All startups need lawyers. From capital raising to drafting confidentiality agreements, startup lawyers wear many different hats. This is particularly true for early-stage startups, where companies are scaling quickly to break into the market. Often, they are looking to raise capital at the same time as bringing on board new employees. When looking for the right startup lawyer or startup solicitor for your startup, you need to pick a lawyer or law firm that will best serve your startup’s vision and goals. There are now a lot of lawyers and firms marketing themselves as startup-savvy. But do they really know what they are talking about? Startup companies hire new employees for “fit” – the same applies to lawyers.
When’s the Best Time to Find a Startup Lawyer?
When you finish with the drawing board (or prototype) and are ready to go-live, hiring a startup lawyer to assist with forming and structuring your company is invaluable. They can also mediate the division of company equity – essential in attracting employees and investors to startups. In startup land, equity is currency.
Most startups hire a lawyer when it is too late, for example, when the firm is facing litigation or trade mark infringement. It is best to engage a startup lawyer during the growth stage, who will assist you to implement best practices to maximise your ability to scale.
The first lawyer or law firm you find may not always be the best. The lawyer who hangs out at the incubator or accelerator may not have the best experience. An experienced startup lawyer and firm will save you costs and time in the long-term. Ask around for a referral to find a startup lawyer with experience in your industry. Your startup lawyer should be willing to learn about your business and your industry as they will be one of your closest advisors. A good startup lawyer will help you with your startup’s roadmap to growth, and not just be there when a litigious matter appears.
How Well Should a Startup Lawyer Know My Industry?
Your startup lawyer or law firm must understand your industry well. Whether you are in biotechnology or software, a good startup lawyer should understand the ecosystem your startup lives and breathes in. A contract lawyer or commercial lawyer or M&A lawyer won’t suffice, especially when you are trying to raise capital from investors who also know the industry well. At least four years of experience in a corporate environment, ideally in startups, will be a good starting point.
Quiz your potential lawyer. Test their knowledge of the industry and make sure they understand the external forces affecting your business. If you are running a tech startup, your startup lawyer should know more than just Software as a Service Agreements (SaaS). They need to know how to retain developers with vesting agreements, how to raise capital from VC deals and the plethora of issues surrounding intellectual property.
What Should You Look For in a Startup Firm?
If you plan to scale quickly and exit, solo lawyers may not be ideal. Solo lawyers often charge an hourly rate and can be easily maxed out while working on multiple clients. They won’t have time to work on drafting your agreement when they are also closing a Series C round of funding and lodging an international patent in the same week for other clients.
Ideally, a law firm with a number of lawyers specialising in startups is ideal. If you engage a large law firm, you will pay a premium for unnecessary overheads and bureaucracy. Pick a firm that isn’t too big, and focuses on startups. Each lawyer should specialise in their area.
What Questions Should I Ask a Potential Startup Lawyer?
Before you sign the dotted line, you should ask some important questions:
- How do you bill? Fixed-fee law firms are quickly becoming the norm. This provides certainty and peace of mind, ideal for startups keeping a close eye on the burn rate.
- Do you work with startups in my space? A law firm with experience in the industry and ecosystem is highly beneficial. They will be able to share knowledge and insight – invaluable advice for any startup.
- Who will be my lawyers? Research the names of your lawyers and find out what clients they’ve worked with. They may also be keynote speakers in the startup space and able to bring much more experience than a first-year graduate lawyer. Personality matters too!
- Do they work with early-stage or startups planning exit strategies? Startups at the early-stage have very different priorities to mature startups. From structuring a startup to planning an IPO, startup lawyers can also specialise in what startup stages.
Picking the right startup lawyer and law firm from the very start is an important decision for your team. Do your research, ask others for recommendations and don’t wait to be involved in a legal dispute before approach a law firm. Your startup lawyer will be there for the entirety of your startup and will be one of your closest advisors – choosing the right one from the start will be one of the most important decisions for your startup!