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neurotech1

Sam Altman posted on his views on his blog:

http://blog.samaltman.com/cruise

And the related HN comments:

https://news.ycombinator.com/item?id=11490188

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So, I have a stupid, flamebait question: What precisely is wrong with Jeremy Guillory's case? I read those links but I also read this related BI piece [1] and it looks like Guillory has a solid claim: there is a document of them representing the company as half belonging to him, and no one's presenting any later agreement that says when his half was bought out or invalidated.

All that Vogt is going on, it seems, is "but you were just congratulating us when we raised more money!". What does that matter?

Altman's response, in turn, is that Guillory isn't being cool about this and taking (what he deems) a reasonable offer from Vogt. Well, why would he? If he was led to believe early on that he had a full 50% stake, why is it some moral transgression not to accept less [2]?

If you don't want a now-silent partner keeping equity, then buy them out. Don't wait until the company is worth something and then try to retroactively void the equity because you don't feel like they're part of the gang anymore.

[1] http://www.businessinsider.com/cruise-cofounder-fires-back-2...

[2] than the corresponding amount modulo later dilution

It sounds like the primary evidence supporting Guillory's claim is what they wrote on one question in their YC application (50:50 equity split). I don't know if that would represent a legally-binding contract if the case had gone to court, since it doesn't reference any shares, corporate entity etc.

The YC application isn't and doesn't need to be a contract. It was just another piece of evidence demonstrating the division of the company at the beginning. They also registered in Delaware as 50 / 50 split if I recall correctly and Guillory never signed any of the paperwork regarding limiting their shares.

IIRC they had registered in Delaware as a Kyle = 100% split, and then never signed any paperwork after that. That's a very different situation.

Yeah, the YC application is merely evidence of a contract rather than a contract itself, but it's pretty smoking gun evidence. Why would you write there is a 50-50 split on your YC application if it wasn't true?

What real company would continue to operate for years after someone with a 50% claim on the company had left after just a month or two of service?

Is it really unheard-of for an angel to hold such an equity stake and only advise for a month or so?

Yes, I believe so.

What's puzzling to me is how they thought about it enough to put down the split in the YC app, but it didn't come up when they split up.

What am I missing? This seems not at all complex. The two believed, when they applied, that they'd share fates. They were quite wrong. Like most people, they didn't do all the paperwork to safeguard against later bad-faith claims after they parted ways.

I'm sure that's what happened, and I'm projecting my own paranoia. But it seems like it was kind of an acrimonious break-up, which would prompt some ass-covering.

It says something about GM's due diligence skills (or their desperation to be seen as a player in self-driving cars) that they were even willing to talk to a company in this position.

Microsoft and Paul Allen? [1] (Not quite comparable, but similar. The consensus is that Allen leaving was good for Microsoft.)

[1] https://en.wikipedia.org/wiki/Paul_Allen#Microsoft

I'm with tptacek, Allen put in 2 years of sweat equity, was friends with bill gates, teed up the company and then had to take a backseat because of illness. How could cruise Possibly have raised money if half the cap-table was subscribed already. Also, typically there is like a 1 year cliff, so I am not sure how that would even be possible.

> Yeah, the YC application is merely evidence of a contract rather than a contract itself

Which is less of a distinction than one might think, since a signed contract document is just a very special piece of evidence (which invokes some special legal rules barring certain other evidence) of the existence and terms of a contract. A contract is a thing that exists in law as a result of particular interactions between the parties, anything you can present is, at best, evidence of the contract rather than the contract itself.

"Sufficiently advanced evidence of a contract is indistinguishable from the contract itself." :-p

The issue is that his ownership only existed as a technicality and he only received a favorable outcome due to to the inflexible nature of the legal system. He was not a 50% owner or anything near that. However, due to a lack of evidence otherwise, he was able to convince the court he was.

That depends: when someone approaches YC and lists equity stakes, is there an implicit understanding of a vesting schedule and cliff? If so, the YC submission wouldn't be enough to substantiate an ownership claim, esp if the assumed schedule is the standard 4-year/12-month cliff.

In the absence of documentation of how the equity dissipates, it would be assumed not to. In that case, I'm not sure it's dismissable as a technicality: if an early, vital partner has to leave, you have to weigh the costs of buying out their equity stake against current cash demands. When the future of the company is tenuous, the value is small and Guillory surely would have accepted a song for a buyout, just as Walter White took a $5000 buyout for his huge stake in Grey Matter (or the Apple guy); but they may also need that money very much.

If you take the approach of "well [in hindsight] OBVIOUSLY they didn't mean to leave him with that equity", you're effectively giving founders a free option on the shares of silent partners, unfair in its own way.

>Guillory never had equity, wrote code, nor invested in the company, although he was listed on the application to Y Combinator

They applied together to YC. They got accepted, but Guillory didn't go. Vogt said he didn't want to work together anymore. A business entity was later formed, in which Guillory had zero ownership of because he left the project before it even began and had nothing to do with it. The only basis for Guillory here is that they did at one point agree to work together.

This is like me saying to you, "Hey, do you want to go halfsies on a lottery ticket?" and then you responded, "Yes". Later, I tell you I no longer want to go halfsies, then go out to buy a ticket by myself and win. You then later sue me saying you get half of the winnings because we had previously agreed to go halfsies, despite the agreement later being revoked and you having never contributed and never planning to contribute anything to the cost of the ticket.

