How Great Founders Navigate Lawsuits & Regulation

1. DCDalton Caldwell0:00

   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.

2. MSMichael Seibel0:12

   While they're suing you?

3. DCDalton Caldwell0:14

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

4. MSMichael Seibel0:15

   [laughs]

5. DCDalton Caldwell0:16

   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."

6. MSMichael Seibel0:24

   Hello, hello. All right.

7. DCDalton Caldwell0:26

   All right. Hello.

8. MSMichael Seibel0:27

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

9. DCDalton Caldwell0:35

   Yeah, you gotta tell them what our credentials are.

10. MSMichael Seibel0:36

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

11. DCDalton Caldwell0:40

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

12. MSMichael Seibel0:47

    [laughs]

13. DCDalton Caldwell0:48

    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.

14. MSMichael Seibel1:13

    I represented the other end of the spectrum.

15. DCDalton Caldwell1:15

    [laughs]

16. MSMichael Seibel1:16

    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..."

17. DCDalton Caldwell1:40

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

18. MSMichael Seibel1:46

    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.

19. DCDalton Caldwell2:05

    It was you?

20. MSMichael Seibel2:06

    Yeah.

21. DCDalton Caldwell2:06

    You had to go in front of Congress-

22. MSMichael Seibel2:07

    Yeah, yeah

23. DCDalton Caldwell2:07

    ...to talk about piracy?

24. MSMichael Seibel2:08

    Yeah.

25. DCDalton Caldwell2:08

    Oh, man. [laughs]

26. MSMichael Seibel2:10

    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?

27. DCDalton Caldwell2:20

    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-

28. MSMichael Seibel3:40

    They only started suing the government recently.

29. DCDalton Caldwell3:42

    Oh. [laughs]

30. MSMichael Seibel3:43

    I think this is one of the f- only companies I've ever worked with that is so regulated that they had to have a government strategy pre-product, and they basically had to get licensed before they could do anything. Counterintuitively, funding two MIT CS kids right out of college, where the first thing they have to do is get a license from some-

Episode duration: 20:44