7 ms·

How to get your money’s worth from your startup lawyer

123 points by samaysharma 8y ago

m0zg 8y ago
Also: rather than immediately going to UpCounsel or LawTrades, try finding a local lawyer through e.g. Avvo. For me this resulted in a lower hourly bill rate. You can compare all three (though if you contacted your lawyer through UpCounsel or LT first, they won't work with you direct). It seems to me that lawyers simply bake the third party fees into their rate, so you might as well skip the middleman.
- lmeyerov 8y ago
  Yep, w nit: 1. Get a corporate lawyer w startup discount for formation , core docs, etc. Keep using for big stuff like fundraising. 2. Use carta or whatever for stock 3. Use upcounsel for anything non-core or boring like office space. You can get a per-topic specialist for each thing fast and cheap. 4. For most deals -- nda, sub-100k contract, etc, have papers etc ready so no legal review.
  - yowlingcat 8y ago
    Great overview. Have seen roughly this model used across multiple orgs with good success.
zekevermillion 8y ago
The article supports a common fallacy that clients just have to understand enough to police their service-providers. I would suggest that if you consider yourself to be a startup founder, you should know MORE THAN your lawyer about your particular transaction. If you do NOT know more than your lawyer, you should consume all available info until you do, or else bring in an advisor (such as a professional seed investor who is not a stakeholder in your company) to help you. Your lawyer can give you advice only, but you have to take charge of your own direction and decision-making. Your lawyer can and should also perform the service of organizing all the paperwork, which is surprisingly time-consuming yet not very edifying.
- tschwimmer 8y ago
  Never having done this I defer to your expertise but isn’t the highest leverage thing a founder can do is delegate specialized tasks? Fundraising and incorporatation are very important but there’s a reason lawyers went to law school. Seems like it’s a high bar to know more than your adviser, especially if it comes at the cost of focusing on building your product.
  - zekevermillion 8y ago
    Lawyers do not learn anything about the practice of startup law in law school, with a few exceptions where there are good clinical programs as at Brooklyn Law for example. Are you building a business around your product or just a product? If you're building a business, you need to understand the structure of your business intimately. Or someone does -- maybe not you, but your cofounder. Otherwise how are you going to evaluate the advice you get from your lawyer (and others)? A good lawyer will have the benefit of breadth -- representing many different clients in different situations. If the lawyer is wise, this will be conducive to good advice. It is only advice. On what basis do you decide to follow the advice?
    - tschwimmer 8y ago
      Yeah, this makes a lot of sense, especially about the part about lawyer providing advice but the founder having to make the decision. You've convinced me. Edit: turns out GP has a law degree himself. I'm further impressed.
      - zekevermillion 8y ago
        At least even if I'm wrong, it will never harm anyone to learn more about their business!
    - neom 8y ago
      I usually just tell my lawyer what I want to happen, he gives me the options on how I might do it with the risks and benefits of each, I ask a few advisors and pick one. Them my lawyer prepares the documents and explains to me pretty simply what I'm signing and why, and then I sign it. I signed about 160 documents last year (to be fair many of them grants) and I really couldn't imagine taking the time to know more than my lawyer about them all.
AndrewKemendo 8y ago
When I first started our company I met a "startup" lawyer at a meetup event and after a few meetings hired him. He was fine, but was expensive and didn't know much about high scale tech startups - mostly govt contract startups. So we fired him and hired Cooley. Cooley had great parties and networking events. When our lead investor came in and asked for multiple preferences (no go) I asked the assigned counsel what they thought and the response was: "Hey this is your first money so it doesn't really matter." At the time this was my first deal, but I had read a TON on this issue and it was clear that this was a hard predatory ask for a deal like ours. I asked some of my other friends and they suggested a different lawyer, whom I called and he said "Tell them to eat shit and call me when they call back with a new term sheet." Cooley was immediately fired and we hired the new guy who has tons of experience in our space and has been the absolute best. Moral of the story is, be informed enough so you can call bullshit, but it's really important to find counsel that 1. you can trust and 2. is experienced in your particular types of deals so that when you are out of your depth you know they will be the best counsel. At the end of the day you're CEO so the buck stops with you. Your lawyers are counsel not operations, so act accordingly.
- theNJR 8y ago
  Oh I was supposed to go to those Cooley parties to get my monies worth with them? I knew I was missing something.
- thisisit 8y ago
  > At the time this was my first deal, but I had read a TON on this issue and it was clear that this was a hard predatory ask for a deal like ours. I am curious if you can recommend some materials to read up on this?
  - AndrewKemendo 8y ago
    Honestly I couldn't because they were from 2009/2010 and I'd have no idea where to find them now. I think I was reading a lot of Mark Suster's stuff back then, so that's a starting point at least.
- 8y ago
gumby 8y ago
