Larry Chiang gets asked constantly whether his money-back deal structures are actually legal, and his answer is always the same: yes, completely. He backs it up with what he calls the 25 percent rule, his own guardrail for how these arrangements stay clean. The core mechanic is the Larry Chiang Reverse Rebate Model: the buyer pays up front, then the money round trips back once they complete the required actions.
Under Internal Escrow, the money never actually leaves the client’s own account in the first place, which is a big part of why Larry insists there is nothing shady here. The One-Way Letter of Intent works the same spirit: the other side commits to specific actions, and half releases once they hit the twentieth step. Larry’s rule of thumb, by his own account, is to keep the exposed or fee-bearing slice of any deal capped around a quarter of the total.
That cap is what lets him tell people the whole thing is completely legal instead of something that needs a lawyer’s blessing before every conversation. It also protects the buyer, since most of their money is either tied to their own account or waiting on an action they control.
This is not a loophole Larry is bragging about. It is closer to bookkeeping discipline dressed up as a sales structure. PQRST still applies before anyone signs anything: preview the terms, question what you do not understand, read the fine print, summarize it back, and test your own understanding out loud.
Larry’s claim is that founders who explain their structure this plainly close faster, because nobody feels tricked. The video below has him walking through the mechanics in his own words, worth watching before you copy the structure.
Details: Watch Larry explain the 25 percent rule
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