1) There was an actual agreement between Guillory and Vogt that they would be a 50% owners. The YC application is a memorialization of the fact that this agreement existed.
2) Even if there wasn't an actual agreement, Cruise is using IP that Guillory developed.
The relevance of the YC application is this: Oral contracts are in general perfectly valid, unless they apply to a specific situation that requires a writing. A YC application listing the parties as 50-50 co-owners is at least strong evidence that an oral contract exists with those terms. It's reasonable to infer that if people have a writing proposing to do X, then they actually did X or have already agreed to do X.
While a vesting schedule might be typical, it's not going to be implied into existence unless there is some evidence the parties intended for there to be a vesting schedule. For similar reasons, questions of how much Guillory actually contributed will be relevant to (2) but not (1). A 50-50 joint venture is like marriage. Come the divorce, the assets will be split 50-50, even if one party earned all the money. The law won't come in and try to value peoples' contributions after the fact. That would be impractical. The law trusts that people say what they mean and mean what they say.
This case will turn on whether Vogt has any evidence to counteract the inference that may be made from the YC application. It will also turn on legal issues such as whether a writing, not just an oral contract, is required for the sort of arrangement Vogt and Guillory allegedly made, and if what's in the YC application is a sufficient writing to meet that requirement. IIRC stock issuance requires a signed writing in Delaware so that could be a stumbling block depending on how the agreement is framed.
Given that the company had been incorporated prior to the YC application, there are two possibilities: The original incorporation paperwork shows a 50:50 split or it contradicts the YC application. In the latter case, assuming that one party handled incorporation but made the other believe it said something different, wouldn't that constitute fraud?
Of course, it's also possible that they discussed resolving the equity when they split but never put it into writing...
In the countercomplaint, Jeremy says that he and Kyle first met in the beginning of October 2013.
Elsewhere in this thread, someone found that the company was incorporated in September 2013.
So a possible timeline is that Kyle creates the company with himself as the sole owner first, and goes looking for a technical partner. He finds Jeremy, they talk, they hit it off, and they decide to apply to YC together, and Kyle offers to split the existing company 50/50. But they don't put anything in writing, so on paper the company is still 100% owned by Kyle. Things go sour between them, and Jeremy leaves/is kicked out without the ownership of the company ever changing on paper. And then things move on, other people are brought into the company, shares and vesting schedules are formalized, and the whole thing is forgotten/buried. Until now.
The original paperwork might not have issued stock to anyone. It is quite common for people to organize a corporation while neglecting to issue any stock until a later date (often when an investor's lawyer first reviews the file). As you can see this creates a host of problems, which could be avoided if people would stop telling founders that the first thing to do is form a Delaware corporation.
With the final irony probably being that the acquiring company may lose its taste for the acquisition given the dispute, meaning they are just fighting over who gets half of the ashes of a bonfire of money.
I suspect large corporations are no strangers to these lawsuits and if they really wanted the IP, they wouldn't be scared off by debacle...although they would likely double down on any due diligence they planned.
Well, at the very least, moving forward if there is a mention of another founder on a YC application, that later leaves, I'm sure YC will probably suggest that the departure is formerly written/signed/witnessed to avoid this type of issue in the future.
Thanks for the summary - perhaps a slightly more philosophical Q: if applying to YC implied an intent to split the company 50:50, then would the notion YC usually asks a company to have a vesting schedule of that sort imply that it was intended?
The fact that it's a YC application as opposed to some other type of writing is mostly irrelevant.[1] What Guillory is relying on is the statements in the application:
> [The YC application] described repeatedly that Guillory was a founder of Cruise Automation and states unequivocally in response to a question asking “who are the shareholders and what percent does each own?” that “Cruise Automation is a Delaware C Corporation created in September 2013. 50/50 split between Kyle and Jeremy.”
That writing is evidence of the agreement. Commercial practice, like what YC usually requires in terms of vesting schedule, may also be evidence of the agreement, but obviously it's weaker evidence than the words on the page. And under certain circumstances,[2] it might not even be permissible to invoke external evidence such as commercial practice to add terms to a contract.
[1] It's relevant to the extent that a YC application is the sort of thing you'd expect to contain accurate and true statements written down with some care. Besides that, it's value is its contents, not any inferences that you may make from what you know about the YC process generally.
