TLDR:
- The FTC’s final non-compete rule could hurt VC returns by impacting equity-based restrictive covenant agreements with employee equity holders.
In a recent article by David Bogoslaw, it was revealed that the Federal Trade Commission’s (FTC) final non-compete rule could have a negative impact on Venture Capital (VC) returns. The final rule not only applies to employment agreements but also to equity-based restrictive covenant agreements with employee equity holders, which would be invalidated unless they are related to a third-party sale.
This new regulation could potentially disrupt the way VC firms operate, as non-compete agreements are often used to protect sensitive information and prevent key employees from leaving and starting rival companies. This could lead to increased competition and talent retention challenges within the industry, ultimately affecting VC returns.
Overall, this article highlights the potential implications of the FTC’s final non-compete rule on VC firms and their ability to protect their investments and maintain a competitive edge in the market.