A few points: - The partner matters a lot more than the firm. For example I used Cooley, but really it was one attorney I wanted. When he moved to another firm my company went with him. - Of course it's the associates, not the partner who will do 99% of the work -- but that's all you need anyway. The partner however supervises. Ideally you never get a bill for the partner's time. - In almost any case you should hardly use your lawyers at all in the first year or two. You get standard NDAs (one way and/or mutual) and can fill them in yourself. If you get one from a partner, ask to use yours or read theirs and if it looks really close just use it (unless its some massive one from, say, Intel -- but really, are you going to be able to negotiate that?). Likewise just use standard job offers and confidentiality/assignment forms. No need to pay a lawyer for those once get up. But don't wing it with anything security or debt related! - Another reason not to care about the firm: a big firm will have lots of services but will you need them? For example for patent filing you may want a boutique firm that specializes in just your area. For HR lawsuits I'd use MoFo even if I don't use them for corporate law. - Make sure your firm understands startups (this expands on what the article said about "Hire lawyers who have experience with the particular task you are asking them to perform"). Various big firms have opened offices in the Valley in order to get that sweet deal flow. But unless they staff up with some local attorneys with local connections and experience you're not going to get a lawyer who can help you no matter how good they are. Even the startup scenes in NY and Boston are different from each other and from the Valley or SF. Not just network but how people do things. - an exception to the "firm doesn't matter" rule: Wilson -- not only have I only had bad lawyer experiences (mainly huge Billings) when I was involved with a company that used Wilson, but the only firm that ever asked me to do something illegal (they were representing our investor...but only for that transaction as our lawyer was also the investor's lawyer. For subsequent rounds the investor used someone else, as they were also disgusted with Wilson). There's a reason this onetime "star startup law firm" has been shrinking.
- ABCLAW 8y ago
  Select for good people, select against bad firms. I think you've articulated something key; You need a competent partner to make sure you're getting decent value, regardless of the firm you're at, but firm culture itself can make any practitioner play poorly. This just pulled together a few strings of thought I've had (I have my own internal industry 'bad firm' and 'bad practice group' list in my head), so thanks for this post.
skrebbel 8y ago
> Finally, make sure you understand in advance what costs and expenses the firm will pass on to you (e.g. photocopying, postage, couriers, travel) (emphasis mine) Is there something particular about the US legal system that forces these people to live in the stone age? I mean, photocopies?
- rayiner 8y ago
  This is funny. I’ve been putting off having my boss sign a contract because a vendor sent me a stupid e-signing link instead of a PDF I can print out, get his signature, and scan back. Paper is easy and everyone knows how to use it, which makes photocopying still a thing. Also, although most court stuff is electronic these days, courts still insist on papers courtesy copies (which have to be mailed or couriered over). Reading on screens sucks, and marking up documents on screens sucks double hard. When I first started practicing I was like “I’m a millenial, I’ll do everything in an iPad!” Now I print everything out, mark it up by hand, use colored tabs, etc. Even a big monitor is incredibly claustrophobic compared to piles of tabbed printed pages.
  - noelwelsh 8y ago
    I had a client that gave explicit instructions to sign, scan, and return. So I signed digitally (MacOS Preview makes this really easy), rotated the pages a little, and added a bit of noise. They were happy and I was happy.
- noelwelsh 8y ago
  My experience is that a lot of the US is like this. The banking system, for example, is terrible. Broadly speaking, it seems to me that in the US existing institutions don't really improve. Instead they are replaced by newcomers.
jacquesm 8y ago
Can't go wrong with Grellas. https://news.ycombinator.com/user?id=grellas https://news.ycombinator.com/user?id=grellas
relaunched 8y ago
There are many startup related firms that have deferred fees or will give a good amount of advice for free. When you are really small, that's makes sure you don't mess up things that affect equity. The whole board member / investors to startup lawyer relationship is something founders have to be cognizant of...I could write for days about how perverse incentives work against the startup / founders. However, there are tons of issues beyond just startup equity / corp governance / incorporating that can kill your company. Discrimination / ERISA (HR issues broadly), privacy, anti-bribery, IP, commercial contracts...the list goes on and on. Most young founders don't even know what they don't know and silicon valley culture tends to err on the side of, "just get the the exit...that's bigCo stuff you don't need to get lawyers involved, just do this." If you truly want to build a great company, hire a well rounded lawyer as an FTE much earlier than you think. They don't need to be a first 10 hire. However, if you are growing and want to build a high-quality company, you should think about hiring a well rounded lawyer somewhere between hire 25-50.
dctoedt 8y ago
I'm going to add this link (and a link to this HN discussion) to the "Startup Law 101" page that I've been maintaining [0] in lieu of providing copies of the slides I use in guest-lecturing on the subject. [0] https://www.oncontracts.com/startup-law/ https://www.oncontracts.com/startup-law/

