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Here's the startup dream: find an untapped need, (say, cheaper travel lodgings or easier cars on demand,) put together a new product to meet that need, "disrupt the paradigm," and get rich in the process. But, as the rise of Uber, Airbnb, and Spotify show, that fast growth can soon run headfirst into a legal brick wall, causing major problems down the line.
Despite these legal troubles, many startup founders think they can worry about the law way down the line. Here's why they're wrong, and how you can help save startups from themselves.
Legal advice isn't just for the biggest companies. Getting legal counsel early in the life of a business can help growing companies identify key issues that could arise down the line. This can be especially important when companies are in their fragile, early stages.
Take, for example, Leap Transit, a "luxury bus" company based in San Francisco. Leap made headlines offering an improved transit experience, but was soon hit with an ADA complaint from the Department of Justice, after it removed wheelchair ramps from its busses. A few weeks later and it got a cease and desist order from state regulators for operating without a proper permit. Some good legal advice might have helped stave off the liquidation that followed.
And Leap is just one example. Homejoy, a cleaning services startup, shut down in July after workers sued them over their classification as contractors, not employees. Last week, Spotify, the music streaming company, paid $30 million to settle a licensing dispute. Uber and Airbnb have faced nearly constant legal disputes over the legality of their products and the treatment of their workers.
Sure, many entrepreneurs view lawyers as the suits who tell them "no." But they're also the ones who can protect them from entering into disastrous deals or creating business plans that cannot survive under the current legal framework.
Many startups can't afford exorbitant hourly billing rates. At FindLaw, we understand this. After all, when FindLaw launched twenty years ago, it was just two attorneys working out of their apartment.
But when it comes to serving innovative startups, attorneys might want to consider disrupting their traditional billing methods. Options like flat fee agreements, limited representation, and even a stake in the company in lieu of cash payment could be considered by attorneys looking to serve nascent markets.
FindLaw has an affiliate relationship with Indeed, earning a small amount of money each time someone uses Indeed's services via FindLaw. FindLaw receives no compensation in exchange for editorial coverage.
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