Innovation@work: Launching a Startup While Keeping Your Day Job
By: Kristin Mendoza
The first few months of any new startup often follow the same pattern. While a product or service is being conceptualized and a business plan for launch is being developed, first-time entrepreneurs find themselves maintaining full-time employment until their startup business is self-sustaining or has at least closed a sizeable financing round to carry the business along until it gets closer to sustainability.
Not only is keeping a day job a financial necessity for most founders, it’s also generally okay from a legal perspective for a founder to take some preliminary steps in starting a new business while working full-time for someone else. However, there are three key steps to juggling both your day job and your startup without creating additional risk for yourself and your new business.
1. Know What Contractual Restrictions You May Be Under
I can’t count the number of times I have had conversations with startup founders who couldn’t remember if they signed any sort of non-compete agreement with their current employer, or if they did remember, whether they could easily put their hands on a copy of that document. It’s absolutely critical to be clear on what obligations you have with your current employer before launching a startup, especially if you plan to eventually engage in direct competition with your employer.
Unless you have signed a contract promising not to do so, a startup founder can take initial steps for launching a new business venture without being in violation of the terms of their existing employment relationship. However, if you have signed some form of a non-compete agreement, you need to have a good understanding of the following:
- What is the nature of the restricted activity? Have you agreed not to compete with your employer, not to solicit customers or both?
- How long is the restriction?
- In what geographic region or territory are you restricted from engaging in this activity?
Some states have passed laws that void non-compete agreements entirely while other states have robust court opinions that have limited enforcement of these types of contracts. If you have signed a non-compete, it’s a good idea to consult with an attorney to help clarify what restrictions may be in effect and what risks may exist if you were in violation of those restrictions.
2. Keep Your Work Activities Separate from Your Startup Activities
The time you spend at your day job and the work you perform while being paid by your employer or using your employer’s equipment belong to your employer. If you develop an idea for a new product or service as part of your day job and your employer decides not to pursue it, the time and materials you developed belong to your employer and you may not freely use them outside of your employment.
Likewise, if you develop an idea for something after normal business hours that is not at all related to your employer’s business but use your work computer or your employer’s software to create renderings of your design, develop a business plan, etc., your employer may also have a claim in this work product.
For those reasons, you want to make sure that time spent at your day job and the materials made available to you by your employer are only used for performing the work required for your day job. Not only should time spent on your startup occur outside of your normal working hours, but work product that you create should be developed and stored on a computer or system that is controlled only by you and not your employer.
3. Respect Your Employer’s Business Information and Resources
As you get closer to the point of leaving your day job to work on your startup full-time, you may realize that there are certain pieces of information or resources that you use at your day job that would be helpful to the operation of your startup. Under no circumstances should you copy, download or otherwise transfer any type of business record, file, document or data from your employer to use with your startup. The first thing that a suspicious or angry employer will do upon your resignation is audit its computer systems to see if you forwarded information to a private email account or copied, downloaded or deleted information in the weeks or months leading up to your resignation. It’s simply too easy to get caught, so don’t do it. Respect your employer’s business information and leave it with your employer. If you have some of your employer’s business information on a personal computing device that you own, create a log of what information was stored and when and how you removed that information from your personal computing device. Again, seeking the advice of an attorney to help you identify commonly overlooked items that may trigger employer suspicions could be useful.
Starting a new business is a risky endeavor. However, keeping these three basic rules in mind during the early stages of your startup will help reduce risk and provide you with a more solid foundation for building your business.