutely nothing about this case, and assuming Sam is 100% right, I
think it is a bit unfair for Sam to use his huge PR advantage. Obviously, it's
just business, and it's good to see Sam and YC putting their considerable PR
weight behind one of their companies, but it's also problematic, especially at
this point in time, where it doesn't seem like the other side has done any PR
(otherwise this move is perfectly understandable). Maybe Jeremy will withdraw
his claim? Maybe he'll take the next settlement offer? Maybe he's an
opportunist, but maybe he truly feels he's been unjustly harmed (and maybe
both)? And maybe he's just so angry with himself for dropping out that he just
can't let it go? Is it really necessary to air this in public, possibly
destroying a person's reputation, when you might well win anyway (and it is
unlikely that this post would change the outcome one way or the other)? Or is
it just a form of deterrence to others?

~~~
ant6n
Meta: What's with all the down-voting these days? Down-voting is not for
disagreeing. If you do, engage the debate.

~~~
gregw134
Is there a way to downvote without flagging on HN?

~~~
atom-morgan
Yes. There's a karma threshold.

------
Animats
It's going to be amusing if GM realizes that Cruise doesn't have much
technology and bails on the deal. GM/CMU has successfully demonstrated a
Cadillac driving around Washington DC in traffic.[1] Cruise crashed into a
parked car in San Francisco.[2]

[1]
[http://www.cmu.edu/news/stories/archives/2014/june/june24_co...](http://www.cmu.edu/news/stories/archives/2014/june/june24_congressforaride.html)
[2]
[https://www.dmv.ca.gov/portal/wcm/connect/bc21ef62-6e7c-4049...](https://www.dmv.ca.gov/portal/wcm/connect/bc21ef62-6e7c-4049-a552-0a7c50d92e86/Cruise_Automation_01.08.16.pdf?MOD=AJPERES)

~~~
ianhawes
While I also think that the GM/Cruise acquisition is terrible, it should be
noted that the linked accident occurred during "Conventional" mode and not
"Autonomous" mode.

~~~
Animats
Read the report. The automation swerved to the left, then to the right, then
the driver took over, but too late. Yes, the vehicle was on manual at the
point of the crash.

I refer to this as the "deadly valley". Autonomous vehicles cannot rely on the
driver as an immediate backup. This is what happens if a system does that.

------
gkoberger
Finding a cofounder is often like dating. You sometimes need to "date" a few
people before you find a "girl/boyfriend" (aka cofounder). It's too early for
contracts or equity splits at this point, which results in enough ambiguity
later on that these issue can arise.

I hate the formality of contracts, but is there any good procedure early on
for avoiding this in the future? It seems every billion dollar company has a
"secret" cofounder that shows up when the money does. I know I've definitely
shared ideas and even code with friends, long before my startup became an
incorporated startup.

I'd feel silly and presumptuous if I started handing out contracts, of course.
Maybe something more along the lines of the YC handshake protocol, as opposed
to a formal contract? Does it legally matter if you say "Hey, just wanted to
acknowledge we talked a lot about this, and wanted to make sure you were okay
with [terms]" and record the response?

~~~
mikeryan
_I hate the formality of contracts, but is there any good procedure early on
for avoiding this in the future? It seems every billion dollar company has a
"secret" cofounder that shows up when the money does._

Yes get a lawyer involved at the beginning to draw up a partnership agreement
with standard vesting terms.

Outside of that no.

All that being said its a slippery slope for every guy "who helped find an
office" there's a guy who "prototyped our mobile app" or "wrote the first
version of our backend". Its very hard to pick the point where someone
_becomes_ a founder.

~~~
debacle
It's not about being a founder. It's about creating value. The value creation
around finding an office might be 2-5k depending on the area. The value
creation around prototyping a mobile application is massively different.

~~~
morgante
Is it?

You can hire a developer to prototype many mobile apps for 2-5k.

------
damonpace
Every lawyer in Silicon Valley knows the biggest threat to your startup is
your co-founder. Not VC's. Not competitors. Not Copy Cats. Not Google or FB.
It's your co-founder! If you don't want to believe that, read the countless
stories and lawsuits in SV about co-founder disputes.

