4 ms·

The legal fees are kind of astounding. $10-50K/month in legal fees for a 30 person company? We spend maybe $2.5-5k/year on legal fees for our three person compa

The legal fees are kind of astounding. $10-50K/month in legal fees for a 30 person company? We spend maybe $2.5-5k/year on legal fees for our three person company after the initial $20k operating agreement/TOS/PP/copyright. The $10-50k/m figure seems a bit outrageous to me. Can someone with more experience than me explain that in more detail?

ph0rque 17y ago
I suspect it has to do with the financial nature of the startup.
- spencerfry 17y ago
  Yeah, you're probably right. I'm guessing the legal nature of having access to everyone's bank account is a tricky situation. But usually once you've outlined (legally) how you're going to approach something there isn't a monthly cost associated to that legal work.
  - dagw 17y ago
    Based on my limited and tangential experience with this sort of stuff in a different country those numbers seem quite reasonable. First of all finance related regulations change quite often and you really have someone who continuously monitors those changes to see what applies to you. Secondly every time you add a new feature or change anything in the way you do things that can quite easily lead to a new avalanche of paperwork.
  - Shooter 17y ago
    "But usually once you've outlined (legally) how you're going to approach something there isn't a monthly cost associated to that legal work." Oh how I wish that were true for everything :( Ph0rque is right, though. Unfortunately, if you're dealing with money (payment processing, financial services/PFMs, large-scale real estate, investment management, etc.) then you basically must have a law firm on retainer to deal with all of the changing legislation, certification guidelines, compliance programs, patents, general disputes, etc. etc. Stuff is constantly in flux and the lawyer work is almost never-ending. Especially right now while the US market is in the economic scramble, blame-game mode. This stuff isn't like writing a basic TOS and being done. I'd actually be very surprised that Mint's legal fees were that low, except for the fact that Yodlee handled all the backend work for them. I would absolutely love to get off that cheap...we pay a multiple of what is quoted here. For each of several financial service companies. I've heard several entrepreneurs say they intend to fill the vacuum created by Mint (by building another anti-Quicken PFM.) My firm has gotten pitches from half a dozen teams already, and we're not even actively seeking investments right now. The relatively small Mint exit seems to have chummed the waters and everyone is probably going to blow out a bunch of money and drown each other like usually happens in these little entrepreneurial frenzy pockets. I'm normally all for the little guy, but if people think this is an easy market to enter now without buckets of cash and industry experience, then they're idiots. For some (most?) industries, being an outsider gives you a new perspective because you don't know what can't be done. Financial industries, however, you need both the cash and the experience or else you may end up in jail.
  - pchristensen 17y ago
    Probably repeated compliance filings, expanding to new countries, partnering with new banks, etc plus they probably hit several milestones for legal needs as they grew.
simonk 17y ago
This is also for all the fundraising. You just start accounting a % of it as your legal costs.

ph0rque 17y ago

I suspect it has to do with the financial nature of the startup.

spencerfry 17y ago
Yeah, you're probably right. I'm guessing the legal nature of having access to everyone's bank account is a tricky situation. But usually once you've outlined (legally) how you're going to approach something there isn't a monthly cost associated to that legal work.
- dagw 17y ago
  Based on my limited and tangential experience with this sort of stuff in a different country those numbers seem quite reasonable. First of all finance related regulations change quite often and you really have someone who continuously monitors those changes to see what applies to you. Secondly every time you add a new feature or change anything in the way you do things that can quite easily lead to a new avalanche of paperwork.
- Shooter 17y ago
  "But usually once you've outlined (legally) how you're going to approach something there isn't a monthly cost associated to that legal work." Oh how I wish that were true for everything :( Ph0rque is right, though. Unfortunately, if you're dealing with money (payment processing, financial services/PFMs, large-scale real estate, investment management, etc.) then you basically must have a law firm on retainer to deal with all of the changing legislation, certification guidelines, compliance programs, patents, general disputes, etc. etc. Stuff is constantly in flux and the lawyer work is almost never-ending. Especially right now while the US market is in the economic scramble, blame-game mode. This stuff isn't like writing a basic TOS and being done. I'd actually be very surprised that Mint's legal fees were that low, except for the fact that Yodlee handled all the backend work for them. I would absolutely love to get off that cheap...we pay a multiple of what is quoted here. For each of several financial service companies. I've heard several entrepreneurs say they intend to fill the vacuum created by Mint (by building another anti-Quicken PFM.) My firm has gotten pitches from half a dozen teams already, and we're not even actively seeking investments right now. The relatively small Mint exit seems to have chummed the waters and everyone is probably going to blow out a bunch of money and drown each other like usually happens in these little entrepreneurial frenzy pockets. I'm normally all for the little guy, but if people think this is an easy market to enter now without buckets of cash and industry experience, then they're idiots. For some (most?) industries, being an outsider gives you a new perspective because you don't know what can't be done. Financial industries, however, you need both the cash and the experience or else you may end up in jail.
- pchristensen 17y ago
  Probably repeated compliance filings, expanding to new countries, partnering with new banks, etc plus they probably hit several milestones for legal needs as they grew.

simonk 17y ago

This is also for all the fundraising. You just start accounting a % of it as your legal costs.