I almost lost my first company. Not to a competitor, not to a market crash, but to a single, stupid JPEG.
It was 2011. We were a tiny, scrappy team of three, fueled by ramen and the conviction that we were building the future. We were pushing code 20 hours a day, and our product was finally getting some traction. Then, the letter arrived. A cease and desist from a major stock photo company. Apparently, the cool-looking background image on our landing page wasn't so "free" after all. The demand? $15,000.
Fifteen grand might as well have been a million. We had about $5,000 in the bank. I remember the cold sweat, the panic, the feeling that everything we had worked for was about to go up in smoke because of a picture. We ended up negotiating it down to $7,500, but it was a brutal lesson. It also delayed our seed round by three months because the legal uncertainty spooked our lead investor.
I see founders making the same mistake all the time. They’re so focused on building the product, they cut corners on things that seem like "details." But here’s the thing: in the world of startups, intellectual property isn't a detail. It's the whole damn thing. Your code, your brand, your content—that’s the value you’re creating. And if you build that value on a foundation of stolen assets, you’re building a house of cards.
The Legal Quicksand: Copyright Isn't Just for Lawyers
Most people think of copyright as this complicated, arcane thing that only lawyers understand. It’s not. Here’s the simple version: if you didn’t create it, you don’t own it. And if you don’t own it, you can’t use it for your business. Period.
Think of it like this: you wouldn’t walk into a stranger’s house and start using their furniture, right? Of course not. Digital assets are no different. Just because you can right-click and save an image doesn’t mean you have the right to use it on your website. Just because a snippet of code is on GitHub doesn’t mean you can drop it into your commercial product.
Every creative work—a photo, a song, a block of code—is automatically copyrighted the moment it’s created. The creator has exclusive rights to decide how it’s used. To use it, you need a license. That license is a contract that spells out exactly what you can and can’t do with the work.
There are many different kinds of licenses. Some are very permissive, like the MIT license for open-source software, which basically says you can do whatever you want as long as you give credit. Others are very restrictive, like a "rights-managed" license for a photo, which might limit you to using the image for a specific purpose, in a specific region, for a limited time.
Real-World Horror Stories (That I've Personally Witnessed)
That $7,500 lesson was cheap. I’ve seen much worse. I was advising a promising AI startup a few years ago. They had built an incredible image recognition model. The problem? They had trained it on a massive dataset of images scraped from all over the internet. They never checked the licenses.
They were in the middle of a Series A due diligence when the issue came to light. The VC’s lawyers took one look at their data provenance and immediately red-flagged the deal. The round fell apart. The company spent the next six months and over $200,000 in legal fees trying to clean up the mess. They had to rebuild their entire dataset from scratch using properly licensed images. They survived, but they lost a year of runway and their momentum.
Another one: a B2B SaaS company I invested in used a popular open-source library in their front-end. They didn’t realize it had a "copyleft" license (GPL). This type of license requires that any software that uses it must also be made open-source. They were effectively forced to open-source their entire proprietary front-end codebase. It was a disaster for their competitive advantage.
"But I'm Just a Small Startup!"
This is the most dangerous myth. Founders think they’re too small to get caught. They think, "I’ll just use this for now, and I’ll fix it later when we have money."
Here’s why that’s a terrible idea:
- Automated Trawling: Companies like Getty Images don’t have people manually searching for infringing images. They have bots that crawl the web 24/7, using image recognition to find their assets. They will find you. It’s not a matter of if, but when.
- Acquisition Due Diligence: The moment you go to raise a serious round of funding or get acquired, you will face a legal due diligence process that is incredibly thorough. Your investors or acquirers will scrutinize every line of your code, every asset on your website. If they find unlicensed material, the deal is in jeopardy. I’ve seen deals get repriced by millions of dollars because of IP issues. I’ve seen deals die completely.
- It’s a Ticking Time Bomb: The longer you wait, the worse it gets. That one unlicensed image on your blog today could be on 100 pages a year from now. That one unlicensed code library could be deeply embedded in your core product. The cost and complexity of fixing the problem grow exponentially over time.
The Hidden Costs Are the Real Killers
Everyone focuses on the legal fees and settlement costs. Those are bad enough. But the real costs are the ones you don’t see on an invoice:
- Distraction: You should be spending your time building your product and talking to customers. Instead, you’re spending weeks or months dealing with lawyers, auditors, and angry emails. It’s a massive drain on your most valuable resource: your focus.
- Reputational Damage: Getting called out for stealing is not a good look. It can damage your brand and make it harder to attract customers, employees, and investors.
- Technical Debt: Having to rip out and replace a core component of your product because of a license issue is a nightmare. It’s a huge, unplanned engineering project that sets you back months.
My Playbook for Staying Clean
Okay, so I’ve scared you. Good. Now here’s the practical, no-nonsense guide to doing it right from day one.
For Images:
- Assume Everything Is Copyrighted: The default is that you can’t use it. Your job is to find proof that you can.
- Use Reputable Stock Photo Sites: Don’t just Google for images. Use paid sites like Getty Images, Adobe Stock, or Shutterstock. Yes, they cost money. It’s a cost of doing business. There are also great free sites like Unsplash and Pexels, but always double-check the license for each image. Sometimes they have restrictions on commercial use.
- Keep a Record: Create a simple spreadsheet. For every image you use, record where you got it, what the license is, and a link to the license terms. This will be your get-out-of-jail-free card during due diligence.
For Code:
- Audit Your Open-Source Dependencies: Use tools like FOSSA or Snyk to automatically scan your codebase and identify all your open-source libraries and their licenses. These tools are worth every penny.
- Have a Policy: Create a clear policy for your engineering team about what types of open-source licenses are acceptable. For most commercial products, you’ll want to stick to permissive licenses like MIT, Apache 2.0, and BSD. Be very, very careful with copyleft licenses like the GPL.
- When in Doubt, Ask a Lawyer: If you’re not sure about a license, don’t guess. Pay a lawyer for an hour of their time. It’s the best money you’ll ever spend.
Building a startup is hard enough. Don’t make it harder by taking unnecessary risks with your intellectual property. It’s the foundation of your company. Treat it that way. That lesson cost me $7,500 and a lot of sleepless nights. I hope it costs you a lot less.
Frequently Asked Questions
How has this view evolved over time?
My thinking on most topics has changed significantly over the years. Early in my career, I held many conventional views that experience proved wrong. I try to update my beliefs when the evidence changes.
How can I apply this thinking to my own situation?
Start by identifying the core principle behind the opinion, not the specific example. Then ask yourself: does this principle apply to my context? If yes, test it in a small, low-risk way before going all in.
What experience informs this perspective?
This perspective comes from over a decade of building companies in Silicon Valley, two successful exits (RemoteTeam to Gusto, MovieLaLa to Gfycat), and investing in 200+ startups including Anthropic, OpenAI, and Scale AI. I write about what I've lived.