[2] Under the parole evidence rule, when a contract seems complete on its face, you can't invoke external evidence to add terms to the contract. Although it's hard to say that in this context you have a contract that's complete on its face.
When you raise a Series A or later funding there normally is an extensive amount of due diligence done before the deal is closed. Sometimes you pay for it, sometimes the VC pays for it, but it happens.
Before that point spending extensive time or money on due diligence is probably a waste. By all means keep accurate documentation of what is going on and follow best practices, but if there are a few minor issues it probably doesn't matter and will get cleaned up later if your business is doing well enough (note: this situation is obviously not a minor issue).
Interesting, so if the case hinges on the YC application as evidence of the equity split, then we also know that YC requires all founders to sign an employment agreement with their company and restricted stock purchase agreement, following a very standardized YC template, that would include a vesting schedule. Other requirements include an employee incentive pool and of course enough common shares for YC to purchase their portion.
I know that YC has a standard RSPA... but I'm also fairly certain that their template is not used universally by all YC companies (eg. Quora, who probably already had other RSPA docs [1]). Therefore, the standard YC RSPA cannot probably be deemed binding after the fact. (IANAL)
Could you comment on the cause of action that references the existence of joint venture? Being somewhat familiar with that area of law it seems like that's a great catch-all for any claims that Jeremy doesn't have any equity in the company specifically. That's an apparently somewhat sound doctrine that would imply that even if he has no shares in the company, there is a "joint venture" consisting of himself and that company which he still has a share of, and that said joint venture is subject to partnership law.
So creating a partnership (a form of joint venture) is extremely easy: if you get together as co-owners and operate a business enterprise for profit a partnership arises, whether or not you intended to create a partnership.[1] So if Guillory and Vogt operated as co-owners of a for-profit business, there might be a partnership. The partnership probably wouldn't be around today. It probably would have been terminated when Vogt "fired" Guillory. But if Guillory was a partner, he was entitled to some distribution of the partnership assets that existed at the time.
Guillory's allegation here is basically that he never got that distribution, and Vogt took the IP that was among the partnership's assets to Cruise. The partnership claim isn't going to get him equity in Cruise. What it does get him will depend mostly on what IP he contributed and the harm to Guillory from Cruise not returning that IP.
[1] At least in California, which follows the Uniform Partnership Act.
I think the biggest thing everyone is glancing over is the wording of the app:
"If you have not formed the company yet, describe the planned equity ownership breakdown among the founders, employees and any other proposed stockholders."
Planned != official, no ? Couldn't cruise claim that the stock was never awarded
So if the issue of stock wasn't in writing for a Delaware company, then his 50% claim is not valid as he was never issued stock? I'm sure #2 is a non issue for Cruise
Maybe. Guillory doesn't need to show he was issued shares to win. If Cruise promised him 50% equity, and didn't issue him any shares, that would be a breach of contract. Guillory would get damages not because he actually owned equity in Cruise, but to compensate him for the equity that was promised to him but never issued as shares. Contract damages put you in the place you would have been had the other side kept their promises.
Honestly, I think this whole story is a case of Kyle and Sama making a serious misstep in how they treated a fellow human being.
It's clear Jeremy was involved and contributed in some capacity. If we ignored the legal for a minute, he is arguably entitled to at least a discussion about the cap table and some sort of payoff.
However, Kyle telling him he gets nothing and than offering him $100k of his own money is both very insulting and very telling. It is a low ball offer starting a negotiation.
It all went downhill from there. It was no longer about money, now it became about justice, and from a justice perspective Jeremy deserves some credit, acknowledgment and respect for his contribution.
Just read Jeremy's complaint and you see he mentions the rewriting of history and the lack of mention of him in the press coverage, etc...
Ronald Reagan had a plague on his desk that read, "Man can achieve anything so long as he doesnt mind who takes the credit."
If Kyle would have shown some respect to Jeremy, this problem would have went away for a couple million.
I don't blame sama, he started with a preconceived notion of charlatans coming out of the woodwork and was also biased to one side. His anger is the most telling sign of all. It is anger at not respecting Jeremy initially, leading to digging a massive hole.
Walking away from this story, I want to side with Jeremy. If we lived in a meritocracy, I am inclined to believe he is not really entitled to much more than an honorable mention as the brains that started it all...but this was mishandled in such a way that any judge would WANT TO SIDE WITH THE LITTLE GUY, and the YC application and video is enough basis to let them find in Jeremy's favor...even though we all know he doesn't deserve it all.
