How Great Founders Navigate Lawsuits & Regulation

I remember being in New York and, uh, like it was with Warner Music Group during the litigation, and we spent the whole day negotiating, and they're like, "Hey, you wanna go to the Knicks game tonight?" And so I went to the Knicks game with the lawyers.

While they're suing you?

I don't think they thought it was a big deal.

[laughs]

That's how normal... That's, they were just so used to suing people. They're like, "Oh, you're a good guy. Let's go see the Knicks."

Hello, hello. All right.

All right. Hello.

Our advice on lawsuits and regulation and dealing with the government. I think we've got decent credentials on this subject.

Yeah, you gotta tell them what our credentials are.

Yeah. Why, why don't you start? What are your lawsuit credentials?

My first company that I started in two thousand and three was called imeem, and it was a music streaming site, and it, um-

[laughs]

And many of my early employees formerly worked at a company called Napster, and, um, not kidding, and there was a lot of overlap with the DNA. It was like the thing after Napster. And needless to say, we eventually got deals with the music industry, and that's a whole long story. But in the process, we definitely were in a lot of litigation, and so a lot of my life for a couple years as a startup founder was, uh, dealing with that stuff. And so sadly, I have credentials here.

I represented the other end of the spectrum.

[laughs]

So I worked in a company called Twitch, and when it started, it was called Justin.tv, and I remember this moment where someone in Ohio decided to stream the Super Bowl live on our website, and I remember watching that part in the beginning that says, like, "This can't be rebroadcasted, retransmitted." [laughs] And I'm, like, watching this on my own website, and I was like, "Huh. Um..."

Michael, to be honest, I, I definitely at least once watched the Super Bowl on your website. [laughs]

We were pitching a VC, and he's like, "Oh, I wanted to go to the Masters," and I was like, "You can just watch it on our website." [laughs] Did not invest. So in the process, we got sued by the UFC, NBC, and then we got called in front of Congress to testify about sports piracy by the major, Major League Baseball.

It was you?

Yeah.

You had to go in front of Congress-

Yeah, yeah

...to talk about piracy?

Yeah.

Oh, man. [laughs]

I think maybe what I would start with is what was your experience of being sued and kind of the speed of startups versus the speed of lawsuits?

The way I would frame this as it pertains to current modern startup advice is the following: New technologies often are encumbered, for better or worse, by laws that were created way before the technologies existed. And so dealing with copyright law, there's all this stuff about mechanical reproduction, which was the physical reproduction of records, and that's codified in the law. Again, I, I became an expert on this stuff, and trying to translate law that was about physical media to digital media was, like, totally dumb. I, I, I don't know. I could use other more colorful terms, but it, it, it was really hard. And the way I think this is relevant to right now is the attempts to regulate AI. In addition, a lot of our startups, our portfolio companies, have experienced tremendous change in the regulatory environment over the past few years. Fortunes are being made and lost based on what kind of laws are being passed and the sophistication ability for founders to navigate these things. Um, just to throw out a couple of, of examples here, um, anyone hear, hear of Kalshi? Uh, you know the company? A few people. So look, they're, they're doing extremely well. Michael funded them for YC. That's his company. You're on the board or something, right? Michael is on the board of that company, and they basically spent years suing the government? I... Why don't you tell them? Why don't you tell them about-