Why is it so important? Because falling afoul of criminal law can lead to severe consequences, including hefty fines, damage to your reputation, and even imprisonment. It’s not just about knowing the law—it’s also about understanding how to navigate it to ensure the sustainability of your startup.

Isn’t it worth a bit of your time now to avoid potentially devastating legal issues later? Keep reading to uncover the potential pitfalls in criminal law for startups and learn how you can steer clear of them.

Understanding Criminal Law In The Context Of Business

Criminal law isn’t just about high-profile trials—it also intersects with the business world in many ways. For startups, navigating this landscape can be particularly challenging due to the unique environments they operate in and the high stakes involved.

The types of criminal offenses that could apply to businesses range from fraud and embezzlement to tax evasion and bribery. For a more comprehensive understanding of how criminal law applies to businesses, you can click here.

With a basic understanding of criminal law in a business context, let’s discuss some specific pitfalls that startups often encounter.

Potential Pitfalls In Criminal Law For Startups

Startups, with their unique environments and challenges, can be especially vulnerable to certain legal pitfalls. Here’s where they often run into trouble:

1. Corporate Fraud

This refers to dishonest activities that a company undertakes to give an advantage to itself or an individual. Startups, due to their often rapid growth and sometimes lax oversight, can be particularly vulnerable to instances of fraud, such as false financial reporting or insider trading.

2. Embezzlement

This occurs when someone with access to company funds or assets misappropriates them for personal gain. As startups often have smaller teams and more trust-based environments, they can be especially susceptible to such actions.

3. Tax Evasion

Startups are required to accurately report income and pay due taxes. However, in an attempt to maximize profits or due to simple oversight, some startups may end up underreporting income, overstating deductions, or hiding money offshore, leading to tax evasion charges.

4. Bribery

This involves attempting to influence someone in a public or legal duty by offering, giving, or receiving something of value. Startups looking for quick wins might be tempted to resort to such measures, but the repercussions can be severe.

5. Intellectual Property Violations

Intellectual property often forms the core of a startup, whether it’s software code, a business model, or a product design. Infringing on someone else’s Internet Protocol (IP) rights, even unknowingly, can lead to criminal charges.

6. Employment Law Issues

Employment law covers a range of issues, from wage and hour violations to discrimination and harassment claims. Mishandling these matters can result in criminal liability for startups.

7. Regulatory Compliance

Startups operating in heavily regulated industries, like healthcare or finance, are required to be particularly diligent about compliance. Failing to follow industry regulations can lead to criminal charges.

Now that we’ve identified the common legal pitfalls startups face, let’s explore some proactive steps you can take to avoid falling into these traps.

How To Avoid These Pitfalls

Awareness of potential legal issues is just the first step. It’s equally important to have strategies in place to avoid these pitfalls. Here are some precautionary measures you can take:

1. Hire A Competent Legal Advisor

It’s worth investing in good legal counsel who specializes in business law. They can help you navigate complex legal landscapes, ensure compliance, and advise on potential legal risks. For instance, they can guide you on the legal nuances of protecting your intellectual property or structuring employee contracts to comply with employment law.

2. Create Robust Internal Policies And Procedures

Implementing clear, robust policies and procedures can help ensure everyone in your startup understands the rules and adheres to them. For example, establishing a strict policy against any form of bribery and educating your team about it can prevent legal issues down the line.

3. Perform Regular Compliance Checks And Audits

Regular internal audits can help identify potential legal issues before they become serious problems. In the case of startups in regulated industries, these checks ensure that you’re always in line with the latest regulations.

4. Conduct Staff Training And Education

Regularly training your team about your company’s legal obligations and their role in maintaining compliance can prevent many legal issues. A well-educated team member is less likely to unknowingly infringe on someone else’s IP or commit other offenses that can lead to criminal charges.

Proactively taking these steps can go a long way in safeguarding your startup from potential criminal law pitfalls.

Final Thoughts

Navigating the legal landscape can be daunting, but it’s a critical part of the journey for every startup. The potential pitfalls of criminal law are not insurmountable obstacles, but rather signposts guiding you towards safer paths.

By taking the right steps, you can mitigate risks and focus on what really matters—building and growing your business. Remember, the spirit of entrepreneurship is not just about taking risks—it’s also about managing them.