I think an apology, and public acknowledgement of Jeremy's contribution to the direction and strategy would go a long way in settling this dispute...that and a few million dollars.
you're kidding? i mean it can't be real. It is like an insult on top of the original insult. When i first read sama's post mentioning the offer without the actual number, i was making bets with myself whether they offered $10M, and was guessing whether the guy was right walking away from money like this. $100k never even crossed my mind :) That is the kind of greed that really kills luck (and getting $1B or just $990M for the Cruise is a Vegas scale luck)
Edit: read in the other comments that from original $100k the offer has now reached $4.5M. That is one "hockey stick"! Giving such low insulting start, my bet would be that instead of $10M - originally reasonable offer - the thing, with all the court filings, lawyers and emotions, will reach closure close to $100M, definitely crossing the $50M. Btw, where is my popcorn, this Cruise story is basically episode 0 of the season 3 of "SV" :)
I'm sympathetic to Jeremy's case, which is actually extremely common in Silicon Valley (group of people get together informally to work on a startup, nothing serious or 100% legally tied up, group of people break apart, idea takes off, legal issues ensue).
But anyone taking either Sam or Jeremy's word at face value has no idea what they're talking about. You have no basis to trust Sam or Jeremy in this hundred-million-dollar matter. Both sides have hundreds of millions of reasons to exaggerate or distort their case.
This. Looks like a classical story of ideas guy using an engineer with relevant education and a decade of experience, then kicking him out. Looks very unjust to me, esp. considering there is big SV establishment (YC) on the other side.
> In early October 2013, Guillory met with 28-year-old Vogt, a self-proclaimed MIT drop-out who had spent a month to earn a degree in installing Microsoft Windows, and whose most impressive technical achievement by his own account was to build a device to crack certain kinds of high security safes. But Vogt had a shared interest in the emerging self-driving field from his days at MIT and its entry in the DARPA challenge. More importantly, Vogt had millions in capital from his successful sale of two previous start-ups in TV and video gaming, along with investor contacts.
Can someone shed light on this paragraph? Twitch sold for $1B, so it's probably a bit disingenuous to take so many digs at Kyle's expertise & accomplishments... If anything, Kyle's software expertise is just as (if not more!) valuable than Jeremy's MechE skills for the early Cruise product.
EDIT: Also, I'm pretty sure Kyle worked on MIT's DARPA entry [1]. At the very least, I know he was working with laser rangefinders -- I wrote an article back in 2008 using photos of his SICK LRF teardown [2]. If anything, after reading this "he stole my expertise/idea" claim, I'm more inclined to side w/ Kyle & sama.
I would imagine that this is supposed to help support their argument for conversion, that Kyle was inclined to use Jeremy's IP contributions in part because Kyle was otherwise incapable of practically accomplishing the company's goals.
It does seem harshly written, but the same could be said of the complaint and sama's post.
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.
> 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.
The most interesting thing to me is that Cruise went through YC, several funding rounds and most of a massive public acquisition - apparently before anyone did enough due diligence to find out about this being even a potential problem (if the claimant has any grounds - which it seems there are at least some amount) and heading it off at the pass.
Agreed, this is a massive fuck-up by everyone involved (Altman, Cruise Board of Directors, Spark Capital, etc). Even if the claim has no merit it should have been dealt with long ago, before the company got to this stage. Now all the employees might get screwed as a result.
I don't think it's fair to blame all of the investors. The later investors were almost certainly misled, and not informed of this risk.
YC on the other hand was clearly informed that there was an individual who was considered a founder at some point in time. Despite knowledge of this risk, they invested and they facilitated follow-on financing. Now there's a big, dumb, expensive problem. YC dropped the ball, big-time.
The fact that Sam Altman is turning this into a public spectacle is further evidence that he knows YC fucked up badly, and probably doesn't have a legal case. The only reason to write what he wrote is if you're out of actual ammo.
But if there's any anger from screwed employees, it should be directed at the criminals who did the bullshit crime instead of the detectives who failed to identify the crime sooner, no?
If you had a partner who left after a month - then do a financing right thereafter with vesting schedules and the like it's easy to assume that those same schedules apply to everyone. If it were to be caught- it would have been at the Series A but it sounds like so much time passed and his involvement was so short people just forgot about the guy.