123 points by samaysharma 8y ago

m0zg 8y ago

Also: rather than immediately going to UpCounsel or LawTrades, try finding a local lawyer through e.g. Avvo. For me this resulted in a lower hourly bill rate. You can compare all three (though if you contacted your lawyer through UpCounsel or LT first, they won't work with you direct). It seems to me that lawyers simply bake the third party fees into their rate, so you might as well skip the middleman.

lmeyerov 8y ago
Yep, w nit: 1. Get a corporate lawyer w startup discount for formation , core docs, etc. Keep using for big stuff like fundraising. 2. Use carta or whatever for stock 3. Use upcounsel for anything non-core or boring like office space. You can get a per-topic specialist for each thing fast and cheap. 4. For most deals -- nda, sub-100k contract, etc, have papers etc ready so no legal review.
- yowlingcat 8y ago
  Great overview. Have seen roughly this model used across multiple orgs with good success.

zekevermillion 8y ago

The article supports a common fallacy that clients just have to understand enough to police their service-providers. I would suggest that if you consider yourself to be a startup founder, you should know MORE THAN your lawyer about your particular transaction. If you do NOT know more than your lawyer, you should consume all available info until you do, or else bring in an advisor (such as a professional seed investor who is not a stakeholder in your company) to help you. Your lawyer can give you advice only, but you have to take charge of your own direction and decision-making. Your lawyer can and should also perform the service of organizing all the paperwork, which is surprisingly time-consuming yet not very edifying.

tschwimmer 8y ago
Never having done this I defer to your expertise but isn’t the highest leverage thing a founder can do is delegate specialized tasks? Fundraising and incorporatation are very important but there’s a reason lawyers went to law school. Seems like it’s a high bar to know more than your adviser, especially if it comes at the cost of focusing on building your product.
- zekevermillion 8y ago
  Lawyers do not learn anything about the practice of startup law in law school, with a few exceptions where there are good clinical programs as at Brooklyn Law for example. Are you building a business around your product or just a product? If you're building a business, you need to understand the structure of your business intimately. Or someone does -- maybe not you, but your cofounder. Otherwise how are you going to evaluate the advice you get from your lawyer (and others)? A good lawyer will have the benefit of breadth -- representing many different clients in different situations. If the lawyer is wise, this will be conducive to good advice. It is only advice. On what basis do you decide to follow the advice?
  - tschwimmer 8y ago
    Yeah, this makes a lot of sense, especially about the part about lawyer providing advice but the founder having to make the decision. You've convinced me. Edit: turns out GP has a law degree himself. I'm further impressed.
    - zekevermillion 8y ago
      At least even if I'm wrong, it will never harm anyone to learn more about their business!
  - neom 8y ago
    I usually just tell my lawyer what I want to happen, he gives me the options on how I might do it with the risks and benefits of each, I ask a few advisors and pick one. Them my lawyer prepares the documents and explains to me pretty simply what I'm signing and why, and then I sign it. I signed about 160 documents last year (to be fair many of them grants) and I really couldn't imagine taking the time to know more than my lawyer about them all.

AndrewKemendo 8y ago

When I first started our company I met a "startup" lawyer at a meetup event and after a few meetings hired him. He was fine, but was expensive and didn't know much about high scale tech startups - mostly govt contract startups. So we fired him and hired Cooley. Cooley had great parties and networking events. When our lead investor came in and asked for multiple preferences (no go) I asked the assigned counsel what they thought and the response was: "Hey this is your first money so it doesn't really matter." At the time this was my first deal, but I had read a TON on this issue and it was clear that this was a hard predatory ask for a deal like ours. I asked some of my other friends and they suggested a different lawyer, whom I called and he said "Tell them to eat shit and call me when they call back with a new term sheet." Cooley was immediately fired and we hired the new guy who has tons of experience in our space and has been the absolute best. Moral of the story is, be informed enough so you can call bullshit, but it's really important to find counsel that 1. you can trust and 2. is experienced in your particular types of deals so that when you are out of your depth you know they will be the best counsel. At the end of the day you're CEO so the buck stops with you. Your lawyers are counsel not operations, so act accordingly.