Stories like this should give you the confidence you need to be a solo
founder. Start solo & hire your co-founders after you get your paperwork done.
It's not about equity or greed. It's about starting smart & protecting your
investment.

------
6stringmerc
> _And so I’ve decided to say something before the lawyers can stop me._

Note to self to etch into brain: Do not emulate this in serious matters.

I can understand the compulsion though, no doubt.

~~~
spinlock
I can't believe he made a public statement either. If you want a baseless
lawsuit to go away quickly, you do not give the opposition ammunition (which
is what this public statement is). The lawsuit sounds like bullshit to me but
I can see this statement costing Cruise a lot of money.

~~~
6stringmerc
Honestly I believe it would've taken minimal effort to obfuscate the players
and turn it into a venting / warning regarding best practices in the industry,
and, in some ways, perhaps have been more constructive.

------
chetanahuja
_" I recognize that I place myself at risk talking about this, but it’s time
that someone speaks publicly about situations like what is happening at
Cruise. And so I’ve decided to say something before the lawyers can stop me."_

I don't understand. What is the great risk to @sama here? For all intents and
purposes, this looks like a public naming-and-shaming of a previously unknown
person by a prominent VC because they made a legal claim against an
investment.

------
michael_storm
> Even if Jeremy had signed a stock agreement, he wouldn’t have reached the
> standard 1-year cliff for founders to vest any equity.

How is someone not fulfilling hypothetical terms of an agreement that doesn't
exist an argument that they don't have a claim? "Furthermore, had they signed
an agreement stating that they wouldn't get compensation, they wouldn't get
compensation. Therefore, they shouldn't get compensation."

~~~
grahamburger
That goes both ways though. "well if I had signed that hypothetical agreement
that I had some ownership, then I would have some ownership."

~~~
fudged71
I don't think that is true. Intellectual property has value associated with
it, and if it hasn't been transferred/compensated then they have some implied
ownership.

Specific clauses of a vesting agreement, however, are not implied or 'owed' by
default.

~~~
jamiequint
That's not true because every standard employee agreement in VC backed
companies (and in most other ones) also contains an IP assignment. So if
you're going to claim that you would have signed a hypothetical employee
agreement, it also would have come with a hypothetical IP assignment.

~~~
morgante
Right, but he never signed the employee agreement and hence never had an IP or
equity assignment.

Legally, this seems far from open-and-shut.

------
pfarnsworth
One of my friends knows someone at Cruise, and he was incredulous about the
deal. He believes that most of the $1B will be related to hitting milestones
in the future, and isn't just straight cash or equity up front. Does anyone
know anything about this?

He basically said they don't have a working product, they have a prototype
that works on one specific model, so the idea that this would garner $1B is
insane unless there's some earnouts associated with it.

I guess it will be in GM's financial statements so I'll be on the lookout for
that.

~~~
foobarqux
Earnouts would be the sensible thing to do, but GM might be more dysfunctional
and desperate than anyone realizes.

------
mangeletti
I'm gonna get a lot of hate for this opinion of mine:

This seems like a great way to muddy the waters for any potential future jury
trial.

What a shameful move on the part of Sam Altman, using such a soapbox to
publicly put somebody's personal ethics on trial, and for personal monetary
gain.

------
JonFish85
Investor argues in favor of preserving his investment. That's about as much
weight as I care to give his arguments.

Also, as an aside, is it really a "merger"? I see it as an acquisition--one
company buying the other out.

~~~
jmtulloss
These terms have legal meaning, and the deal is probably structured as a
merger. Since GM is so much larger than Cruise, I would speculate that they're
forming a new wholly-owned subsidiary that Cruise is merging into, or some
other sort of triangular merger.

------
mcculley
> And so I’ve decided to say something before the lawyers can stop me.