If Jeremy never said a word about it since it would never come up. If I owned 50% of a company and it did a financing- I'd certainly inquire about my shares. Sounds like he never even did that.
Kyle probably feels like shit I am sure- it's a sickening case to read but to be honest I could see it going down exactly like that.
The facts seem to be more on Jeremy's side than Kyle's except that the application video demonstrates that Jeremy believed Kyle also knew something about robotics.
Regardless of the outcome of this incident, if you apply to Y Combinator with someone who knows the YC partners better than you, and your cofounder decides to push you out, your cofounder will be supported by YC against you. This is now something that every team of founders will have to think harder about now. It will harm founder cohesion which will reduce the success percentage in each batch.
On the other hand, this is a positive signal to people who want to exploit a cofounder to get past the YC application process and then push them out of the company.
"If you apply to YC with someone who knows the YC partners better than you and your co-founder decides to push you out, your co-founder will be supported by YC against you"
What? One founder worked on the company for almost 3 years and the other party in question worked on the company for one month, yet this is a huge YC conspiracy? How do you get this crap out of the written complaints in any way?
Would Cruise have been accepted to Ycombinator at all if it had just been Kyle applying?
Put another way, if Jeremy didn't contribute anything, then why did Kyle start working with him in the first place? Put him in the YC video? List a planned 50/50 equity split in the YC application?
These seem to be at least reasonable questions IMO.
All that said, I think the issue here is that Sam Altman personally invested in Cruise, which creates a subtle conflict of interest. It's in Sam's best interest as a Cruise director to crush Jeremy, but perhaps (as the parent suggests) it would be in YC's best interest to just stay out of it (above the fray).
Uh, how do you not get that from Guillory's counter-complaint, unless you believe that Guillory is lying? He claims to have been forced out. The YC app has him listed as a 50% co-founder. Altman's blog post and the complaint against Guillory don't dispute that fact.
Or it means you should always get everything in writing no matter what side you're on. A simple statement regarding how the shares vest would have prevented this.
> The promise was memorialized in the October 21, 2013 Y Combinator application, submitted by Vogt with the knowledge and approval of Guillory, that identifies Guillory and Vogt as the founders of Cruise and lists Guillory as a 50% shareholder of Cruise Automation
This is interesting, as the YC Application does require breakdown. ["If you have not formed the company yet, describe the planned equity ownership breakdown among the founders, employees and any other proposed stockholders. (This question is as much for you as us.)"]
"According to Kyle, Jeremy did not write any code or build any hardware during this exploratory period. He did help find an office for the company. At the point of Jeremy’s departure, neither he nor Kyle had signed employment agreements, stock agreements, or any documents of any sort with the company. Even if Jeremy had signed a stock agreement, he wouldn’t have reached the standard 1-year cliff for founders to vest any equity."[1]
Right, but even without contracts, if there's a document listing that the planned ownership split is 50%, and that they're both listed as cofounders...
It sounds like there's documentation that this was the original agreed upon split. If there's no documentation of some sort of "vesting" or "minimum effort required", I don't see the legal argument for this person to not have this split.
Contracts are documentation of agreements, but the agreements themselves are what hold legal strength. The contracts just help when there's a dispute over the facts.
Conspicuously absent from this paragraph (and Sam's post) is any mention of the technology that Jeremy claims to have brought to the initial partnership from his previous work.
From this paragraph, it sounds like Jeremy could have been any dork off the street who can find some office space. The question then is why Kyle worked with Jeremy at all, and in particular, why he proposed to Ycombinator to found a self-driving car company with Jeremy as an equal partner.
From the YC application video alone, there seems to be a major point of contention about what Jeremy actually contributed. In the video they are talking about specific plans involving commodity hardware, that they devised a way to constrain the engineering problem to make it feasible, and that they had co-developed a business plan to get it to market quickly.
That's all just plainly in the YC application video.
That doesn't seem compatible with what Sam Altman says, so either the video does not depict Jeremy's contributions up to that point in time, or else Sam is incorrect and has omitted many contributions from Jeremy. Those contributions may or may not justify Jeremy's claim, but they certainly complicate the issue and present a very legitimate position for Jeremy to at least make the claim.
Jeremy's claim may ultimately not be considered or may not be upheld, but either way the degree to which Altman seems to think it should be categorically ignored does not seem to match the facts regarding the initial formation of Cruise at all.
