Perhaps I'm missing something (I've never lived in lawsuit happy US), but I've relied on basic human decency all my life and it has turned out fine for me.
I think there is a time for lawyers, but it's not when you are building your first prototype. You just can't afford to throw money at problems that don't exist yet.
but I've relied on basic human decency all my life and it has turned out fine for me.
This may work if you're starting out by yourself, but as soon as you involve another person you have to have contracts. Too many people I know have lost their best friends over relying on decency. When money is involved spell it out multiple times in a contract and have it reviewed. Removing any confusion early on will prevent huge headaches later.
The important thing there, even before you get to writing an actual contract, is to write out the agreement informally and sit down with your friend and go over everything to make sure you are talking about the same thing. Most of the problems I have seen have resulted from people assuming they understood each other's positions when they didn't. Then you can write a formal contract if you need one (the most dangerous potential risk is if one party dies and things have to go through probate, all the good will in the world won't help then).
"basic human decency" is so 20th century (at least here in U.S.).
...not that 99.9% of people cannot be relied on to be such - but that when you expose yourself (as the internet does) to the other 0.1% you are exposing yourself to thousands of less-than-decent folks.
Most people are decent human beings. But you have to watch out for the minority who are not - they can destroy your business.
I would say that one scenario where you should consult a lawyer at the begfinning of a startup is if the startup engages in a sticky legal area. You know, sharing files, privacy issues, etc. (I'm just thinking off the top of my head here, there's a lot more gray legal areas out there.) How terrible would it be if you found out that your business model is basically illegal conduct?
Be aware of the changing regulatory landscape of the internet - especially in the U.S.
(I don't want to be all doom and gloom, but it's more about figuring out if the startup is worth the risk.)
I think there is a time for lawyers, but it's not when you are building your first prototype. You just can't afford to throw money at problems that don't exist yet.