I hate when people say things like this. Maybe he meant that other people's
lawyers will prevent him from saying something, but often people are referring
to their own lawyers. Your lawyer can't stop you from doing anything. Your
lawyer can only encourage you to not say anything which might damage your
case. And people often take that advice in the interest of self-preservation
or greed or damage control instead of speaking candidly. They then blame the
lawyers as if the lawyers are the reason they can't talk.

------
jondubois
It sounds like Jeremy was part of the company before any of these 'vesting
schedules' were agreed upon. It would be nice to read Jeremy's side of the
story.

It's strange that somebody as wealthy as Kyle (who sold Twitch for $1 billion)
would make such a fuss over what is probably only a couple of millions... It
would be interesting to know exactly how 'extremely generous' his settlement
offer was.

Also it's really strange/suspicious that the founder of Cruise would put
himself on a vesting schedule... Is this common practice?

------
daveguy
Kindof off topic, but I find it odd that they are referring to Cruise/GM as a
merger. GM is a behemoth compared to Cruise. Isn't that more of an
acquisition? Is merger a legal term? If so, can anyone clarify why this is a
merger and not an acquisition?

~~~
peyton
According to Investopedia [1], acquisitions are sometimes negotiated to be
called mergers to avoid negative connotations of being "bought out."

[1]:
[http://www.investopedia.com/university/mergers/mergers1.asp](http://www.investopedia.com/university/mergers/mergers1.asp)

------
minimaxir
Wow, this is incredible transparency on YC's part, and an interesting tactical
decision naming names. I assume this post went by several of YC's lawyers.

EDIT: Had asked about Jeremy's complaint; see sama's comment below

~~~
sama
As far as I know he hasn't filed a complaint yet, it's just been verbal/emails
(which is still more than enough to interfere). I assume he will file
something soon.

