Will the end of non-compete clauses be great for startups?

Will the end of non-compete clauses be great for startups?

The non-compete clause has long been a dream-crusher for thousands of entrepreneurs. But now business secretary Sajid Javid wants to assess the impact of these non-compete clauses on new enterprises, and so the government is launching a consultation which will investigate whether non-compete clauses are stifling innovation.

So just what is a non-compete? It’s a clause that states that you’re unable to work with existing customers for a pre-specified amount of time. This can be as long as nine months and means that, if you quit your job for your startup, you could fall foul if you take clients along with you to your new venture. You might be offering them a better deal, and you might have worked with them for a long time, but it doesn’t matter.

Non-competes are technically only enforceable if they protect a legitimate interest, but in some industries such as finance they are rife. And it’s not just making it harder to start up by restricting your client base – it also makes hiring the best employees more difficult.

It’s great to see the government investigating practices like this and rewarding innovation. You could look at this this way: if big businesses are worried about losing staff and customers to hungry startups, maybe they would be better off focussing on how they can keep upping their own game…

What do you think? Tweet us over on @VirginStartUp.