How to work with Lawyers at a Startup by Mark Suster

  • Source link: https://bothsidesofthetable.com/how-to-work-with-lawyers-at-a-startup-cf4f15feb8d3
  • TL;DR: In a startup environment, you want to get a lawyer as soon as possible; choose a lawyer that is local, the right size, and start-up oriented; manage your costs effectively; and keep in mind that your lawyers are your support staff, not your brain.
  • How helpful?: 5/5 
  • Topic Tags: lawyers, negotiations
  • Relevant questions addressed:
  • How to work with lawyers in a startup environment?
  • Summary bullet points
  • When to get a lawyer
    • The best time to start meeting and getting to know lawyers is long before you ever start your company
    • It can save you from having serious issues with intellectual property claims from old employees/contractors later down the road.
    • There is a complex legal jungle that you need to be able to navigate well
  • Too expensive?
    • “Most lawyers that work with startups are willing to work on a deferred payment schedule” if they think you’re legit and have a good chance of raising money later
    • Talk to several lawyers to make it competitive and get a fair deal
  • Additional value outside of legal documents
    • Good start-up lawyers are immersed in the startup scene
      • They can be great at helping VCs generate deal flow
      • They are important for introductions, as they often have their “ear to the street” since the best lawyers are helping the most promising startups register their company etc.
  • How to choose a lawyer
    • Local
      • You want to work with a local law firm because you can walk into their office, they will tap you into the funding source, invite you out to events to meet their other clients, and get to know them much better
    • Right sized
      • Don’t just go for the largest, most prestigious firm in town. They will probably be using most of their resources to help out their huge clients, and you will probably be assigned a newer lawyer that is trying to build their business book.
    • Startup focused
      • It doesn’t have to be a small firm, You can sometimes work with specialized startup divisions within larger firms
  • How to manage costs
    • Ask for the “fixed” budget to avoid getting exorbitant hourly fees
    • “I also am a very loyal person. I always tell the lawyers that I work with that if they’re fair on pricing and do great work I promise to make it up to them in intros for future work. I think most people would say I’ve held that bargain.”
    • Don’t ask your lawyers to do things you can do yourself
  • Traps to look out for
    • Don’t expect your lawyers to help you negotiate good deals. Often they will just tell you what the terms mean and sometimes tell you what is commercially normal
      • “You need to own your legal agreements. You need to know how liquidations preferences work. You need to know how ‘tag along’ rights could potentially screw you. You can’t just understand “redemption rights” in theory.”
    • Come up with a list of things that you think could go wrong or want to protect against, and ask your lawyer to help you come up with solutions.
  • “Lawyers are your support staff, not your brain”
  • Follow up links
  • https://venturehacks.com/bram-cohen-lawyers