When I re-read this carefully, I get the feeling an analogy might work:
"You see, your honor, I meant to pay my bill at the restaurant, but they threw me out on the sidewalk before I had a chance to pay it."
As in, one of the two parties might have been genuinely interested in signing such documents, and one of the two parties might have had reasons to want to avoid letting the other one sign those documents.
This is exactly the right question. It's clear that Jeremy is not and has never been a formal shareholder in Cruise.
The question is whether having explored (and subsequently abandoned) a potential co-founder relationship constitutes sufficient basis for an equity claim.
That would seem to be the case. If Jeremy's claims were true there wouldn't be any lawsuit, as Jeremy would already have what he is currently suing for.
It amazes me from the other HN replies comments how much debate and confusion there is, about something so obvious.
This whole case is really surprising. I would expect intellectual property assignment agreements and a vesting cliff, particularly after cofounding Twitch.
On the other hand, I know how normal it can feel to trust each other, procrastinate on docs, and just get all over the tech.
Readit News
1) There was an actual agreement between Guillory and Vogt that they would be a 50% owners. The YC application is a memorialization of the fact that this agreement existed.
2) Even if there wasn't an actual agreement, Cruise is using IP that Guillory developed.
The relevance of the YC application is this: Oral contracts are in general perfectly valid, unless they apply to a specific situation that requires a writing. A YC application listing the parties as 50-50 co-owners is at least strong evidence that an oral contract exists with those terms. It's reasonable to infer that if people have a writing proposing to do X, then they actually did X or have already agreed to do X.
While a vesting schedule might be typical, it's not going to be implied into existence unless there is some evidence the parties intended for there to be a vesting schedule. For similar reasons, questions of how much Guillory actually contributed will be relevant to (2) but not (1). A 50-50 joint venture is like marriage. Come the divorce, the assets will be split 50-50, even if one party earned all the money. The law won't come in and try to value peoples' contributions after the fact. That would be impractical. The law trusts that people say what they mean and mean what they say.
This case will turn on whether Vogt has any evidence to counteract the inference that may be made from the YC application. It will also turn on legal issues such as whether a writing, not just an oral contract, is required for the sort of arrangement Vogt and Guillory allegedly made, and if what's in the YC application is a sufficient writing to meet that requirement. IIRC stock issuance requires a signed writing in Delaware so that could be a stumbling block depending on how the agreement is framed.
Of course, it's also possible that they discussed resolving the equity when they split but never put it into writing...
Elsewhere in this thread, someone found that the company was incorporated in September 2013.
So a possible timeline is that Kyle creates the company with himself as the sole owner first, and goes looking for a technical partner. He finds Jeremy, they talk, they hit it off, and they decide to apply to YC together, and Kyle offers to split the existing company 50/50. But they don't put anything in writing, so on paper the company is still 100% owned by Kyle. Things go sour between them, and Jeremy leaves/is kicked out without the ownership of the company ever changing on paper. And then things move on, other people are brought into the company, shares and vesting schedules are formalized, and the whole thing is forgotten/buried. Until now.
> [The YC application] described repeatedly that Guillory was a founder of Cruise Automation and states unequivocally in response to a question asking “who are the shareholders and what percent does each own?” that “Cruise Automation is a Delaware C Corporation created in September 2013. 50/50 split between Kyle and Jeremy.”
That writing is evidence of the agreement. Commercial practice, like what YC usually requires in terms of vesting schedule, may also be evidence of the agreement, but obviously it's weaker evidence than the words on the page. And under certain circumstances,[2] it might not even be permissible to invoke external evidence such as commercial practice to add terms to a contract.
[1] It's relevant to the extent that a YC application is the sort of thing you'd expect to contain accurate and true statements written down with some care. Besides that, it's value is its contents, not any inferences that you may make from what you know about the YC process generally.
[2] Under the parole evidence rule, when a contract seems complete on its face, you can't invoke external evidence to add terms to the contract. Although it's hard to say that in this context you have a contract that's complete on its face.
Before that point spending extensive time or money on due diligence is probably a waste. By all means keep accurate documentation of what is going on and follow best practices, but if there are a few minor issues it probably doesn't matter and will get cleaned up later if your business is doing well enough (note: this situation is obviously not a minor issue).
