At Traklight, we often preach the importance of contracts and agreements. It’s an admirable quality to have faith in others, and there are many times that faith is rewarded. But the fact remains that while it’s nice to hope for the best, it’s prudent to plan for the worst. That even applies when it comes to those whom you choose to cast your business lot in with: your co-founders. There are far too many cases of partnerships gone awry to think that your particular pairing will never run into problems. And money can only compound those issues, as evidenced in the case of Cruise Automation, a company that was recently acquired for a considerable sum by General Motors and subsequently saw founding members fight over shares of that prize.
What first drew the attention of GM to this San-Francisco based startup is technology Cruise has developed related to self-driving cars that would allow drivers to bring their cars into traffic and then push a button to enable the car to essentially drive itself. But as can happen when large sums of acquisition money come in, things like ownership and contribution and who creted or invented can become contrntious.
The company is now facing a legal battle between itself and its current CEO, Kyle Vogt, and an ousted co-founder, Jeremy Guillory. Vogt fired the first shot, filing a suit alleging that Guillory had left Cruise Automation shortly after it was incorporated, and held no shares nor contributed any patents or technologies. Guillory subsequently countersued, claiming himself to be a 50% owner based upon a 2013 funding application to Y Combinator. Guillory is seeking a jury trial that would determine his share of the reportedly $1 billion plus that GM is reported to have paid to acquire Cruise.
As with many of these cases, it becomes a matter of which version of events is to believed. In Guillory’s filing, he claims that there was an agreement on a 50/50 split of ownership, although the only evidence supporting that claim is the funding application. He also portrays himself as the technical brains of the operation before Vogt decided that he no longer wanted to together. Guillory claims that when he asked about his share of the acquisiton money, he was offered from $100,000 to $1.5 million by Vogt, and $4.5 million from Y Combinator president Sam Altman in exchange for signing an agreement.
With the matter possibly headed to trial, Cruise’s acquisition by GM could be delayed, although with the current fervor to try and get self-driving cars to market, it seems unlikely that GM would back out altogether from buying a company that it found promising enough to spend $1 billion on. Nevertheless, it serves as another lesson that failing to put agreements in writing, and not creating agreements in the early days of your startup, can lead to costly problems down the road.
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