Quit a Big Silicon Valley Firm? Tread Carefully When You Start Your Own Company

The biggest players in Silicon Valley’s burgeoning autonomous car industry have a warning for their top engineers: if you quit to set up your own company, tread carefully.

Anthony Levandowski, a pioneering self-driving car engineer, became the highest-profile casualty of this increasingly litigious approach after Uber Technologies Inc. fired him in the midst of a contentious legal fight. Alphabet Inc.’s autonomous car project, now called Waymo, sued Uber alleging Levandowski stole some of its core technology and took it to the ride-hailing company when it acquired his startup. Levandowski has refused to testify in the case.

“You could consider this as a shot across the bow, of companies saying they’re not going to stand for this stuff,” said Michael Dovorany, a Los Angeles-based consultant at the CarLab. “In the past there really hasn’t been a lot of respect or upholding of non-compete agreements. Now you’re seeing the pendulum swing the other way.”

Once General Motors Co. paid $581 million for Cruise Automation Inc. last year, a bevy of engineers recognized they could get a bigger payday if they set up their own companies rather than remain employees of a bigger beast. Tesla Inc. and Waymo started to hemorrhage top staff, and the number of autonomous car testing licenses granted in California ballooned from about a dozen companies to 30 inside a year.

Several of those engineers have faced legal pressure from their former employers that are trying to gain an advantage in an industry McKinsey & Co. estimates will be worth $6.7 trillion by 2030.

Waymo alleges that Levandowski stole key intellectual property when he left to create Otto, the startup that was subsequently acquired by Uber for about $700 million. Meanwhile Tesla settled out of court in April with Sterling Anderson, a former director of its Autopilot program. Anderson formed a company called Aurora Innovation LLC earlier this year with Chris Urmson, the ex-head of Google’s self-driving car program. Tesla had claimed that Anderson breached his contract by starting Aurora and recruiting engineers from the Elon Musk-led company.

The smartphone, computer and tablet markets are “very mature, whereas autonomous cars is brand new,” said Bob O’Donnell, president and chief analyst at Technalysis Research. “It’s a real opportunity for these tech companies so that’s why they’re taking it very seriously.”

When online learning company Udacity Inc. decided to spin out its autonomous car operations into a standalone business earlier this year, it faced a significant hurdle, according to a person familiar with the process. Founder and President Sebastian Thrun had led the Google X innovation lab before leaving to start Udacity, and navigating his relationship with Google held up the formation of Voyage, as the self-driving car business was subsequently dubbed, according to the person, who asked not to be identified because the discussions were private.

Discussions were drawn out over several months, and Thrun, who initially planned to be Voyage chairman, ultimately assumed no formal role at the company, beyond an equity stake through Udacity, the person said.

“Given my deep involvement with Udacity and my close friendship with the Google team, I felt it would be inappropriate to take any role or equity in Voyage,” Thrun said in an emailed response to Bloomberg News questions about discussions with Google. An Alphabet spokesman couldn’t be reached for comment.

Google filed a complaint in December against Leonid Shamis, a software engineer who left to join startup Drive.ai the previous month. The search giant alleged that he and 10 unidentified defendants had breached the terms of employment agreements not to use Google’s confidential information for other means, according to court filings.

Others have so far succeeded in evading the tech companies’ lawyers. Bryan Salesky and Peter Rander, former leaders of self-driving car teams at Uber and Google, secured a $1 billion investment from Ford Motor Co. in February for their company Argo AI. The Pittsburgh-based startup aims to build the brains for a self-driving car.

“There really do seem to be a select few people who have made a name for themselves in this space,” said the CarLab’s Dovorany. “Their value is really great.”

About BloombergNEF

BloombergNEF (BNEF) is a strategic research provider covering global commodity markets and the disruptive technologies driving the transition to a low-carbon economy. Our expert coverage assesses pathways for the power, transport, industry, buildings and agriculture sectors to adapt to the energy transition. We help commodity trading, corporate strategy, finance and policy professionals navigate change and generate opportunities.
Sign up for our free monthly newsletter →

Want to learn how we help our clients put it all together? Contact us