RE naming names, the complain is public anyway, but still it's not something I
feel great about. However, behavior like this is becoming more common (I spend
far more time dealing with related issues than I'd like) and it needs to stop.

~~~
Cshelton
If you want some horror stories, go find a CPA that works with primarily small
businesses. You will hear about the families fighting or deadweight partners
that bring the company down and force it to close shop. Choosing who to go
into business with is one of the most scary things when starting something
new.

If you find a good solution to reduce the rate of this happening, please
share! It is a huge problem and a major barrier to why many businesses are
never started or die a premature death. People are inherently unstable and
difficult.

------
businessy350
As a naive entrepreneur I allowed someone to become involved with my business
and quickly discovered they were not the right person to work with. Their
behaviour became a concern and I had to sacrifice millions of dollars to
prevent the destruction of what I have worked for. By taking an acquisition
offer in an effort to remove them from a position of control I lost a lot and
they made a lot. I deeply sympathise with the decision Kyle made to offer
Jeremy his own money to end this. I have many regrets about involving that
person in my business but to this day I do believe that the decision to allow
them to walk away with a lot (of undeserved money) was the right one. The
business lives on.

The person on the wrong side of my experience went on to deceive many other
people and has left a trail of negative experience behind them, even using
their involvement in my business to help deceive. I take comfort in knowing
that my business survived their involvement and regardless of how they
profited from my work they will likely never find honest success.

------
abalone
_" I’ve decided to say something before the lawyers can stop me."_

Is this really a smart decision that the HN community should model? To view
your friend's lawyers in a multi-million $ lawsuit as obstacles that should be
routed around?

Posting to the HN community about this seems like an emotionally-driven
decision. With so much at stake, wouldn't it be better to (a) follow your
lawyer's advice and (b) do a post-mortem on it after the acquisition closes?

------
blazespin
[https://www.google.com/webhp?sourceid=chrome-
instant&ion=1&e...](https://www.google.com/webhp?sourceid=chrome-
instant&ion=1&espv=2&ie=UTF-8#safe=off&q=Jeremy+Guillory+cruise) Is like the
second entry on Google Search. Great job, Sam. Boy I don't think i'd ever want
to do business with you.

------
tlogan
Here is how understand what I was told regarding these kind of problems.

\- When acquisition happens, then acquirer will do due diligence. They will
want that all people which were involved in the development without the
contract to sign a waiver / transfer IP.

\- If people involvement in the development were working for free and there
were not contract, then, by default, they are eligible for part of equity.

In short if co-founder leaves and was not paid you must ask him to sign waiver
/ transfer of IP (not sure exactly what: ask your lawyer - then can craft
that). I believe the key here is whether is that person was compensated or
not.

Am I right here?

------
Scirra_Tom
Can't see any mention of what Jeremy did for Cruise apart from help find an
office, he must of done something else? Would like to hear the other side of
the story tbh.

Wondering if the risk Jeremy posed was identified in the duedil at any stage
for previous rounds, and if the risk was identified if it was used as leverage
for lower valuation at all, or if it was not identified or underestimated.
Would of thought seasoned investors would of wanted to snub out any future
issues like this before handing large amounts of money over.

------
dataker
We don't know what made Jeremy leave the company and how he helped before YC.

If this is a case Jeremy was present at incorporation, he contributed to the
product (in some way) and his shares were eventually diluted, this will be
similar to Saverin's case.

------
oxryly1
Does this strike anyone else as naive speculation? And fiercely prejudicial,
as well?

------
vnchr
I can't imagine PG posting something like this.

------
sandGorgon
So the claims in this case are based upon the fact that they made the YC video
application together and clearly mentioned in the YC application on what each
cofounder's contribution was ?

Hmm...this is very tricky. Because I'm very sure they attributed some concrete
work to each founder . in fact if i remember correctly, they ask how much code
each cofounder wrote.

------
CPLX
As a side note, having read the actual court filing, this kind of language in
legal complaints always rubs me the wrong way:

 _1\. This case arises out of Defendant’s opportunistic and brazen attempts to
extort money from Cruise and Mr. Vogt. As alleged below, after mutually
parting ways with Mr. Vogt over two years ago, Mr. Guillory emerged from the
shadows with his hand out within days of the March 11, 2016 news that General
Motors Company (“GM”) intends to acquire Cruise. As explained below, Mr.
Guillory should put his hand back into his pocket; he does not have any stake
in the Company.

2\. Defendant’s shocking and opportunistic claim is an attempt to thwart,
interfere or otherwise delay GM’s merger acquisition of Cruise for his own
pecuniary benefit. Knowing that his claim could interfere with the GM
transaction, Mr. Guillory hopes to leverage his extortionist claims to achieve
a pay-off from the Company. Declaratory relief is therefore necessary to
remove potential uncertainty regarding equity ownership, partnership
interests, intellectual property and trade secrets of the Company..._

Given that such inflammatory language will have no positive effect on the
judge, and if anything distracts from the actual precise legal arguments, it
seems calculated entirely for the attention of the press and/or general
public.

I have no opinion on the merits of this one obviously, but in my experience,
when you see a complaint with language of that kind it's often a sign that
there's more to the story.

To that point, the fourth cause of action is regarding "Trade Secrets" in the
possession of the Defendant and states that "Plaintiffs have reason to be
concerned that Defendant may attempt to use such trade secrets in his further
endeavors"

Which does prompt a question of how a person who never had any involvement in
the company and its technology came to be in possession of its trade secrets.

In fairness, it's certainly plausible that its basis is solely in claims made
by the Defendant, and not meant to imply there is any actual IP in his
possession.

Or, it could mean that during the acquisition his early role came to light and
he was asked to sign away any potential IP by the acquiring company and
declined to do so without compensation, since he might want to do a similar
project in the future. Did he reach out when he heard the news, or did the
company reach out to him during acquisition due diligence?

That's complete speculation, but we have no choice but to guess, since unlike
a typical complaint to commence a legal action, this particular one doesn't
contain an affidavit or make any attempt to establish an underlying factual
record at all.

Instead of saying he "emerged with his hand out" it could state "contacted X
via email asking for Y on Date Z" in the style of an actual legal argument
rather than of a press release. Rather than referencing "baseless allegations"
and "shocking and opportunistic claim" it could just state the claims he made.

So, what shocking thing did he say? What is his stated rationale for
compensation? On what date is there the first written evidence that he's
making a claim of equity? Why aren't there any exhibits attached? Why aren't
there any quotes from the emails he sent?

