Amazon is suing former executive Gene Farrell to prevent him from working for a start-up, and an email in the lawsuit provides fascinating insight into why Farrell wanted to leave. The lessons could well apply to any exec considering leaving a big tech company for a fast-growing start-up.
As previously reported by Geekwire, Amazon has filed suit against Gene Farrell, who left his position as vice president of enterprise applications and EC2 Windows team as part of Amazon Web Services (AWS), Amazon’s market-leading cloud infrastructure division. He sought to become head of product at Smartsheet, a company based in Bellevue, Washington, that offers collaborative work management software.
Citing a non-competition agreement that Farrell had signed, Amazon sought a temporary restraining order to block Farrell from working at Smartsheet. Judge Jim Rogers granted it on June 12.
Farrell’s June 12 declaration includes an email from him to AWS CEO Andy Jassy. In it, Farrell provides four reasons for leaving.
Farrell noted that he has wanted to be a CEO himself for a long time, and that he wants to take a company public. (Smartsheet announced a $52 million funding round led by Insight Venture Partners last month.)
Additionally, Farrell said he desired a role where he could have a big impact on both the business and the company.
“You are right in your assessment that AWS Apps has the potential to be a bigger business than the start-up,” Farrell told Jassy. “The flip side is that as member of a five-person executive team in a smaller company I can have a much bigger influence on the overall company and culture. I have worked at big companies my entire career, and the challenge of proving to myself that I can be successful in a smaller company with fewer support systems is intriguing.”
Farrell’s other justification concerns his return on investment, in terms of both time and money.
“I looked at my current trajectory at Amazon, which included my latest grant, against a range of Amazon stock price growth assumptions vs. the range of likely outcomes if I join the start-up,” Farrell wrote. “Without getting into all the details, the expected ROI over the next four years from joining the startup is 3x to 6x the total compensation I expect at Amazon.
“There is always some risk that they won’t go public, but based on the current trajectory of their business and my discussions with their board, I believe there is a better than 75 percent chance that it will happen.”
During his time at AWS, Farrell worked on several existing services, including Chime, WorkDocs, WorkMail and WorkSpaces. But a vice president, he also had access to information on “AWS’s strategy, roadmap, pipeline, customers, strengths and weakness for cloud-based productivity products, including the development of new products not yet publicly launched or announced,” Amazon said in its original complaint.
Today AWS doesn’t offer any services that directly compete with Smartsheet’s main service, although redacted filings suggest forthcoming services could change that. Farrell’s June 12 declaration mentions discussions with Adam Bosworth, an Alphabet and Microsoft veteran who came to AWS from Salesforce last year. The nature of those discussions are heavily redacted, suggesting a potential overlap with Smartsheet’s capabilities.
Farrell signed a non-competition agreement in 2012 when he joined Amazon from Coca-Cola. Farrell was under the impression that Amazon only enforced those agreements when employees leave for direct competitors such as Google or Microsoft, based on input from his hiring manager, he said in the June 12 filing.
But Farrell’s case may be special because he is apparently aiming to become CEO of a company that’s looking to go public — Farrell’s boss at AWS, Charlie Bell, indicates that Farrell was becoming head of product with the intent of soon taking on the Smartsheet’s CEO role.
California courts do not enforce non-competition agreements. A bill seeking to stop them from being included in employment agreements in Washington state recently stalled, as Geekwire reported.
The case is currently in the Superior Court for Washington state’s King County.