Understanding the potential legal pitfalls and knowing how to avoid them is a sign of a savvy entrepreneur. After all, a successful startup is not just built on great ideas, but also on a solid legal foundation. So, here’s to building a startup that’s not just innovative, but also legally sound!

As a startup founder, wouldn’t it be awesome if you could predict the future a little bit more than you currently do? It turns out you can: By paying close attention to what the behemoths in your space are doing. Last year’s AWS Re:Invent set the direction for a lot of what Amazon is doing this year — including where it invests. Re:Invent 2023 is coming up soon.

Google I/O revealed that Google is investing heavily in computational photography, large language models and all things AI. As a startup, you can use these data points and draw a line into the future: Can you align yourself with the big-picture trends? Are you missing anything?

This week, at Apple’s worldwide developer conference WWDC, the company took the wraps off its AR/VR headset. Priced at $3,500 it won’t be a commercial success, but as a startup, you’d be very silly not to pay attention: It is a complete game-changer for startups.

Startup valuations are taking a pounding

After a frothy few years of don’t-call-it-a-bubble, it seems like the inevitable market correction is here. We’ve seen wave after wave of tech layoffs, and it seems like investors are starting to take a more realistic view of their investments, starting to mark them down.

Marking down an investment doesn’t necessarily mean drama; it refers to the common process of adjusting the value of an investment asset to reflect its current market value. In the case of VC, that often happens if the valuation turned out to be a bit on the optimistic side. Investors will typically mark down investments to avoid overstating their portfolio’s worth. In a nutshell, it’s best practice to acknowledge potential losses before they are realized. That’s what is happening now — and perhaps should have been happening for a while, as Rebecca argued late last year, when she noticed that a bunch of startups had quietly marked down their own valuations.

Jeremy Abelson and Jacob Sonnenberg, both at Irving Investors, argue that if you haven’t yet, you probably won’t grow into your 2023 investment valuation.

Just in the past few weeks week, we had another handful of examples of this:

Life is a highway

The EV space is exploding (sometimes literally) at the moment, and there seems to be a huge amount of stuff in motion in the world of transportation.

Mercedes just got permission from the state of California to start selling a car that can self-drive without having to hold the wheel or look at the road. No doubt this’ll set Elon Musk’s little temperature gauge to “furious” as the company’s cars do attract a federal tax break but come up short on the self-driving front in its native California.

Price is often brought up as a major hurdle for EVs, but Volvo snuck out a small SUV that can cruise along for 275 miles and has a sub-$35,000 price tag. That still isn’t pocket change, but it’s a lot cheaper than a lot of the EVs on the road. Meanwhile, Fiat showed off a city vehicle it’s working on that made both Harri and myself squee with delight.

Safety is another theme across TechCrunch’s transportation coverage: Smarter cars should, in theory, mean safer roads. In practice, Waymo had to explain why one of its autonomous Jaguars ran down a dog in San Francisco last month, and Transportation’s National Highway Traffic Safety Administration (NHTSA) recently proposed a rule that means all new cars and trucks would need to have emergency systems that “would have to be capable of stopping and avoiding contact with a vehicle at speeds of up to 62 miles per hour.”

Remember what we said about legislation driving innovation and opportunities for startup? That proposed NHTSA rule falls into that category. Thought experiment: Could your company tap into that shift somehow?

Image Credits: Bryce Durbin/TechCrunch

Apple sets the pace

While Apple isn’t really a startup, it is the world’s first $3 trillion market cap company, so in a week where our servers have been melting from all of the exciting news that came out of the WWDC keynote, I wanted to highlight some of the things that are most interesting to startups and startup founders.

One thing worth paying attention to is the Apple Design Awards, which often foreshadow large trends in design and user experience best practices — along with what the Cupertino-based software giant celebrates at the moment.

Another trend worth paying attention to from Apple is its focus on health and safety: It released a check-In feature to ensure people get home safe, a nudity filter to shield you from unsolicited real-life aubergine emoji and mental health mood tracking. All of that is specific to this WWDC, but it continues a trend: Fall detection, car crash detection, ECG to detect heart events, and lots of other health and safety indicators. It has made it easier to find and disable AirTags that might be used for stalking, and a Safety Check and lockdown mode, which takes your iPhone off the radar to get away from an abusive partner (more from our security team here).