~~~
paulgb
> having read the actual court filing

Sam said elsewhere in this thread that to his knowledge no actual claim exists
yet. What filing are you referring to?

edit: Sam was saying that Jeremy hasn't filed anything, but the founders filed
for declaratory relief.

~~~
CPLX
It's linked in the third paragraph of the article that we are both now
commenting on.

~~~
paulgb
Thanks, I see it now. I've updated my comment.

------
bitmadness
I disapprove of investor's commenting on such cases. Sam has a conflict of
interest in this case, and was not even present for the events in question.

------
jboydyhacker
From the filing it looks like they only collaborated for one month. Assuming
that's true - it's a pretty offensive shakedown. It sounds like Kyle tried to
offer some portion of the proceeds to make it go away but it was declined. Out
of curiosity how much was he asking for?

Also in what form did the claim take- Did Jeremy hire lawyers to write a
demand letter? Why isn't that in the filing? DOes Jeremy have a lawyer or was
he just talking.

Further, isn't there a way to close on the merger given the specious nature of
the claim and just ignore the claim and this whole thing? I mean- they knew
each other a month.

------
intrasight
Obviously I don't have the full context, but I don't see the benefit of an
open discussion on this legal issue. It's just going to have to work its way
through the legal process.

------
matt_wulfeck
The more money the higher the stakes. There was a founder that left under
potentially unfavorable conditions? Then they definitely should have done
their due diligence before going forward on a mega, billion dollar deal.

This has nothing to do with silicon valley. These guys can learn something
from the way investment banks prepare and close deals. Get all of your ducks
in a row before putting that much money on the table.

------
flashman
> According to Kyle, Jeremy did not write any code or build any hardware
> during this exploratory period.

He'd better be 100% right about this. I imagine it wouldn't look good for Kyle
if it comes out that Jeremy wrote some code, no matter how insignificant.
Because if 'no code written' = no equity, 'some code written' could turn out
to be a gateway to having some equity.

------
andy_ppp
This is the sort of blog post I'd write :-)

My spidey-sense for business works like this (probably wrongly); as a geek I
assume it's normal for investors to screw me over if I haven't done due
diligence of contracts and also for every single former employee to come back
if there is a chance for a pay day.

It's sad but I don't find it that surprising; I'm surprised we don't hear
about this more.

------
jasonwilk
This shouldn't hold up the deal. GM can write in the agreement that Cruise
shareholders have an unresolved potential obligation which they will cover
with proceeds.

I had to deal with this at a previous company and it in no way blocked or
slowed down the sale. Just a pain in the ass and something that is
unfortunately too common.

You can never be too careful with starting your business.

------
theoracle101
The sheer amount of misinformation in this thread is astounding.

He wrote no code, literally did not prototype anything, contributed nothing.

Self driving cars take 100s of moving pieces and complex algorithms. You can
literally just check the github repo to see who has contributed what. There is
no one IDEA that is the silver bullet. Its an entire system working together.

Obviously I can't say much as most is hearsay (though I do believe what I've
heard), but the one part of this story that irks me the most is that this all
started when Jeremy (allegedly) drunk at a party, bragged to Cruise's counsel
that he could stall the GM deal if he really wanted to. Can't believe its
actually come to this.

I feel for the engineers there. All their hard work, and likely they will have
to lose a large portion of their shares due to indemnity clawbacks when the
deal goes through.

------
danielpwm
Sure, but Sam Altman is biased here. He is a share holder and has a lot to
gain from the merger going through, and not being delayed or derailed. So it's
hard to read this as if it were neutral, which is how he is presenting it.

------
kelvin0
Looks like that Jeremy guy is gonna have some splainin' to do in his next job
interview. Pretty sure other startups won't want to touch him with a 10' pole,
regardless of the veracity of the allegations made.

~~~
jonknee
Rooting against someone to be able and work again is a weird reaction to
hearing very little about one side of a private legal matter.

