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4 months ago I quit my job to found a small startup (A) aimed at solving a niche problem only a few companies (including my old one) experience.

I reached out to one potential customer (B) to invite them to try our demo, and they responded saying that they were interested in hiring me.

I can see many ways becoming an employee for B could be mutually beneficial:

  • I can improve A through first-hand experience & insights gained
  • B gets free access to A's product, and A gains free testing
  • Social proof: A can advertise B as a customer
  • $$$ (duh) - able to keep A running longer. And possibly open-source it (will damage potential sales but increase potential impact)

The one thing I'm concerned of - will it cause legal trouble? If I've already founded the company 4 months prior, could they say that I took the idea from working with them? Are there any risks I need to be aware of?

More info:

  • A is a software product, subscription based. We have no customers as yet, only demo users. I have about a month of runway left. We have applied to a startup accelerator and find out in 10 days if we have got in.
  • B is a successful financial service provider.

Thanks - Anon

  • Did you have a non-compete or employment agreement with the previous employer? – Ron Beyer Feb 8 at 15:16
  • Do you mean B wants to hire you personally to develop for them or they are hiring your startup as a contractor? Because it sounds like they want to buy your code without buying your company. – pboss3010 Feb 8 at 16:25
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You need to be very clear with B that you intend to continue to operate A. You need to be clear whether you are to be an actual employee of B, or a hired contractor for B. If an employee, you need to agree with B how much time you can devote to A while employed by B, or to put it another way, how much time (per day, week or whatever) you are expected to devote to B before doing stuff for A. Are there to be restrictions, such as a ban on your doing things for A while at B's worksite?

Above all, you need to agree on who owns what rights to both the existing A code, and any new code will be held by you, and what rights will be held by B.

All the above should be in a written agreement, and you would be wise to have a lawyer draft or at least review the language.

If B will not agree to this, you will have a choice to make: put A on hold while working for B, or not accept B's offer. Do not lie to B about what you are doing with A.

Oh, and if you had any sort of non-compete agreement at the job you quit four months ago (let's call them C) be sure that you comply with it, or are prepared to fight it. If there is any question, this is another area where you would do well to consult a lawyer. Many non-compete agreements claim more than local law allows, and are not enforceable. Many others are very much enforceable. It depends on the wording of the agreement, and the provisions of the law where you are located.

Also, do not use any confidential data from C without C's written permission.

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