As a startup, all of the above should give you pause for thought: There are big trends at play here that Apple clearly wants to continue to invest in. Apple has gone heavy into the privacy of your data, and leaning into security, safety, mental and physical health and more. Build something truly innovative in these spaces, and you have the world’s most valuable company validating that these are problems worth solving.

Throughout my various stints as a CIO, I’ve had a number of opportunities to assist sales teams as they worked to land or close significant deals. But even more frequently, I was brought in to help with discovery — essentially determining whether a prospective customer was a good fit for our product.

In my experience, the sales teams that are most successful have a complete and well-established discovery playbook that allows them to determine whether a potential customer is the right customer for the organization to have at its current stage.

For fledgling startups, this is especially critical. New technologies are inherently fluid, and they require customers willing to make a long-term bet. Startups also have to move quickly and efficiently. The discovery process can’t be long and protracted, so its foundations must be sound.

Whether you’re pursuing customer number five, 50 or 500, the process of determining if there’s a fit remains largely the same. Here are some tips for approaching discovery in the early days and as your organization scales.

Start with key questions to determine fit

Determining whether your solution or technology is right for a prospective customer is critical. But it’s just as important to know whether that customer is a good fit for you. Questions to ask yourself might include:

• Is your tech displacing an existing product? If so, there’s at least a logical fit from a solutions standpoint.
• When was the last time they purchased new technology? As a startup, you don’t want to spend months going back and forth before deployment. You want your product in use and generating feedback.
• Are they forward-looking? Some customers truly want to invest in cutting-edge technologies. Some are just going through the motions because it’s what their bosses expect. Others are just trying to learn or plan for the future. Figure this out early on.
• Do they care enough about getting it right to spend the time and money required? New technologies necessitate ongoing investment and two-way participation to improve and evolve over time. Get a sense of how effective they would be as collaborators.
• Have they been burned in the past? Some companies have a tremendous appetite for new technologies but have simply tried too many that haven’t worked. Find out what other technologies they’ve tested, what worked and what didn’t.
• Are they the type of customer you’d want other prospects speaking to as a reference? If not, they’re not the ideal early customer.

In these times of heightened tensions and global volatility, I believe startups can play a critical role in our defense, space and national security ecosystem by bringing the very latest innovation to public institutions, some of whom lag startlingly far behind.

Startups and active investors in the sector are uniquely positioned to support the defense efforts of the West and the mission to keep our societies safe. Let’s not mince our words: Right now, we are already locked in hybrid warfare with Russia, a nuclear-armed superpower, while tensions with another, China, simmer just below the surface. Despotic regimes threaten our values and way of life, and few would predict that is set to change anytime soon.

Yet despite all this, much of the technology and venture capital industry has shown little inclination to engage with the defense establishment. Prior to Russia’s invasion of Ukraine, over dinner with friends and co-workers, you risked triggering anguished disapproval (and far worse), by stating that you believe startups should work with the likes of the Pentagon, NATO and Western governments in general. Today you largely garner a very different response: murmurs of assent.

The very latest, most powerful technologies offer an edge to those who create and possess them – as we have seen in some of the Western firepower deployed in Ukraine, alongside Ukrainian battlefield innovation. The brutal truth is that in resting on our laurels, the West has allowed those who wish us harm to catch up, and in some instances, surpass our capabilities – and the tech industry is partially to blame.

For example, in 2018, thousands of Googlers signed a letter to their boss, Sundar Pichai, declaring that “Google should not be in the business of war.” Specifically, they were protesting their employer’s involvement in a U.S. Department of Defense initiative, Project Maven, which was using Google AI tools to analyze military drone footage. “Building this technology to assist the US Government in military surveillance – and potentially lethal outcomes – is not acceptable,” they wrote.

This uncompromising and combative stance ultimately led to the decision by Google’s management not to renew its lucrative Maven contract, and soon afterwards it also withdrew from contention for the Pentagon’s cloud computing contract known as the Joint Enterprise Defense Infrastructure cloud (JEDI) – reportedly worth $10B over ten years.