theNJR 8y ago
Oh I was supposed to go to those Cooley parties to get my monies worth with them? I knew I was missing something.
thisisit 8y ago
> At the time this was my first deal, but I had read a TON on this issue and it was clear that this was a hard predatory ask for a deal like ours. I am curious if you can recommend some materials to read up on this?
- AndrewKemendo 8y ago
  Honestly I couldn't because they were from 2009/2010 and I'd have no idea where to find them now. I think I was reading a lot of Mark Suster's stuff back then, so that's a starting point at least.
8y ago

gumby 8y ago

A few points: - The partner matters a lot more than the firm. For example I used Cooley, but really it was one attorney I wanted. When he moved to another firm my company went with him. - Of course it's the associates, not the partner who will do 99% of the work -- but that's all you need anyway. The partner however supervises. Ideally you never get a bill for the partner's time. - In almost any case you should hardly use your lawyers at all in the first year or two. You get standard NDAs (one way and/or mutual) and can fill them in yourself. If you get one from a partner, ask to use yours or read theirs and if it looks really close just use it (unless its some massive one from, say, Intel -- but really, are you going to be able to negotiate that?). Likewise just use standard job offers and confidentiality/assignment forms. No need to pay a lawyer for those once get up. But don't wing it with anything security or debt related! - Another reason not to care about the firm: a big firm will have lots of services but will you need them? For example for patent filing you may want a boutique firm that specializes in just your area. For HR lawsuits I'd use MoFo even if I don't use them for corporate law. - Make sure your firm understands startups (this expands on what the article said about "Hire lawyers who have experience with the particular task you are asking them to perform"). Various big firms have opened offices in the Valley in order to get that sweet deal flow. But unless they staff up with some local attorneys with local connections and experience you're not going to get a lawyer who can help you no matter how good they are. Even the startup scenes in NY and Boston are different from each other and from the Valley or SF. Not just network but how people do things. - an exception to the "firm doesn't matter" rule: Wilson -- not only have I only had bad lawyer experiences (mainly huge Billings) when I was involved with a company that used Wilson, but the only firm that ever asked me to do something illegal (they were representing our investor...but only for that transaction as our lawyer was also the investor's lawyer. For subsequent rounds the investor used someone else, as they were also disgusted with Wilson). There's a reason this onetime "star startup law firm" has been shrinking.

ABCLAW 8y ago
Select for good people, select against bad firms. I think you've articulated something key; You need a competent partner to make sure you're getting decent value, regardless of the firm you're at, but firm culture itself can make any practitioner play poorly. This just pulled together a few strings of thought I've had (I have my own internal industry 'bad firm' and 'bad practice group' list in my head), so thanks for this post.

skrebbel 8y ago

> Finally, make sure you understand in advance what costs and expenses the firm will pass on to you (e.g. photocopying, postage, couriers, travel) (emphasis mine) Is there something particular about the US legal system that forces these people to live in the stone age? I mean, photocopies?

rayiner 8y ago
This is funny. I’ve been putting off having my boss sign a contract because a vendor sent me a stupid e-signing link instead of a PDF I can print out, get his signature, and scan back. Paper is easy and everyone knows how to use it, which makes photocopying still a thing. Also, although most court stuff is electronic these days, courts still insist on papers courtesy copies (which have to be mailed or couriered over). Reading on screens sucks, and marking up documents on screens sucks double hard. When I first started practicing I was like “I’m a millenial, I’ll do everything in an iPad!” Now I print everything out, mark it up by hand, use colored tabs, etc. Even a big monitor is incredibly claustrophobic compared to piles of tabbed printed pages.
- noelwelsh 8y ago
  I had a client that gave explicit instructions to sign, scan, and return. So I signed digitally (MacOS Preview makes this really easy), rotated the pages a little, and added a bit of noise. They were happy and I was happy.
noelwelsh 8y ago
My experience is that a lot of the US is like this. The banking system, for example, is terrible. Broadly speaking, it seems to me that in the US existing institutions don't really improve. Instead they are replaced by newcomers.

jacquesm 8y ago

Can't go wrong with Grellas. https://news.ycombinator.com/user?id=grellas https://news.ycombinator.com/user?id=grellas

relaunched 8y ago

There are many startup related firms that have deferred fees or will give a good amount of advice for free. When you are really small, that's makes sure you don't mess up things that affect equity. The whole board member / investors to startup lawyer relationship is something founders have to be cognizant of...I could write for days about how perverse incentives work against the startup / founders. However, there are tons of issues beyond just startup equity / corp governance / incorporating that can kill your company. Discrimination / ERISA (HR issues broadly), privacy, anti-bribery, IP, commercial contracts...the list goes on and on. Most young founders don't even know what they don't know and silicon valley culture tends to err on the side of, "just get the the exit...that's bigCo stuff you don't need to get lawyers involved, just do this." If you truly want to build a great company, hire a well rounded lawyer as an FTE much earlier than you think. They don't need to be a first 10 hire. However, if you are growing and want to build a high-quality company, you should think about hiring a well rounded lawyer somewhere between hire 25-50.

dctoedt 8y ago

I'm going to add this link (and a link to this HN discussion) to the "Startup Law 101" page that I've been maintaining [0] in lieu of providing copies of the slides I use in guest-lecturing on the subject. [0] https://www.oncontracts.com/startup-law/ https://www.oncontracts.com/startup-law/