Non-Competition Agreement Covenant (VC Financing)

A non-competition agreement prevents founders and key employees from competing with the Company during employment and temporarily after leaving the Company. The typical duration of a non-competition agreement is one to two years after leaving the Company. The agreement can also be limited to a specific geographic area.

While non-competition terms are present in many agreements, founders and key employees will likely push back against this term because it restricts their future career prospects. Also, many states (including California and Washington State) do not allow or severely restrict non-competition agreements in the employment context.

Term Sheet Language: Founders and key employee will enter into a [one] year non-competition agreement in a form reasonably acceptable to the Investors.