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Why Startups Should Never Rush to Launch

By George Khoury, Esq. on July 24, 2022 3:01 PM

While being first to market may be the key ingredient to success for some of today's biggest tech names, like Amazon and Uber, entrepreneurs rushing to launch startups could face legal trouble down the road. It can be helpful to perform market studies to identify potential customers or test a product with a soft launch, but if your startup isn't ready, there's no end to the types of problems that can pop up by launching too soon.

Often, startups fail because the entrepreneurs who launch them have made common mistakes. First-time founders may have miscalculated demand for their product and assumed that early adopters would stick with them. They may have stumbled with faulty messaging. They may have overestimated their capabilities to handle e-commerce, and myriad early-stage tasks. However, startup founders can also fall prey to legal risks that can emerge when they rush to launch a new business too quickly.

Regardless of the type of business you plan to operate and the venture capital you may have to fund its early stages, there are likely potential liability and compliance issues that need to be addressed before opening. For starters, if you plan on servicing customers at your business location, you will want to obtain some form of premises liability insurance coverage. Additionally, your location should be inspected to ensure that there are no potential dangerous conditions that might not be readily apparent (such as loose flooring tiles or railings).

Depending on the type of business you'll be running and the business model you’ve adopted, there may be more legal compliance issues apart from the ordinary ones like local business licensing, employment taxes, workers compensation insurance, employee benefits, and taxes. You should have systems in place to ensure that your new business complies with the laws in your industry before starting operations.

Industry Disruption

Startups, particularly those in the tech sector and silicon valley, have a reputation for "disrupting" industries by shifting an industry's focus away from big companies and the status quo. The most obvious example today is the new prevalence of ride-sharing services, such as Uber or Lyft, and their impact on the taxi industries of the cities these providers operate in.

However, if a tech startup that is poised for disruption is not funded to litigate potential issues against the heavy hitters already occupying the market, it may never be able to disrupt the industry. Litigation is expensive and can stop a business from moving forward. Entrepreneurship can be powerfully energizing, but if your startup is vulnerable to a legal challenge, it is best to prepare to face that challenge before starting operations.

If you or a co-founder need more reasons to contact an attorney before opening for business, here are the basic 10 reasons why you want to have a lawyer help with your startup. If you take the right legal steps, who know? Your startup might become the next Apple.

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