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As someone who has both started and worked very early at multiple startups, it's so incredibly outlandish to hear someone claim that they brought in a business plan and some ideas, and that ideas alone should represent an equal percentage ownership to someone who actually worked on building a business for multiple years. In startups no battle plan ever survives first contact with the enemy. There is a reason why most successful companies release an initial version of a product early, then adapt to market conditions rather than sitting down, writing a long business plan, and executing it.

If Jeremy's MechE experience and background in self-driving cars was so valuable how did Cruise manage to pivot from just offering an autonomous driving add-on that only worked on the highway to building a fully-autonomous city-based driving solution without him. How did they manage to raise millions of dollars, write all the code, and build all the hardware without him. It just doesn't add up.




> it's so incredibly outlandish to hear someone claim that they brought in a business plan and some ideas, and that ideas alone should represent an equal percentage ownership to someone

This is a filter bubble that startup founders need to snap out of...in the real world, two people can agree to anything, and general startup best practices dont dictate or say anything about the past, they can just guide you in the future.

That startup advice about how to split equity is sound advice and it is arguably outlandish to not follow it...but that in no way shape or form makes it the reality of what actually happened. People agree to all sorts of things all the time.


Cruise hasn't (yet) built fully autonomous cars. Arguably even Google hasn't done it yet.


Does Cruise Automation hold any autonomous vehicle patents? I could not find any in Google Patents.


> it's so incredibly outlandish to hear someone claim that they brought in a business plan and some ideas, and that ideas alone should represent an equal percentage ownership to someone who actually worked on building a business for multiple years.

I really don't understand your view here. If the value of the business plan didn't merit equal percentage, that should've been made clear at the onset. At the time, according to Jeremy's complaint it was valued at 50% of the company:

    ... Vogt agreed that Guillory should be a co-founder and 50% equity owner of Cruise.
If the business plan and some ideas didn't merit 50% ownership, Vogt shouldn't have agreed that Guillery should be a 50% equity owner of Cruise. Simple as that.


Ownership as stated in a Y Combinator application 100% of the time implies there is also a vesting agreement.

I've filled out my own (successful) YC application which stated that I owned 50% of my company. My own equity was still subject to a vesting agreement requiring that I continue to be employed at the company.

A proposed (or even stated) equity split doesn't grant outright ownership. It would be impossible to raise investment from any professional Series A/B investor (anything involving a priced round) without founder and employee vesting, typically on a 4 year vesting schedule with a 1 year cliff at the very least.


> Ownership as stated in a Y Combinator application 100% of the time implies there is also a vesting agreement.

An ownership agreement doesn't require vesting, unless one was agreed to. An implication is worthless.

> A proposed (or even stated) equity split doesn't grant outright ownership.

In a YC boilerplate stock vesting agreement, perhaps. Doesn't apply to contract law as a whole.

EDIT:

> It would be impossible to raise investment from any professional Series A/B investor (anything involving a priced round) without founder and employee vesting, typically on a 4 year vesting schedule with a 1 year cliff at the very least.

You can raise investment from someone if they never know of an outstanding ownership claim until an event occurs.


I'm just wondering what startup you're a founder of that didn't have founder vesting?


Facebook didn't have founder vesting. Which is why Saverin has billions of dollars despite not really doing anything.


He actually has billions of dollars because he was the first investor in the company, he invested $18k in Facebook in 2004.


No, most of his stake is almost certainly from shares given to him as a founder. Mark Zuckerberg publicly admitted at Startup School that it was a billion dollar mistake not to have founder vesting (because he didn't know anything about startups at the time), and claims that Eduardo "just bounced."

Anyways, this is irrelevant because the fact is Facebook initially did not have founder vesting.


I'd imagine most of them start that way. Most startups go without a formal partnership agreement or incorporation until they need it (like being funded). Look at the winklevosses and facebook


I'm sorry, but you're flat out wrong.

There has to be a definitive and clearly stated offer to do something in exchange for valuable consideration to make a valid contract. A document that simply says what the proposed ownership is doesn't make said ownership legally valid.


OK firstly, consideration doesn't have to be "valuable". It has to have _nonzero_ value, but that value can famously be as trivial as "a mere peppercorn" [0]. Furthermore: "a peppercorn does not cease to be good consideration if it is established that the promisee does not like pepper and will throw away the corn".

[0] https://en.wikipedia.org/wiki/Peppercorn_(legal)

The point is that the law doesn't attempt to make everyone "be nice", nor does it protect you from making a bad business decision. It's really just ensuring that there was _some_ business (ie, some exchange of nonzero value) occurring at all.

Secondly, it's important to note that a written contract is not absolutely needed to enact shared ownership; a written contract (or a deed, or a shareholder's agreement) is just to formalize the agreement in writing to avoid disagreement later.

If you start working together, shared ownership is the _default_ in the absence of any mode-changing agreements. Were they working together? A recorded video, in which they take turns looking into the camera and effectively saying "We are working together" [1] is a pretty strong evidence that, at one point, they were working together.

[1] https://m.youtube.com/watch?v=_P6oXe1YI90

Thirdly, in the absence of formal documents saying "We are officially working together" or "We are officially not working together", the court has to fall back on attempting to determine the intention. It will have to fall back on looking for any evidence (like that video) that suggests they were in agreement about working together at some point.


If I were on the jury, that video would definitely make me accept Jeremy's claims.


The complaint says that Jeremy brought to the initial relationship his previous work on self-driving car technology, for which he received 50% equity. Kyle brought his capital, experience, and VC contacts, for which he received his 50% equity.

Now, maybe that's a lie, but taken on face value, it reads to me like there was exchange of value between the company and each founder.


Consideration takes many forms. Just because a small, niche population like HN thinks something isn't consideration, doesn't mean a jury of 12 is going to see it the same way.


Vesting is absolutely not implied, expected, or required by the law. Regardless of common practice in YC companies or YC applications, vesting is not the automatic default mode in corporation law or contract law.

If there is evidence of an agreement (whether written or oral) between the parties to apply a vesting schedule, then that will override the default mode; otherwise the default mode (no vesting) prevails.


Just because your ownership agreement stipulates a vesting schedule doesn't mean all companies are organized that way. In fact, I believe the default is to have no vesting, which is why we have vesting agreements in the first place!

I'm not arguing that having immediate vesting is a smart way to organize a company. But, to claim that a YC application 100% of the time implies anything is a stretch.


Presumably because equity is also for the work done?


Assumptions aren't contract law. If someone says you own 50% of the company with them, even if you do nothing, you own 50%.


It's super rare that founder shares don't vest. YC would have advised it.


What happens to ownership interests/claims that YC isn't aware of?


What if they stop working with you and buy out your worthless stake?


Presumably the money raising came from Vogt. And there are other engineers at Cruise capable of assisting with the rest?




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