Google employees were far from alone in confronting their bosses over perceived collaboration with the Trump administration, which was widely reviled in progressive-leaning tech circles. Around the same time, Microsoft employees called on CEO Satya Nadella to stop working with Immigration and Customs Enforcement (ICE), Amazon workers protested their company’s development of surveillance tech, while Salesforce employees signed a petition calling for its leaders to “re-examine” the company’s contract with US Customs and Border Protection (CBP)”.

What a difference a few years make. Fast forward to 2022 and a combination of COVID-19 and its legacy, stressed and unstable global supply chains, Russia’s war with Ukraine, the first threat of food insecurity in the U.S. or in the West since WW2, and increased tensions with China have prompted a sharp rethink from much of the tech and venture capital industry on its responsibilities towards government.

Today, in marked contrast to most other verticals, investment in aerospace and defense startups is surging. Between January and October 2022, according to PitchBook, VCs invested $7B in 114 aerospace and defense tech deals, which placed the sector on a trajectory to surpass 2021’s record $7.6B total. In 2018, VCs invested just $1.4B in those industries. (A part of this, notes PitchBook, may be due to the fact defense and aerospace are rather more recession-proof than, say, consumer or enterprise products.)

I’m immensely proud that Techstars is one of the most active investors in this category. With almost about 100 investments overall in aerospace, defense and space tech, we are one of only three VCs to have participated in more than 20 space startup deals since 2000, while 25% of the firms selected for 2022 NASA Small Business Innovation Research contracts were Techstars-backed companies. One of our portfolio companies, Slingshot Aerospace recently closed a $40.8M Series A-2 funding round. Its clients include the U.S. Air Force, the U.S. Space Force, and NASA.

Yet there is much ground to make up. A blog post from defense tech company Anduril that was cited in The Information put it this way:

“Despite spending more money than ever on defense, our military technology stays the same. There is more AI in a Tesla than in any U.S. military vehicle; better computer vision in your Snapchat app than in any system the Department of Defense owns; and, until 2019, the United States’ nuclear arsenal operated off floppy disks.”

Recent relative calm convinced us, erroneously, that we were living in a stable, post-conflict world where threats to our way of life and maneuvers by bad actors could somehow be ignored or wished away. In this scenario, much of the Valley could persuade itself that it could refuse to build products that are designed to harm and kill (even when that is not their overt aim). Such stances now seem naive and idealistic at best; posturing at worst.

Back in 2018, the hashtag #TechWontBuildIt was used to protest Big Tech’s government contracts. Not only must we build, but there is little time to waste.

The facts are clear: Startups are finding funding increasingly difficult to secure, and even unicorns appear cornered, with many lacking both capital and a clear exit.

But equity rounds aren’t the only way for a company to raise money — alternative and other non-dilutive financing options are often overlooked. Taking on debt might be the right solution when you’re focused on growth and can see clear ROI from the capital you deploy.

Not all capital providers are equal, so seeking financing isn’t just about securing capital. It’s a matter of finding the right source of funding that matches both your business and your roadmap.

Here are four things you should consider:

Does this match my needs?

It’s easy to take for granted, but securing financing begins with a business plan. Don’t seek funding until you have a clear plan for how you’ll use it. For example, do you need capital to fund growth or for your day-to-day operations? The answer should influence not only the amount of capital you seek, but the type of funding partner you look for as well.

Start with a concrete plan and make sure it aligns with the structure of your financing:

• Match repayment terms to your expected use of the debt.
• Balance working capital needs with growth capital needs.

Your term of repayment must be long enough so you can deploy the capital and see the returns. If it’s not, you may end up making loan payments with the principal.

Say, for example, you secure funding to enter a new market. You plan to expand your sales team to support the move and develop the cash flow necessary to pay back the loan. The problem here is, the new hire will take months to ramp up.

If there’s not enough delta between when you start ramping up and when you begin repayments, you’ll be paying back the loan before your new salesperson can bring in revenue to allow you to see ROI on the amount you borrowed.

Another issue to keep in mind: If you’re financing operations instead of growth, working capital requirements may reduce the amount you can deploy.

Let’s say you finance your ad spending and plan to deploy $200,000 over the next four months. But payments on the MCA loan you secured to fund that spending will eat into your revenue, and the loan will be further limited by a minimum cash covenant of $100,000. The result? You secured $200,000 in financing but can only deploy half of it.

