Why I Killed Noncompetes at My Startup—And You Should, Too

Opinion

There’s a battle brewing in Boston that every local startup founder and employee is closely watching, but the outcome will have implications far beyond Massachusetts. As our state legislature weighs several bills that would ban noncompete agreements, the New England Venture Capital Association (NEVCA) and many entrepreneurs, including myself, are arguing that the time is past due for this move.

Noncompete agreements clash with our company culture at ClearSky Data – they slow innovation, harm entrepreneurship, and limit employees’ career development. As a co-founder, I’ve removed these clauses from my startup’s employment contracts, and I urge other Massachusetts businesses to do the same.

Noncompetes slow the growth of innovation

During the 15 years I’ve worked in Boston’s startup community, I have personally seen some of the negative results of noncompetes in my own companies and other startups in the area. Before I became CEO and co-founder of ClearSky Data, I co-founded a company called CloudSwitch that was acquired by Verizon in 2011. Verizon committed significant resources to building a local technology hub in the Boston area as a result of the acquisition, hiring more than 100 people here. Previously, I was part of the executive team at Netezza, a data warehousing company in central Massachusetts that went public in 2007 and was acquired by IBM in 2010, scaling to hundreds of people employed locally.

I am a NEVCA board member and am active in the local Boston tech community, encouraging innovation and the development of young entrepreneurs and companies. So I’ve had many years of first-hand experience seeing the impact of noncompetes on tech startups and employees.

One way to make the economy more productive and innovative is to make noncompetes unenforceable in general employment contracts. Noncompetes serve mainly to protect large employers and the status quo. They are not needed to protect intellectual property, copyrights, or non-solicitation, which can all be enforced separately.

Startup culture runs on achievement, not risk aversion

At my last company we wanted to hire an engineering employee who had already left another startup that was not actually competitive, but we were told that the previous startup planned to enforce his noncompete—not because they were concerned about him joining us, but to use him as an example to deter other employees from leaving and taking new jobs. We had to suspend the employee’s work for a couple of months while we engaged in extensive legal action, none of which was productive for either company, and it was extremely stressful for the employee. Noncompetes can be used in this way as a weapon to limit employees’ career growth opportunities. This is wrong.

Here’s something I have seen many times over the years, as I’ve recruited teams for my startups: it is extremely difficult for employees to leave large local technology companies given the ongoing threat of noncompetes. This causes them to stay in less challenging and innovative roles, over time becoming “lifers” instead of moving on to greater challenges. This creates a culture of risk aversion and promotes career decisions based on fear, rather than building a startup “culture of achievement” that is based on bold risk taking and creativity. Particularly in Massachusetts, where we have the talent pool and the drive to create a startup community that rivals Silicon Valley’s, we can’t afford to let a tradition of noncompete agreements impede progress.

It’s time to move forward                                           

I grew up in a Boston suburb, stayed here for my college and graduate degrees, and have chosen to build three companies here. I am committed to helping the Boston tech community continue to thrive and to supporting the next generation of young entrepreneurs.

The Massachusetts government should do everything possible to create a true innovation economy here and to remove policies that block innovation. Legislators in other regions should follow suit, but until that happens, entrepreneurs can take the proactive step to halt the noncompete practice in their own companies. Noncompetes are not needed to protect local employers, as proved by the success of Silicon Valley, where such practices have fallen out of favor with the courts. Noncompetes only serve to maintain the status quo and hurt employees. It’s time to make them history.

Ellen Rubin is the CEO and co-founder of ClearSky Data, an early-stage company that is building a breakthrough solution in enterprise infrastructure. Most recently, she was co-founder of CloudSwitch, a cloud enablement software company that was acquired by Verizon in 2011. Follow @ellen_rubin

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