Just released: How to raise venture capital in 2023

Download

Snapchat: Proof that Startups Need D&O Insurance

Carl Niedbala - Founder Shield
Carl Niedbala

COO & Co-Founder

 

One of the major products we provide for our clients is Directors and Officers Insurance.  Admittedly 90% of our D&O clients sought us out because their investors required them to get coverage.  Don’t be mistaken, though…startups need D&O insurance regardless of the investor situation.

Case in point: the Snapchat lawsuit.  Here’s a quick rundown of what’s going on:

Reggie Brown brought a lawsuit against Snapchat’s co-founders Evan Speigel and Bobby Murphy in June.  The complaint alleges that Brown, the former classmate of the co-founders, came up with the basic idea of timed / self-deleting messages and helped start the company.  Some of the original filings for the lawsuit include emails from Speigel where he claims to have created the app with two of his friends, indicating that Brown may be on to something here.  That bit of information came out in the latest filing on October 23rd.  Brown also joined Snapchat’s investors as defendants in that same filing.  With $60 million in previous funding and a prospective $200 million round looming,  Brown could walk away from the court room quite comfortably.

We’re sure that Snapchat’s investors required D&O coverage to be in place after the first round of funding.  They were clearly justified with that requirement.  The D&O policy would kick in to pay for this lawsuit and related costs that the company or its investors would otherwise have to bear.  But what if the complaint was filed before the first round was even closed?  It sets up for a scenario where both company assets and the co-founders’ personal assets are totally exposed and investors get cold feet due to the pending lawsuit.

 

Having a D&O policy in place right away prevents this situation and gives investors confidence to continue with their due diligence process.  You can learn more about why startups need D&O insurance here.

 

Questions? Comments? Concerns?

Reach out to us at 6468541058 or info@foundershield.com, or go right ahead and get a quote using the link below!

 

Related Articles

Fintech Insurance Trends for 2023
June 22 • Thought Leadership

Fintech Insurance Trends for 2023 [Updated for 2024]

The fintech industry is undergoing massive changes, creating new challenges and risks. As a result, fintech insurance trends are responding. Let’s review 2023 what to expect from this market in 2024.

sec cracks down on crypto
June 20 • Thought Leadership

SEC Cracks Down on Crypto — What the Binance and Coinbase Lawsuits Mean for Risk Management

As the SEC cracks down on crypto, suing Coinbase and Binance, our experts chime in about the greater risk management implications on the industry. What can we expect for crypto regulations in the future?

D&O insurance
April 25 • Directors & Officers

D&O Insurance Pricing Trends 2023

The D&O insurance market was hard-hit in 2021, but 2022 brought some relief that overflowed into 2023. Let’s talk about the trends unfolding and what we can expect in the future.

ftx_bankruptcy
November 14 • Thought Leadership

Crypto Crash: FTX Files for Bankruptcy — Here’s What We Know

FTX filed for bankruptcy. SBF is in hot water. Investors and stakeholders are seeing red. Ponzi is now a four-letter word. What’s next? Let’s review this crypto crash through our risk management lens.

crypto-market-news
November 4 • Thought Leadership

6 Lessons Learned From Recent Crypto Lawsuits — Market News to Know

The crypto market used to be hot news for its new innovations — but now the scams and lawsuits tend to make headlines. Let review some recent cases and talk about lessons we can learn from them.

D&O_insurance
October 13 • Thought Leadership

The Roundup — Alright, Alright, Alright: A Look at Cannabis and Executive Risk (Webinar)

Matt McKenna from Scale Underwriting provides takeaways from the PLUS 4-person panel, reviewing challenges that cannabis underwriters face.