On choosing a lawyer

A framework for choosing a lawyer for your startup

By popular demand (from founders), I’m sharing my personal framework for selecting a lawyer. In the spirit of building in public, please let me know if there are any improvement you’d recommend, and I’ll add amend this post accordingly! 

A few points to set the scene: (1) I am starting from first principles and assuming that both you and your co-founder(s) have no legal background, and (1) you do not have any pre-existing relationships with lawyers.

1. Pick a law firm

The first decision you need to make is which firm you will partner with.

I strongly urge founders to pick a law firm with extensive prior experience with high growth early stage startups (not just vaguely “in tech”), and with experience in both Delaware law (where you should be incorporated - see my prior post on this topic here) and in your local jurisdiction (whether a specific US state - like California - where you will be hiring people, or in an international geography - like the UK or Australia).

My personal recommendation is to limit yourself to the top 10 firms (you can find a ranking here). Much like choosing where to incorporate, your choice of law firm shouldn’t be a place where you take risks. It raises unnecessary questions from potential investors, and distracts from a conversation about your vision.

2. Pick a law partner

The most senior (and experienced) individuals at law firms are titled Partners. While the Partner assigned to you won’t be doing ALL of the work related to your company (some will be done by cheaper Associates and paralegals), the individuals Partner will own the relationship, and be your primary contact going forward.

Here, it is important that you pick an individual that you both get along with and that will generate the best outcomes for your startup.

Partners at law firms operate as (almost) mini franchises - they share the backend operations (like billing, payroll, office leasing) with the rest of the firm, but they largely make independent decisions on their team, their clients, and their preferred working styles. There is no point picking a top tier law firm if you do not like the specific Partner - you’ll find yourself dealing a lot more with the Partner than with their firm (apart from billing questions), so choose wisely!

Here are a few things to keep in mind when making the choice:

• Do they understand me easily? Lawyers charge pre unit of time, and that includes time spent listening to you and responding to you. If you find yourself needing to explain yourself over and over, you’re not only quickly going to get frustrated, you’re also going to quickly rack up a large legal bill. In the long run, this may also result in you dreading calling your lawyer, leading to unnecessary legal risk exposure and mistakes.

• Do I understand them? When you get a response from your lawyer, do you understand what they are saying, or is the response filled with technical jargon and unexplained new concepts? Does your lawyer make the effort to explain why they are making specific recommendations? Does their response generate tangible, comprehensible next steps? Your lawyer will often need specific information from you, and it’s their responsibility to help you understand both why they need it, and where you can find it.

• Do I like them? Your lawyer is the single person with whom you will spend the most time working on your startup idea (outside of your co-founders and early employees). Make sure it is someone who shares your vision, who is excited to work with you, whom you enjoy spending time with, and who leaves you energized to progress on your idea.

• Do they like me? While your lawyer should obviously know more about the law than you do, they do not know more about your company, your team, or your product. Your interactions should leave you feeling energized to work together to resolve issues, not belittled or dismissed.

• Will I follow their advice? This one is a tough one to get right, especially in conjunction with the above point. Lawyers often have to disburse tough love. When your lawyer tells you a course of action is legally risky, it’s important that you seriously consider their advice before you decide how to proceed. A lawyer whose advice you ignore is just a very expensive podcast.

All of these points, are, obviously, on top of any personal recommendations you get from other founders you know and admire, any accelerators that you are part of, and any current investors you have. Please always take personal recommendations, if you’re fortunate enough to get access to them, as a first step.

3. Decide when to hire a lawyer

My strong recommendation is to bring a lawyer onboard earlier rather than later. 

Getting a lawyer onboard early means their understanding of your startup develops as the complexity of your company grows. Getting a lawyer onboard early also means that they can spot issues before they emerge (and before they get expensive to repair!). 

And, perhaps most importantly, getting a lawyer early onboard gives you time to invest in the relationship so you have a strong partnership to lean on when your startup inevitably faces tough times. 

4. Pay for a lawyer

Many startups hold off on hiring legal counsel because a lawyer “sounds expensive”. However, there’s a great saying on this concern:

Nothing is more expensive than a cheap lawyer 

Focusing only on costs when deciding on your legal strategy could backfire later if VCs won’t invest in you - because of the way you have structured your startup, because someone else is stealing your intellectual property (and you can’t do anything about it because you didn’t file for a patent in time), or because you have an expensive lawsuit from a former employee who wasn’t treated correctly! 

Please note that for startups in the earliest stages, many law firms will let you defer payment until after you’ve raised a Series A. Law firms that have experience with start-ups can also provide additional deferred payment options in exchange for equity.  Ask your lawyer about “fee deferral” or “partial payment in equity” to start the conversation about how to make the cost relationship work for both sides. 

Also keep in mind that most top tier VCs can’t actually close an investment in your startup until the company is legally incorporated and has negotiated legal documentation for the round. Having a well respected law firm do this for you builds trust with investors, and may speed up the closing as the investors (and more importantly, the investors’ lawyers!) are more familiar with the form and legal approach of your documentation.

5. Advanced questions

(shoutout to Brian Coleman and Lena Petrovic of Perkins Coie for their expert assistance on these questions)

Are smaller or boutique law firms cheaper than large firms?

There are two main classes of law firms: general practice large firms or boutiques specialized in a particular area of law. 

A boutique law firm, specializing in employment law, for example, can serve you in that particular area. However, you would need additional law firms for privacy, incorporation, IP, and other issues. 

The legal fees of a boutique are likely to be lower than the legal fees of a big law firm. However, managing multiple law firms incurs significant overhead in the time spent on your end. 

A smaller but non-boutique legal firm can house multiple areas of legal coverage under one roof. However, given the smaller size, they may lack the deep expertise internally to appreciate and efficiently address the wide range of issues facing a startup. For example, to help you handle your patent portfolio, you may require attorneys with deeply technical backgrounds who can delve into and understand the technical details. Consequently, the resulting work product will be done slower (read: in more billable hours!) and not represent your company as well. 

Startups win by being nimble and customer focused. Taking time out of building a product or finding new customers to manage multiple law firms or worry about the breadth of expertise at a smaller firm may prove to be more expensive in the long run than the savings on your legal bills. 

The biggest benefit in your earliest stages, however, is the reassurance that engaging a well-established large law firm can give to VCs looking to invest in your company. Effectively, you’re borrowing the reputation of a large technology law firm when showing investors that your operations are sensible and legally sound.

What if I have esoteric legal needs (for example, I’m running a biotech startup, or my hardware business has a lot of IP needs)?

If you foresee having specific needs - raise them with your potential law firm at the beginning of your conversation! This might lead them to add a specific partner to the relationship or offer additional information to show their expertise in that area. Keep in mind that especially if you have esoteric legal needs, a large law firm is more likely to have an expert in your particular area.