Welcome to Degen Lawyer's Newsletter, where we bring you your weekly dose of legal insights, and regulatory updates in the emerging tech and law space. Our expert lawyers serve up curated analysis, hot takes, and expert commentary, sprinkled with a healthy dose of the wacky and meme-worthy content. Enjoy!

In this week’s edition:

News in short:

1. World Health Organization's take on AI for health 👀

   The WHO has released a new publication outlining key considerations for artificial intelligence (AI) in the health sector. WHO recognizes the potential of AI in enhancing health outcomes, such as improving medical diagnosis, treatments, self-care, and person-centered care, as well as supplementing healthcare professionals’ knowledge and skills. However, the rapid deployment of AI technologies without a full understanding of their performance could pose risks to end users. To address these challenges, the publications suggests six areas for AI regulation in health, including transparency, risk management, data quality, compliance with privacy and data protection regulations and collaboration between various stakeholders in healthcare, from regulators to hospitals to the patients. It’s time for the rise of the machines! Not as killers but as healers….

2. Digital Asset regulation bill approved by California governor 🧑‍⚖️

   California Governor Gavin Newson has approved a bill that will regulate digital asset firms in the state, starting in 2025. The bill requires digital asset firms to obtain a license, provide disclosures, and maintain financial records. It also gives the state financial regulator the authority to enforce rules and prosecute those who violate them. The bill is intended to protect consumers and investors form fraud and ensure that digital assets firms operate in a responsible manner. Will this pave the way for increased legitimization of digital assets such cryptocurrency?

3. Japan to curb AI overreliance and bias 🤖

   Japan which has been on the frontline in regulating AI, has come out with draft guidelines containing 10 rules for any company utilizing AI in Japan. The draft guidelines essentially propose that such companies must take steps to curb overreliance on AI. Additionally, these regulations require that AI developers avoid using biased data to train their applications. AI companies will have to maintain all records of their interactions with the technology and protect human rights, documenting how they collect personal information and prevent its use or sharing by their models without the owner’s explicit consent. Will the guidelines be a blueprint for a responsible future or a hurdle to innovation? Only time will tell.

Article of the week

How to split equity? A guide for start-up founders.

Equity Split is the number one reason for a start-up’s failure. A Harvard Business Review’s report found that the percentage of founders who express unhappiness with their equity split, increases 2.5 times as their startups mature. When dividing equity, what are the most common mistakes founders make and how can you avoid them? Let’s take a look.

Equity division is a tricky balancing act and delaying equity is fraught with pitfalls. Many founders go for equal splits, while other use complex formulas. Both methods have their downsides.

Here are some tips for structuring equity to prevent future co-founder conflicts:

1. Don't Overestimate Early Value

   • Startups tend to allocate founder equity quickly. More than 73% of founding teams allocate equity within the first month. This often leads to overvaluing initial contributions of the founders.

   • Early commitment might not last; roles and contributions evolve.

     50% of start up founders experience a change in their business model in the first year. And majority don’t anticipate how drastically their roles may change.

   • Keep an eye on the bigger picture! Predicting these changes is tough, but it's crucial to address them. But how do you mitigate these risks and future conflicts? What mechanisms could you build to make your equation dynamic and future proof!?

2. Include Provisions to Keep Everyone Accountable

   • Vesting provides for conditions under which founders receive their equity over a period of time or after meeting certain milestones.

   • Why? What if one of the founder leaves unexpectedly? It ensures that co-founders stay actively engaged and committed to the organization.

   • Grunt funds is a complex but effective method which assign value to various actions or contributions such as relationships, networks and ideas. It is based on the book ‘Slicing Pie’ by Mike Moyer.

3. Accountability Is Key

   • Mechanisms like vesting and open communication help ensure that co-founders remain committed and accountable.

   • They align your goals, roles, and equity with the evolving needs of the business.

4. Don't Limit Equity Splits to Fixed Percentages

   • Think of equity as an inverted tiered cake where you keep adding layers of value over time and carve them up based on contributions.

   • Regularly reassess and negotiate each layer to adapt to changing roles and contributions.

In conclusion, avoiding these conversations can lead to tensions and conflicts down the road. Equity splits are a crucial part of a successful startup journey - don't rush. Use dynamic methods, stay accountable, and communicate openly to set your startup up for success!

Bet You Didn’t Know!

Yes, you read that right. Stanford researchers developed an AI model, that can predict death with incredible accuracy, which could revolutionize end-of-life care for patients with terminal illnesses.

The AI model was trained on over two million patient records and could spot patterns associated with death in the patients health data that the doctor simply could not recognize. When used to predict the passing of patients who are in palliative care, the system could predict death with an astonishing 90% accuracy.

The purpose is to ensure that these AI model predictions help patients and families plan for the inevitable end of life. This can include making decisions about medical care, finances, and personal affairs. It can also help patients spend their final days in a way that is most comfortable and meaningful to them.

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