'Due diligence' must be performed by the buyer, otherwise it is something else.
[1] http://techcrunch.com/2014/05/11/quora-y-combinator/
Am I reading that right?
Guillory's allegation here is basically that he never got that distribution, and Vogt took the IP that was among the partnership's assets to Cruise. The partnership claim isn't going to get him equity in Cruise. What it does get him will depend mostly on what IP he contributed and the harm to Guillory from Cruise not returning that IP.
[1] At least in California, which follows the Uniform Partnership Act.
"If you have not formed the company yet, describe the planned equity ownership breakdown among the founders, employees and any other proposed stockholders."
Planned != official, no ? Couldn't cruise claim that the stock was never awarded
It all went downhill from there. It was no longer about money, now it became about justice, and from a justice perspective Jeremy deserves some credit, acknowledgment and respect for his contribution.
Just read Jeremy's complaint and you see he mentions the rewriting of history and the lack of mention of him in the press coverage, etc...
Ronald Reagan had a plague on his desk that read, "Man can achieve anything so long as he doesnt mind who takes the credit."
If Kyle would have shown some respect to Jeremy, this problem would have went away for a couple million.
I don't blame sama, he started with a preconceived notion of charlatans coming out of the woodwork and was also biased to one side. His anger is the most telling sign of all. It is anger at not respecting Jeremy initially, leading to digging a massive hole.
Walking away from this story, I want to side with Jeremy. If we lived in a meritocracy, I am inclined to believe he is not really entitled to much more than an honorable mention as the brains that started it all...but this was mishandled in such a way that any judge would WANT TO SIDE WITH THE LITTLE GUY, and the YC application and video is enough basis to let them find in Jeremy's favor...even though we all know he doesn't deserve it all.
I think an apology, and public acknowledgement of Jeremy's contribution to the direction and strategy would go a long way in settling this dispute...that and a few million dollars.
you're kidding? i mean it can't be real. It is like an insult on top of the original insult. When i first read sama's post mentioning the offer without the actual number, i was making bets with myself whether they offered $10M, and was guessing whether the guy was right walking away from money like this. $100k never even crossed my mind :) That is the kind of greed that really kills luck (and getting $1B or just $990M for the Cruise is a Vegas scale luck)
Edit: read in the other comments that from original $100k the offer has now reached $4.5M. That is one "hockey stick"! Giving such low insulting start, my bet would be that instead of $10M - originally reasonable offer - the thing, with all the court filings, lawyers and emotions, will reach closure close to $100M, definitely crossing the $50M. Btw, where is my popcorn, this Cruise story is basically episode 0 of the season 3 of "SV" :)
But anyone taking either Sam or Jeremy's word at face value has no idea what they're talking about. You have no basis to trust Sam or Jeremy in this hundred-million-dollar matter. Both sides have hundreds of millions of reasons to exaggerate or distort their case.
Fair enough. Its hard not to judge on what we think we know...but its clear the bias on both sides means a court should figure this out.
Can someone shed light on this paragraph? Twitch sold for $1B, so it's probably a bit disingenuous to take so many digs at Kyle's expertise & accomplishments... If anything, Kyle's software expertise is just as (if not more!) valuable than Jeremy's MechE skills for the early Cruise product.
EDIT: Also, I'm pretty sure Kyle worked on MIT's DARPA entry [1]. At the very least, I know he was working with laser rangefinders -- I wrote an article back in 2008 using photos of his SICK LRF teardown [2]. If anything, after reading this "he stole my expertise/idea" claim, I'm more inclined to side w/ Kyle & sama.
[1] http://web.mit.edu/6.111/www/s2005/PROJECT/Groups/15/main.ht...
[2] http://www.hizook.com/blog/2008/12/15/sick-laser-rangefinder...
Is he trying to imply that Vogt never attended MIT and is making himself look cool that he dropped out?
It does seem harshly written, but the same could be said of the complaint and sama's post.
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.
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.
Deleted Comment
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:
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.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.
That alone speaks volumes.
YC on the other hand was clearly informed that there was an individual who was considered a founder at some point in time. Despite knowledge of this risk, they invested and they facilitated follow-on financing. Now there's a big, dumb, expensive problem. YC dropped the ball, big-time.
The fact that Sam Altman is turning this into a public spectacle is further evidence that he knows YC fucked up badly, and probably doesn't have a legal case. The only reason to write what he wrote is if you're out of actual ammo.
