4 ms·

Massive, scary legal risk here. This won't last long.

brandnewlow 14y ago
I'm sure you have your reasons for thinking this, but having read Hacker News for 4-5 years now, whenever people start making claims of startup failure based on legal risks, for me that's now a pretty sure sign of a winner-in-the-making.
- staunch 14y ago
  PayPal (banking laws), YouTube (copyright laws), Airbnb (hotel laws), Uber (taxi laws), Facebook (FTC privacy laws).
  - brandnewlow 14y ago
    Right. Startups that are "innovating" on what's legally acceptable seem to do pretty well once they reach momentum. We can certainly debate the "rightness" of it, but the fact that there's a debate there is a real obstacle to keeping out other players.
  - billirvine 14y ago
    Those are nothing compared to SEC laws and IRS requirements. Run afoul of them, and prison is in the cards. And PayPal didn't break any banking laws, only ran into parochial issues in some states. And Uber is having trouble too, aren't they?
    - Evbn 14y ago
      AirBnB does pretty well on an IRS-flouting (and similar state-level authorities) business model.
      - billirvine 14y ago
        AirBnB doesn't have any IRS issues (at least not that I've heard of). Their problems stem from being an enabler within an industry that typically requires licensing... and doing so to rent properties for fewer than 30 days without permit (required in some areas). Yeah, the law seems preventative, but it's in place as a zoning issue to prevent a bed and breakfast from popping up in your mom's cul-de-sac. AirBnB is a good idea, running up against zoning laws that are also (generally) good ideas.
    - rdl 14y ago
      The biggest risk here is that the transaction will be voided out (at the option of the buyer) -- if your company fails, you may have to pay the money back to the investor. If the company is successful, the investor won't exercise that option. Honestly, for $100-200k, I'd do it -- paying $200k back to investors in the (1%?) chance that this funding mechanism is invalidated AND your company fails is a risk I'd be willing to take. I am not a lawyer and this is not legal advice, of course.
- billirvine 14y ago
  I've been reading hacker news for a long time, and actually making companies also... more than just reading. The "legal risks" here are with the SEC and IRS -- the top two most risky legal risks in the universe. Both send people to prison.
  - arbuge 14y ago
    Way exaggerated. At most they get some road bumps. Nobody's going to prison.
    - billirvine 14y ago
      > Nobody's going to prison. That depends on what happens. No one thought Martha Stewart would end up in prison for insider trading, something that didn't put other people's money at risk.

I'm sure you have your reasons for thinking this, but having read Hacker News for 4-5 years now, whenever people start making claims of startup failure based on legal risks, for me that's now a pretty sure sign of a winner-in-the-making.

staunch 14y ago
PayPal (banking laws), YouTube (copyright laws), Airbnb (hotel laws), Uber (taxi laws), Facebook (FTC privacy laws).
- brandnewlow 14y ago
  Right. Startups that are "innovating" on what's legally acceptable seem to do pretty well once they reach momentum. We can certainly debate the "rightness" of it, but the fact that there's a debate there is a real obstacle to keeping out other players.
- billirvine 14y ago
  Those are nothing compared to SEC laws and IRS requirements. Run afoul of them, and prison is in the cards. And PayPal didn't break any banking laws, only ran into parochial issues in some states. And Uber is having trouble too, aren't they?
  - Evbn 14y ago
    AirBnB does pretty well on an IRS-flouting (and similar state-level authorities) business model.
    - billirvine 14y ago
      AirBnB doesn't have any IRS issues (at least not that I've heard of). Their problems stem from being an enabler within an industry that typically requires licensing... and doing so to rent properties for fewer than 30 days without permit (required in some areas). Yeah, the law seems preventative, but it's in place as a zoning issue to prevent a bed and breakfast from popping up in your mom's cul-de-sac. AirBnB is a good idea, running up against zoning laws that are also (generally) good ideas.
  - rdl 14y ago
    The biggest risk here is that the transaction will be voided out (at the option of the buyer) -- if your company fails, you may have to pay the money back to the investor. If the company is successful, the investor won't exercise that option. Honestly, for $100-200k, I'd do it -- paying $200k back to investors in the (1%?) chance that this funding mechanism is invalidated AND your company fails is a risk I'd be willing to take. I am not a lawyer and this is not legal advice, of course.
billirvine 14y ago
I've been reading hacker news for a long time, and actually making companies also... more than just reading. The "legal risks" here are with the SEC and IRS -- the top two most risky legal risks in the universe. Both send people to prison.
- arbuge 14y ago
  Way exaggerated. At most they get some road bumps. Nobody's going to prison.
  - billirvine 14y ago
    > Nobody's going to prison. That depends on what happens. No one thought Martha Stewart would end up in prison for insider trading, something that didn't put other people's money at risk.