Well-Capitalized Amateurs (Like Me) Are Lawsuit Magnets

When you’re a first-time founder handed a lot of money to build something that hasn’t been proven yet, you’re opening yourself up to tremendous exposure — especially to lawsuit threats.

Not because you’re a bad actor.

But because you’re, by default, extremely bad at every single aspect of your job — and it’s nearly impossible for anyone — investors, employees, or even courts — to confidently discern whether your mistakes are made in bad faith…or just made in earnest, as you tackle the steepest learning curve of your life under the most pressure you’ve ever been in your life.

It turns out:

And unless you’re already building your second unicorn, you don’t get the benefit of the doubt (and even if you are, that grace only lasts so long).

The world only forgives three things:

• Winning. (Which only the seasoned founder has proof of.)
  

• Good faith. (Which most founders don’t have a system to prove.)
  

• Improvement over time. (Which is incredibly hard to measure in the first five years of venture-backed founderhood…Murphy’s Law.)

That’s what makes this comparison so important:

In 2023, Daylight — a venture-backed LGBTQ+ neobank — shut down after allegations of wage discrimination, whistleblower retaliation, and fabricated projections (source).
Multiple employees sued. Major publications ran exposés. The founder eventually returned assets to investors and shut the company down.

By December 2023, SwayID (then Swaypay) faced over $4M in coordinated legal threats. On the surface, it looked like the company wouldn’t survive. The pressure was extreme. Investor confidence was wavering. And lawsuits felt inevitable.But instead of collapsing, the founder had been operating from day one with a shared system of record — a transparent, timestamped framework designed to document:

• Good faith

• Timestamps

• Public accountability

• And a pattern of improvement

When legal threats hit the founder’s inbox:

• The threats were neutralized.

• Lawsuits were dropped.

• The investors eventually calmed down — after reiterating they did not have concerns over the founder’s integrity or business conduct.

That’s structured truth.

It’s not about being perfect.
It’s about being a provable good faith steward of investor capital.

Daylight imploded under narrative scrutiny.
SwayID rebuilt under it.

Because the difference wasn’t who made what mistakes.
It was the context under which mistakes were made.

And in SwayID’s case, that context was evidenced by a consistent pattern of proactive, timestamped, documented weekly proof of good faith — shared with investors for over three years (without them asking for it) — primarily in the form of over 1,500 real-time play-by-play emails from the founder (me) to its lead investors.

That’s what saved the company.

And that’s why well-capitalized amateurs don’t just need capital.
They need a system for proving the difference between a mistake and a lie.

– Kaeya

PS: This is also why creators should never publish sponsored UGC or influencer posts without SwayID.