Things were going amazingly well at Carted last year. Launched in 2020, the Australian e-commerce software company landed $13 million in seed funding in May 2021, marking one of the biggest early-stage rounds in the country's history. Co-founders Mike Angell and Holly Cardew were all smiles in photos that ran in the press along with the announcement.

Now Carted’s fortunes are still climbing, but Angell is no longer at the company. He was also forced to give back his 10% equity stake. What happened? Framing his tale as a lesson learned, he explained in a recent LinkedIn post that he had a conflict with Cardew and agreed to step down. 

Under the impression that he had “no obligations to the company,” he went on to become chief technology officer of Fractal, a gaming NFT marketplace started by Twitch co-founder Justin Kan. Then things got sticky. 

After joining the new company, a representative from the venture capital firm that invested in Carted, Blackbird, “contacted me and said I couldn’t work on anything else and threatened my position in Fractal,” Angell wrote. The firm “then sent a new contract saying they wouldn’t pursue my position with Fractal if I just signed away my equity,” he added, referring to his 10% vested stake in Carted.

“If I wasn’t under the pressure of building a new company I’m excited about I wouldn’t have signed anything and stood my ground,” he wrote. “Honestly I’m just interested in getting on with my life, however others seem to want to make that harder.” 

His story struck a chord with dozens of founders and startup executives on LinkedIn, many of whom chimed in with messages of support, questions about the situation, and appreciation for his decision to share his experience. It also highlights the perils of noncompete agreements for founders, which might be imposed by their past companies as obstacles to starting new ventures or joining new firms within specified periods of time.

“As a 3 time founder I’m gutted for you,” wrote Danny Ku, co-founder and CEO of influencer marketing firm Captiv8 Kids, in a reply to Angell’s post. “To get that far in 12 months means you must have been motoring around the clock giving every bit of obsession to it.” He added that the Angell must be experiencing “a feeling of betrayal.”

Thomas Walkley, cofounder of an app for apartment residents called Erin Living, told Angell “this is a big eye-opener for anyone starting a business and raising venture capital.”

Some observers were more critical, however. Noting that Angell must have had “some kind of non-compete” and violated it by joining Fractal, Benjamin Humphrey, cofounder and CEO of analytics startup Dovetail, suggested that Angell was being unwise by instigating “a discussion about it on social media and the news.” 

“I don’t know you or Carted, but Mike I recommend stepping back to think about whether you really want all of this to play out on the public stage,” he said

Blackbird, when contacted by The Business of Business, disputed Angell’s characterization of events and said he entered into the deal to sign away his stake willingly after acknowledging the concerns at issue. 

“Mike made the decision to end his involvement with Carted,” a representative from the VC firm said. “After trying to explore ways in which he could stay involved, we respected his decision and supported his wishes to transition out of the business. Mike then reached a mutual agreement with the company that he negotiated and we sincerely wish him all the best for the future.”

Cardew told us in a statement that the dispute "was an internal matter and the cirumstances of Mike's exit have been taken out of context."

"Mike's exit from Carted took place following his full agreement and understanding of all the terms of this exit," she continued. "As investors, Blackbird helped Mike and myself as founders through a difficult time, and went out of their way to help mediate a complex situation, ensuring that Carted could move forward on stable footing while also enabling Mike's transition to launch his new venture."

Noncompete agreements can be tricky for founders and employees alike. Often used to prevent poaching or the sharing of trade secrets, they are sometimes thrown out by courts in both the U.S. and Australia as being unfair or unreasonable. But just the prospect of being sued and having to fight the case is often enough of an incentive to get founders or employees to abide by them.

Australian courts generally enforce noncompete restraints if they are deemed reasonable to protect legitimate business interests. In the U.S., three states largely ban noncompetes: North Dakota, Oklahoma and California (home to Silicon Valley), according to Russell Beck, a Boston-based employment and trade secrets litigator. The rest will uphold them to varying degrees depending on whether they’re deemed appropriate or too restrictive.

“In some states, courts will be permitted (or even required in some states) to narrow an agreement to make it enforceable,” Beck, of Beck Reed Riden LLP, told us. “In other states, courts cannot fix an overly broad agreement. But even in the states that permit a court to narrow the agreement, the court must still decide whether the narrowed agreement would still prohibit the conduct and, if so, whether to enforce it.”

Before being asked to sign away his stake, Angell had lavished praise on Carted, which is working to simplify e-commerce by developing a universal application programming interface. In an earlier LinkedIn post about his joining Fractal, Angell said leaving the e-commerce startup was “likely the hardest decision of my life.” And that he looks forward to Cardew and her team “ringing the NYSE bell one day.”

Note: This story has been updated to include a statement from Carted cofounder and CEO Holly Cardew.

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