~~~
kelvin0
Not rooting for anything, just saying this is not good for any of the involved
parties 'images' (bad PR).

------
bookmarkacc
I don't know much about this domain. However it seems like this is an
important time to create presedence.

It is in Angel investors interest that people coming out of the wood works be
entitled to nothing.

------
dmode
Jeremy deserves nothing in principle. You cannot ask for millions of dollars
of someone's hard work when you have barely put in 1 month of effort. A
billion dollar exit requires a lot of hard work and execution. Even if the
core idea was Jeremy's, ideas are dime a dozen. Heck, several billion dollar
ideas popup in my brain every day. Building on that idea and getting it to
market is where the value is. I have no sympathy for Jeremy. He is an
opportunist. And Sam is 100% correct.

------
sjg007
Real Companies of Silicon Valley Season 2 episode 1

------
noahmbarr
People will be opportunistic when it's most opportune.

A stern reminder to us all to get a release whenever you part ways.

~~~
forgetsusername
> _People will be opportunistic when it 's most opportune._

It cuts both ways. Plenty of founders make promises of equity in the early
going that never materializes.

------
errantspark
This made me smile, maybe the future isn't so grim. I hope this doesn't end
with an undue amount of fallout for sama such that he's discouraged from doing
something like this again should the situation require.

------
sharemywin
Seems like there should be some kind of project before company type of
agreement. Kind of like "modeling agreements" photographers get you to sign
before taking your picture.

------
mslate
$1,000 This blog post will be taken down w/in 24 hours.

------
studentrob
There is no value in making this public. It is going to be decided by a judge,
arbiter, or parties themselves. Public opinion has no say in that matter.

------
yuhong
I really wish the restrictions on public companies can be reduced or removed
so board of directors can tweet more on the companies.

------
Bluestrike2
Nobody should ever find themselves in a situation like this. Unfortunately,
it's altogether too common even when everybody involved is acting in good
faith. I can say from experience that if things ever get to the point they did
with Cruise, everybody involved has made a series of blunders.

I've been on the other side (sort of; the situations aren't analogous) as
someone pushed out by two other non-technical founders after they'd discovered
a cheaper option in a startup-in-a-box (best description I can come up with).
I wrote about this on here a year or two ago, but there's nothing like
discovering that on the day your grandmother dies, and having to deal with
their bullshit while focused on her funeral.

I didn't pursue the matter for a number of reasons (one of the two was a
lawyer with sufficient resources to draw out any dispute, etc.), but as angry
as I was at them for their actions, I realize that had I been more proactive,
the entire situation could have been avoided. Instead of accepting repeated
excuses and prevarications like "we'll deal with the legal documents soon,
just after X" because the one was a good friend, I should have pushed to get
everything out of the way first. I knew better, and I ignored my better
judgment for what was largely emotional reasons. In hindsight when I look at
how things went down in the end, and I look at the events leading up to it,
I'm of the opinion that I was going to be be screwed no matter what. But I
suppose that I got the last laugh, as they didn't get a line of code I wrote
and they've more or less stagnated since a launch that few noticed and fewer
cared about. They might not be dead, figuratively speaking, but they're
certainly on life support.

Good contracts that are highly specific might seem insulting to some people
(they're not), or they might seem like an unnecessary delay, but they're
incredibly important even when _everything_ goes right. They spell out duties
and roles, and make absolutely certain that everyone is on the same page with
no confusion or misunderstandings so that you can focus on building things
without any uncertainty.

Basically, pay the lawyers and get things done right from the beginning. You
don't have to go to a large firm and pay out $500/hr for this sort of work.
There are plenty of small, solo practitioners who focus on business formation.
When circumstances change, or you learn more about the business's nature and
the risks you need to mitigate, you can always amend or replace your
agreements at a later date.

We usually don't think in these terms, but getting involved in a startup
without contracts in place is akin to writing complex code without tests. You
can do it, but you're making a huge mistake that'll bite you in all sorts of
unexpected ways.

------
tomjacobs
I didn't know legal documents could be funny.

"Mr. Guillory emerged from the shadows with his hand out within days of the
March 11, 2016 news that General Motors Company (“GM”) intends to acquire
Cruise. As explained below, Mr. Guillory should put his hand back into his
pocket; he does not have any stake in the Company."

Maybe Jeremy could go build his own company. There's plenty of wealth to
create, you don't have to take.

