A New Way to Justice & Fairness with Decentralized Networks
YES, LITIGATION ISSUES COUNT
I worked for Ernst & Young as a partner for many years with a special focus on startups and corporate finance. Since more than 10 years I have been running my own business as CPA, auditor, consultant and business angel. And, I am sure you agree, startups are a tough place to be in whatever position – founders, investors, consultants, lawyers or CPA’s.
Being a CPA/consultant/business angel specialized in the tech industry means being in the upfront of new economic phenomena and accompanying startups and/or investors in this early stages of their life cycle. You definitely can burn your wings in this hot space. Hence, I was involved in the rise and in the fall of new economy companies, I have seen startup founders getting “really” rich and loosing a lot. I advised them in going public and afterwards I advised them in avoiding personal liabilities during difficult situations of the Company. I know how difficult it is to raise funds for a startup and to manage the investor relationships afterwards. Founders and startups are permanently threatened by legal claims from investors, creditors, lenders, suppliers or authorities.
Most startups operate with a “fail fast paradigm”, i.e. they are testing different approaches, tools and ideas on their search for the “perfect business model”. They have to behave opportunistic as well as adaptive. These highly vibrant startup environments are a fertile soil for power plays, frustration and struggles within the founder team.
Looking back, I identify two major legal threats in the early stage of a startup when they are still evolving their infrastructure and business model (especially in the early financing as well A and B rounds).
THE HOME-BREWN SCENARIOS
In the VC industry, there fur sure exists a “genetically determined” dialectic between the founder-team, that mainly wants to realize their envisioned business idea in their own mode on the one hand and investors who want to maximize the return on their investment as soon as possible on the other hand.
Sometimes startup teams and investors manage to build great companies by joining their efforts and aligning their different experiences into a powerful working model with shared responsibilities (we call them “ponies”, “centaurs” and “unicorns”). But we all know that most of the time it is a very fragile equilibrium. If this equilibrium is disturbed by homebrewn attidudes regarding the next steps in the development of the startup, very often (an educated guess: the number is around 50%) a fight between the investor and the founders ends up in a hostile take-over attempt, with the investor kicking founding members and taking the lead. Very frequently, founders are the big losers as they simply do not have the funds to fight in money-consuming litigation and claims.
THE EXTERNAL SCENARIO
To develop new business models very often comprise the challenge of established structures and existing legal frameworks i.e. taxation or financial regulations. Startups and their founders, thus, are confronted with money-consuming legal discussions with authorities. Just to mention the very complex discussions around intellectual property rights (IPR) that are very often threatening startups and their founders.
BLOCKCHAIN AND LITIGATION COIN
Both the home-brewn and the external scenario require substantial financial funds for the founders, as winning a legal claim very often is not a question of justice but a question of “who puts more money in the claim”. Currently, I am involved in a legal case which demonstrates this issue again: A hostile take over attempt of a startup by an investor results in the legal claims destroying everything, especially the promising business model of the startup and leaving the founders to collect the shards.
Now the founder came up with a new great idea: based on the Ethereum blockchain a LITIGATION COIN concept will be set up to defend himself and his team in the litigations started by the investor who literally invested tons of money to win over the founder. He plans to do an Initial Coin Offering (ICO) soon to look for support in the blockchain & startup ecosphere and offer innovative earning opportunities in return.
I am convinced hat this litigation coin concept has a big potential to disrupt another legacy business model, hence I joined the team. Up to today third party litigation fundings are mainly provided by specialised Venture Capital or Private Equity funds and offer great income possibilities to them.
I think that this LITIGATION COIN concept could replace these middlemen, enable the startup to unleash the potential of its stakeholders by purchasing litigation coins, and, in addition, offers the possibility to establish a more justice system by harnessing the power of decentralized networks and the crowd.
Stay tuned as, join the LITIGATION COIN movement and read my postings!