Choosing a lawyer for your startup is a decision you should consider carefully. Your options may include solo practitioners, small regional firms, large multi-national firms and everything in between. You might even consider relying on online form generators and doing away with engaging a lawyer altogether. Any of these choices may be fine for simple incorporation paperwork, but as you grow, you want your legal team to be knowledgeable in the common and best practices for fast-growing companies.
You’ll need advice from your legal team on things like stock option plan strategies, term sheet negotiation, licensing and IP strategy, regulatory matters, international expansion and much more. If you plan to raise venture capital, investors will expect you to be represented by a reputable legal team. Here are a few considerations in selecting counsel:
Focus and experience of the lawyer and law firm
Choose a lawyer/firm that is experienced in working with startups in your industry and building those startups into successful companies.
Questions to ask:
- Does the lawyer/firm have a focus in your industry? (e.g., software, AR/VR, digital health, edtech, gaming, hardware, etc.)
- How many startup clients does he/she/the firm have?
- What did the lawyer/firm do for these clients? (i.e., incorporate them, help with fundraising, represent them in a financing, help with licensing, represent them in an IPO or M&A deal, etc.)
Law firm culture and value
If the lawyer is part of a large firm that focuses on startups, you may also have the ‘one-stop-shop’ benefit of specialty areas such as intellectual property (IP), licensing, employment, compensation and benefits, regulatory, international, litigation and more. In addition, a law firm’s culture (collaborative vs. an individual) may be important to you. In more collaborative/team cultures, your lawyer is better able to leverage the collective knowledge of the firm to offer more effective and efficient legal counsel, quicker responses and business-friendly answers. Be careful, however, about a large firm where startup representation is not a primary focus since most of their lawyers are likely to be unaccustomed to dealing with the problems – and cost constraints – that startups face.
Questions to ask:
- Why is representing startups important to the firm?
- How is the firm positioned to support my company through the full corporate lifecycle? At any point, will my company “outgrow” the law firm?
- If I hit a problem down the road, how do I get access to specialists at your firm who can help me? How will I know whom to contact?
- Culture is not an easy area for an outsider to assess, but ask the lawyer to describe the firm’s culture and how the culture benefits their clients (get specific examples)
Connections to capital
Don’t underestimate the ‘non-legal’ services that your lawyer and law firm can provide. In addition to representing startups, some Silicon Valley law firms also have a venture capital practice where they represent VCs in their fundraising and investment activity. A firm with a strong VC practice has relationships with investors that can be very helpful. They know which VC firms may be interested in investing in your company, what those investors care about and should be willing to introduce your company to appropriate investors when the time is right.
Your lawyer/firm should also be willing and able to assist with introductions to angel investors (if you are looking for a seed investment) and to strategic partners.
Questions to ask:
- Does the firm have a venture capital practice? If so, how many funds have they formed? Where are they located (local vs. national vs. international)?
- What are the firm’s relationships with angel and seed-stage investors?
- What is the firm’s relationship with corporate and strategic partners?
- If you have a list of investors that you are interested in approaching, share these with the lawyer. Does the lawyer/firm know the firms and specific partners in those firms? Can they recommend any others that might be appropriate for your company?
Early-stage startups are often cash constrained. Law firms and lawyers who work with startups are sensitive to this and may be willing to offer fee arrangements that lessen the short-term cash burden. These arrangements can take many forms, and the firms who work with startups should be conversant in options that are available to you at your stage of growth.
Questions to ask:
- What sorts of fee arrangements does the lawyer/firm offer when working with startup companies?
- What services does the lawyer/firm provide that are not charged to the client?
- What does the firm do to create efficiencies in the client relationships?
- What does the firm do to promote innovation in the legal industry?
A great legal advisor is important as you launch and grow your company. Choose a lawyer who is smart, accessible, interested in you and your company, easy to talk to, and is someone you can count on to be honest and forthright with you. You’ll be working with your lawyer during both exciting and occasionally difficult times – choose wisely!