With $100,000 of your financing kept in a cash account, only half the loan will be used to drive operations, which means you’re not likely to meet your growth target. What’s worse, as you’re only able to deploy half of the loan, your cost of capital is effectively double what you’d planned for.

Is this the right amount for me at this time?

The second consideration is balancing how much capital you need to act on your near-term goals against what you can reasonably expect to secure. If the funding amount you can get is not enough to move the needle, it might not be worth the effort required.

Ah, email. Why did you send my friend’s birthday party invite to my spam folder? Why do you make it so easy to archive an email when I don’t even know what that means? Why are you … blue now … Gmail?

Email is a necessary evil. So whenever I hear about startups looking to innovate on the decades-old communication tech, I’m instantly intrigued considering the huge number of potential areas of improvement. Plus, talk about a large TAM!

Startups have taken note. Boomerang launched its email productivity software in 2010, and since its 2014 launch, Superhuman has raised $108 million to help users get through their inbox faster. Trying to build a better email mousetrap isn’t exactly a novel concept, but it could be big business.

I recently received pitches from two new upstarts, both of which launched their email innovations in the last year, that really piqued my interest. Let’s meet them.

Startups looking to make it easier for people to rent apartments on a flexible, shorter-term basis are gaining momentum thanks in part to the rise of remote work. Last week, Dealbook reported that a flexible living startup, Flow, founded by WeWork co-founder Adam Neumann, has locked down $350 million from Andreessen Horowitz. Earlier today, TechCrunch reported that an online rental marketplace, Zumper, just raised $30 million in a Series D1 round of funding led by Kleiner Perkins to help it better serve people looking for short-term rental options.

Now, Landing, a startup that is making it possible for its customers to rent a fully furnished apartment on its platform for as short a period as one month, says it, too, has secured fresh funding: $75 million in equity funding and another $50 million in debt.

Delta-v Capital led the equity piece, joined by new and earlier investors, including Greycroft and Foundry. Landing has now raised $237 million in venture funding and $230 million in debt since its launch in 2019.

We told you a bit last week about Landing’s founder Bill Smith, a serial entrepreneur who we dubbed the “anti-Adam Neumann,” given that he’s decidedly understated, he’s conservative when it comes to raising venture funding, and his two past companies have only made investors money. Neumann, in comparison, is a forceful personality, and not everyone came out ahead, famously, on WeWork’s path to becoming a publicly traded company last year.

Smith’s company works like so: Using gobs of data on pricing and demand around the country, it zeroes in on multifamily buildings around the U.S. Through performance marketing and referrals, it then finds tenants for these apartments, itself signing one-year leases, then quickly moving in everything from furniture to utensils for the tenant. Landing has all of these furnishings made in Vietnam and shipped to warehouses in Austin, Phoenix and Alabama, where it is based.

Tenants, who sign on as Landing “members” for a $199 yearly fee, commit to renting from Landing for a minimum of six months, though they’re allowed to move freely to other Landing-operated apartments during that period, provided they give the company two weeks’ notice. Smith says that currently, on average, they stay in one spot six months.

Right now, Landing — which is not profitable — makes money by marking up what it pays in rent by upwards of 40%. Eventually, Smith told us last week, Landing intends to sell its software directly to the multifamily property owners. “Over time, we’ll partner with owners to bring this product to their building, and it really won’t be a ‘Landing’ lease product,” he said. “They’ll just join the Landing platform. They’ll operate using our technology and our standards. And, and it won’t be this model of, you know, Landing leases it and is committed to that lease.”

It sounds very much like what Flow is building, based on a “inside” story about Flow in the real estate outlet The Real Deal this week. According to the outlet’s sources, Flow is effectively a service that landlords employ to make their properties more attractive to people who want to bounce around yet also experience a branded, consistent experience.

As with Landing, shorter lease terms and furnished apartments will likely allow Flow to command higher rents, notes The Real Deal.

Unlike Landing, Flow will itself own at least some of the multifamily units into which its members move. Indeed, with his ample WeWork proceeds, Neumann has already snapped up more than 3,000 apartment units in Miami, Fort Lauderdale, Atlanta and Nashville, per Dealbook. It could give the outfit an additional advantage. As The Real Deal notes, Flow’s buildings will “also be able to tap into cheaper financing . . . because banks can lend to the properties at the same leverage point offered to apartment projects, or up to 80 percent. Those are more favorable terms than the roughly 55 percent typically offered to hotel developments, essentially creating a high-yield business with lower costs.”