It isn't an issue of assuming a vesting schedule, it's an issue of someone deceitfully claiming ownership of something they never owned.

Well, it raises the question of whether it's legitimate to ask applicants to list the equity stakes in the first place.

Seems like YC is asking people to hold to that structure when it is in their interests, but ignore it when it is not.

To be clear, don't think this is terrible. Just, if you are going to claim the split means nothing, then why force applicants to create one in the first place?

It's an application, not a legal document for creating a legal entity. They're asking the question because it's valuable to them as an indicator. If you have two do-nothings that own 90% and a PhD researcher who's the brains of the operation who owns 10%, that would be a red flag. Additionally it's important because there's a minimum equity stake required to join them in CA and they don't want you making it up after the fact.

I think Alman's emotional arguments were a bit misplaced and while I disagreed with, at the time, how they were made, he seems to be fairly correct. Here is my interpretation of why:

> What precisely is wrong with Jeremy Guillory's case?

It isn't that there was anything wrong with it, but if you see Alman's post, they were in the preliminary stages of the company and I think jointly applied to YC. if IIRC they didn't even both do through YC together.

Let's say you and I talk about doing a lemonade stand. We apply to Techstars as Junicorn bespoke lemonade purveyors. Unfortunately, I want to use tensor flow & the latest stanford NLP techniques for our lemonade startup and build it on blockchain technology using go. You wanted to do some anachronistic throwback where the Lemonade POS system is built on nodeJS with gulp & browserfy having it be mobile-first, cloud based omnichannel.

So we have the break up.

Then I, and my new founders build an entire company based on Lemonade stands & blockchain technology. Going throug techstars with an entirely different group of people and taking the idea all the way from an idea into a product. Again for a timeline recap:

1. We both had the same idea independently.

2. Then we tried to combine our ideas.

3. Then we went our seperate ways to work on our own seperate implementation.

4. Then my team and I built Junicorn: Summer Lemonade and sold to MinuteMaid for our Concentration technology. (this is like thousands of steps you weren't part of)

5. Then you ask for some large number payoff because we both discussed starting a company but ultimately didn't.

However, depending on the legal structure and some of the other factors (e.g. massive leverage before a sale) he was probably able to make some money. He may have even contributed to the company in a way that entitled him to something. It was just pretty shitty to bring that up during a massive sale like this.

In the scenario that you describe, you muddied the waters of Junicorn without properly cleaning up your mess during the breakup. That opens you up to claims like these, which is probably why this happened at Cruise. As soon as you have an adverse relationship to a business partner, it's time to cut bait, get releases signed, or do something completely unrelated.

correct. The reason I believe that this was shitty was timing. The lawsuit coincided with the GM deal by all public accounts. Regardless of the legal structure, this was a shitty thing to do. Clearly, he cofounded Cruise and probably did contribute at least to the zeitgeist of the project.

Obviously, a cliff is standard for founders and kyle (based on the application) had posted a personal 100k convertible note. so if he fired Jeremy, that's fine. Jeremy probably would be entitled to something, and it should have been spelled out. However claiming 50% 2 years later to coincide with a 1B exit, seems fucked up. The approach to this, is what I have issues with.

If you read the legal documents, instead of Sam's attempt to try the case in the media, you'll see it's quite clear. There are signed documents stating Guillory owned half the equity. These documents were in YC's possession. Nothing ever voided them.

Instead of separating Guillory early and cleanly, they dropped the ball, and attempted to shame him, attempted to threaten him (Sam called Guillory dozens of times in a single weekend and told him to take a small buyout or he'd never work again), and then only as a final result did the thing they should've done out of the gate: negotiate a settlement.

If true, is this professional? No. However, OJ Simpson wasn't found guilty, using a technicality to escape justice. So while the legal system is helpful and i wouldn't consider it a total piece of shit, I think if I built a 1 billion dollar company and someone asked for $500M, because I forgot to file some paperwork due to the quickie shotgun starter-marriage we rushed into I would probably flip the fuck out.

Also, it's like in the social network where "Mark" says:

You know, you really don't need a forensics team to get to the bottom of this. If you guys were the inventors of Facebook, you'd have invented Facebook.

edit: I responded to SA from my account* and articulated why I thought he made a mistake. You created a novelty/new account called 's[am]alt[man]wrong'. Your point isn't that bad, Jeremy may deserve something (i'm not an insider on the story) but this is cowardly behavior, and downright harmful to your case due to how chldish this is. I respect Sam for taking a personal stance on this which ultimately could/might have slightly damaged him personally. So, in essence this was the point I was making here.

It isn't about the issue, but how it was handled. Coming out of the woodwork in the final hours of a massive deal to demand payment is shady and doesn't seem to be handled in a way that was particularly reasonable. Just as anonymously asserting insider info on here which is unverifiable because you are choosing to hide your identity...is also less than forthcoming. You and Jeremy may be correct, but I would allege that regardless how Sam and Kyle handled themselves, the burden of being reasonable rests on detractors, I mean Kyle doesn't need to prove he added a ton of value to Cruise because he fucking started Cruise and built the team that ended up building the product that was Cruise and turned into the company that was Cruise which then put together the sale of the company(Cruise) to GM.

* which is like >800 days old and pretty fucking tied to my real identity. I mean, there is a goddamn keybase public key attached to it...

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