~~~
mtkd
Courts exist so that both sides of situation can heard

I briefly read the original post - it mentioned a month - a lot of strategy
and insight can be transferred in a month

~~~
kybernetikos
> a lot of strategy and insight can be transferred in a month

Not just that, a fair amount of work can be done in a month (bearing in mind
that '1 month' is probably a rounding down). It sounds as if Cruise has gone
from being worth very little to an awful lot in around 24 months.

------
msane
I prefer to see the clean laundry.

------
mkoble11
seems like a shakedown to me.

\- jeremy left after a MONTH, never went through the YC interview with kyle

\- >>> jeremy never signed any agreement over equity breakdown, etc <<<

\- jeremy never inquired about equity when kyle raised previous rounds, only
after the $1b exit.

pretty straightforward.

~~~
mattthebaker
\- j contributed something, anything to the company

\- j was never compensated

\- j was never forced to legally release rights to anything when he left

\- legally, if j contributed anything of significance, even ideas, cruise is
about to learn a very expensive lesson

------
gargarplex
Going through something similar with a pseudo ex-cofounder. He has been
behaving extraordinarily passive aggressive.

For a long time, he hasn't been picking up phone calls, responding to emails,
or completing tasks that he agreed to do. Sometimes he'll send a text, like
seven days later, asking for a clarification on a requested-task that has now
already been completed.

Things are finally starting to pick up. I don't know what to do. Technically
he owns 50% of the "venture" but it's not like we've issued stock, etc. Things
are hairy.

~~~
abraae
Its too late for you now, but one thing that gets specified up front sometimes
is a "roulette clause". More or less, either party can make an offer to buy
the second party out at any price they like. The second party must either
accept the offer, or buy the first party out at the same price.

Its one way to avoid the deadlock situation where one founder mentally checks
out, offers no value, but refuses to be bought out at any reasonable price.

~~~
Everhusk
Is this a common thing? Never heard it before, it is very clever though.

How would you prevent a founder from bluffing though? Say founder B knows that
founder A only has $X, so he offers to buy it for $X + some number. Makes it
hard for founder A to keep any ownership of his company without taking out an
expensive loan and paying way more than the company is worth.

------
free2rhyme214
Sam's a leader. Reminds me of one of the recent Hubspot founders LinkedIn
post. We need more leaders like Sam!

------
rdl
Hopefully this gets resolved soon. Seems like three clear takeaways for
everyone else.

1) Don't work with Jeremy Guillory

2) Be extra careful with paperwork and understandings early on. (Although it
doesn't look like they could have done anything more.)

3) If you possibly can, you want Sam Altman on your side. not just for when
things are going badly, but also when they go world changingly well.

~~~
jsmthrowaway
> 1) Don't work with Jeremy [...]

And this, right here, is why this post is _bad_ , _bad_ , _bad_ news. You're
allowing someone to dictate your interaction with someone you've never met due
to circumstances with which you're not involved based on a single-sided
narrative and public record.

That'd be bad enough, but then you're taking it further and telling the rest
of us to blackball a person _as a forum_. A person. With a career.

Do you not see how absolutely crazy that is? I won't invoke his name because
it's passé, but that shit happened in Congress once, and it didn't go well.

~~~
akg_67
Second this. This post from sama was very bad idea. It came across nothing
more than vindictive and publicly shaming Jeremy because of sama's personal
interest in seeing deal through.

If there was any incentive for Jeremy to quietly settling the issue, this post
just took it away. Now he should go for jugular- half of Kyle stake and then
turn around and sue sama for defamation and crimping his ability work in SV in
the future.

------
brackin
Awesome work, I wouldn't be surprised if shaming these tactics stops him from
filing or deters future shady characters from similar tactics.