But if there's any anger from screwed employees, it should be directed at the criminals who did the bullshit crime instead of the detectives who failed to identify the crime sooner, no?
Move fast, break things.
I bet this is one thing that will be fixed for all future applications.
It's also pretty scary that YC are willing to railroad a co-founder in favour of a SV insider.
If Jeremy never said a word about it since it would never come up. If I owned 50% of a company and it did a financing- I'd certainly inquire about my shares. Sounds like he never even did that.
Kyle probably feels like shit I am sure- it's a sickening case to read but to be honest I could see it going down exactly like that.
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Regardless of the outcome of this incident, if you apply to Y Combinator with someone who knows the YC partners better than you, and your cofounder decides to push you out, your cofounder will be supported by YC against you. This is now something that every team of founders will have to think harder about now. It will harm founder cohesion which will reduce the success percentage in each batch.
On the other hand, this is a positive signal to people who want to exploit a cofounder to get past the YC application process and then push them out of the company.
What? One founder worked on the company for almost 3 years and the other party in question worked on the company for one month, yet this is a huge YC conspiracy? How do you get this crap out of the written complaints in any way?
Put another way, if Jeremy didn't contribute anything, then why did Kyle start working with him in the first place? Put him in the YC video? List a planned 50/50 equity split in the YC application?
These seem to be at least reasonable questions IMO.
All that said, I think the issue here is that Sam Altman personally invested in Cruise, which creates a subtle conflict of interest. It's in Sam's best interest as a Cruise director to crush Jeremy, but perhaps (as the parent suggests) it would be in YC's best interest to just stay out of it (above the fray).
This is interesting, as the YC Application does require breakdown. ["If you have not formed the company yet, describe the planned equity ownership breakdown among the founders, employees and any other proposed stockholders. (This question is as much for you as us.)"]
"According to Kyle, Jeremy did not write any code or build any hardware during this exploratory period. He did help find an office for the company. At the point of Jeremy’s departure, neither he nor Kyle had signed employment agreements, stock agreements, or any documents of any sort with the company. Even if Jeremy had signed a stock agreement, he wouldn’t have reached the standard 1-year cliff for founders to vest any equity."[1]
[1]http://blog.samaltman.com/cruise
It sounds like there's documentation that this was the original agreed upon split. If there's no documentation of some sort of "vesting" or "minimum effort required", I don't see the legal argument for this person to not have this split.
Contracts are documentation of agreements, but the agreements themselves are what hold legal strength. The contracts just help when there's a dispute over the facts.
From this paragraph, it sounds like Jeremy could have been any dork off the street who can find some office space. The question then is why Kyle worked with Jeremy at all, and in particular, why he proposed to Ycombinator to found a self-driving car company with Jeremy as an equal partner.
That's all just plainly in the YC application video.
That doesn't seem compatible with what Sam Altman says, so either the video does not depict Jeremy's contributions up to that point in time, or else Sam is incorrect and has omitted many contributions from Jeremy. Those contributions may or may not justify Jeremy's claim, but they certainly complicate the issue and present a very legitimate position for Jeremy to at least make the claim.
Jeremy's claim may ultimately not be considered or may not be upheld, but either way the degree to which Altman seems to think it should be categorically ignored does not seem to match the facts regarding the initial formation of Cruise at all.
"You see, your honor, I meant to pay my bill at the restaurant, but they threw me out on the sidewalk before I had a chance to pay it."
As in, one of the two parties might have been genuinely interested in signing such documents, and one of the two parties might have had reasons to want to avoid letting the other one sign those documents.
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The question is whether having explored (and subsequently abandoned) a potential co-founder relationship constitutes sufficient basis for an equity claim.
"Vogt, as the sole Director of Cruise Automation, Inc., authorized the issuance of 50% of the Company’s stock to Guillory;"
That seems like a very clear statement. It's either true, in which case Guillory has a very strong case, or it's false and he doesn't.
"Cruise Automation is a Delaware C Corporation created in September 2013. 50/50 split between Kyle and Jeremy."
Edit: Added quote.
Talk to your lawyer before posting on social media.
It amazes me from the other HN replies comments how much debate and confusion there is, about something so obvious.
On the other hand, I know how normal it can feel to trust each other, procrastinate on docs, and just get all over the tech.