Flow, Landing and Zumper aren’t alone in spying opportunity in flexible living. Last fall, Zeus Living, which is focused on giving people “flexible living” options, raised $55 million in a round led by SIG. Blueground, a pre-furnished apartment rental startup focused on short-term and long-term rental, meanwhile raised $180 million in equity and debt funding last September. Another tech-enabled platform, Placemakr, separately raised $90 million from investors back in March.

Another flexible-living company is Sentral, whose 3,000-plus properties are owned by Iconiq Capital, the San Francisco-based investment firm whose investors include Mark Zuckerberg and Reid Hoffman; Iconiq is also a major investor in Sentral, the WSJ reported last year.

Expect more players backed by more capital, despite the uneven performance of some companies in the space, including Sonder, a short-term rental startup that went public last year via a SPAC merger and that last month cut one-fifth of its staff as part of a restructuring designed to shave $85 million in annual expenses. (On the customer-review platform Trustpilot, Sonder receives 1.3 out of five stars, with complaints about everything from a lack of hot water in its branded units to blood-stained linens.)

While the short-term rental business is complicated given its many moving parts, more individuals are adopting a nomadic existence owing to the pandemic’s ripple effects, and VCs like nothing more than an industry in flux.

“Our view,” Placemakr’s CEO tells The Real Deal, is that the “more the merrier. The institutionalization of an asset class doesn’t happen by a single group.”

The reality is that start-ups often have little to no marketing income. They struggle to communicate what makes them different from their competitors to their target audience. However, you don’t necessarily need deep pockets to make an impact. With a little creativity and quick thinking, start-ups can adapt their marketing strategies and tell the world just how special they are.

Here are a few budget marketing tips to help your brand stand out.

Put your Brand on Their Desk

People love a freebie. Use this knowledge to your advantage and offer branded merchandise. It’s an opportunity for long-term brand recall and for you to present your merchandise time and again. Merchandise options can be bulk bought at lower per unit prices. Examples of popular choices include tote bags, ballpoint pens by IGO and water bottle.

Learn The Value of Word-of-Mouth Recommendations

Word-of-mouth recommendations are free and a great way of promoting your brand. Consumers are 92% more likely to trust recommendations from friends and family above other kinds of endorsement. This kind of marketing can be employed both face-to-face and through consistent social media pushes. Inside the business, ensure everyone in your start-up can recall immediately, and in layman’s terms what the business is, who it’s for and what it does; it makes this message easier to filter down through other channels for a clear marketing message.

Network, Network, Network

We all know the well-known phrase “sometimes it’s not what you know, it’s who you know” and it’s just as true in networking circles as it is personal ones. Look for networking opportunities for your start-up. If a specific industry-focused group doesn’t exist in your area, research start-up networking groups. You may find them a useful place to meet others and build a strategic list of contacts. If you don’t have a suitable group in your area, set up your own, and publicise it using your start-up social media pages. For the cost of a few bottles of wine, soft drinks and an evening after work, you could hugely boost the profile of your business.

Toot your Own Horn

Enter industry awards. They are usually free to enter and even if your start-up isn’t likely to win or make a shortlist, it’s a profile-raising opportunity. If you’re shortlisted, use this as a marketing tactic. If you don’t make the shortlist you’ve still drawn attention to your start-up with potentially high profile judges.

Speak Up

Volunteer to speak and/or present at industry or local events. It’s a way of you cementing your organisation’s reputation as a thought leader while promoting your start-up to anyone attending or streaming the event.

Stay Social

Social media marketing is a critical part of business strategy for most businesses, and remains an inexpensive advertising option. Most channels that offer paid-for advertising provide the ability for hyper-targeting and audience segmentation alongside trackable ROI. It means audiences can be built and developed swiftly without too much trial-and-error.

Ensure you use social media networks that are relevant to your target audience. It’s an opportunity to raise your brand profile, stay relevant with your audience and gather important customer intelligence.

Instead of investing heavily in marketing at the beginning, it’s important you set your budget and intended marketing outcome first, and then focus on producing quality content for your target market, consistently engage with your audience on social media and learn from any mistakes along your business journey.