We needed legal help to set up our company. We had a choice. The cheap choice was to use boilerplate documents from a legal startup like LegalZoom or, for the human touch, a lawyer with a one-room office above a liquor store. The smart choice was to sign up with a serious firm.
If you are a good founder who can speak clearly, has a compelling startup idea, can get your shit together and can get any form of lukewarm introduction, then you can get a great lawyer. All the big law firms in San Francisco want startup business. They don’t want to miss out on being the go-to-firm for the next Google or Facebook. So I made a call. 30 minutes on the phone is all it took. I said–
“Here is our idea. This is the support we will need. This is how we see the company structure. We would like the basic package.”
Remember, this is standard procedure for these firms. They’ve incorporated thousands of startups so they have figured out what investors will accept and what they won’t. We signed a standard engagement letter. They put in a modifier that all their support was on deferred payment, to be paid when we raise our series A, and if we fail, their bill goes away; we’re not personally liable. Why is this a huge deal? It gives us access to top quality lawyers who will give us a lot of ‘free’ support at the beginning. There’s no reason to avoid that. Yes, it is committing to future expenses. Partner time at the big San Francisco firms is billed out at $800-$1200 per hour. At this rate, they had better provide significant value to your business and in my experience – they do.
These are not cheap conversations or phone calls. You need to know what questions you want to ask in advance. You want to avoid long in-person meetings and drawn out phone calls that are being billed out at the full rate. It’s a good idea to keep your emails to the point and really, really brief.
Consider the alternative. Online legal boilerplates or the attorneys above liquor store provide cheaper service but that service isn’t the Silicon Valley standard. This goes beyond filing basic incorporation documents. It saves time, money and lends credibility if you are working with the same by-laws, stock purchase agreements, NDAs, and employment agreements, specific to tech, that everyone has seen before.
You benefit greatly from having expertise on your team that has been through this process thousands of times. What corporate structure is right for you? Do you need to resolve complicated banking or compliance issues? Do you have patent questions? How do you structure your board? What will you do if a founder quits the company? Who will protect you from the less honest investor who’s pushing really hard and aggressively for you to agree to bad deal terms? You can push back a lot harder when you can make decisions based on data from thousands of other deals.
If you’ve established a relationship with one of these large firms and they are supporting you, they will get you to one of the top people in the country to answer your varied questions. Just by having that information, you’re going to avoid a lot of mistakes in planning for the future.
This is a relationship. You are hiring an important team member, so treat it seriously. The single most important thing about a relationship with an attorney is that they, as a person, genuinely want to support you as a person. If you go to a firm just for the name without that connection with your partner you’re not likely to get the best service or the best price. Shop around for that person who wants to be on your team, invested in your idea and will support you. If you want to succeed, you need a great lawyer who cares about your success.