LegalVision recently spoke at Fishburners, one of Australia’s leading coworking spaces, about raising capital for startups. While we were there, we took the opportunity to share a few tips on getting the legal side of your house in order, without using too much of your startup’s precious working capital.
Entrepreneurs and Lawyers – the Original Odd Couple
In most people’s minds, the entrepreneur and the lawyer could not be more different. The entrepreneur thrives on taking risks, the lawyer is risk averse. The entrepreneur is creative, and the lawyer is conservative. The entrepreneur seeks opportunities for wealth creation, and the lawyer charges a fee for their services.
Entrepreneurs are reluctant to spend money on legal services at the early stages of an idea. They know better than most that from every 100 ideas, only one might work. As a startup itself, LegalVision also understands the importance of spending wisely.
In a rapidly-changing economy, entrepreneurs form an increasingly important client basis for law firms. But the reality is that entrepreneurs need lawyers as much as lawyers need them. When that one great idea comes along, you’ll want to make sure you have the right legal mechanisms to support it.
Five Tips for Spending Wisely on Lawyers
So, how can entrepreneurs get the most out of their limited dollars for legal services? These five tips will help you make wise decisions when spending on lawyers.
1. Understand the Issues That Are Relevant to Your Business
Naturally, you can’t expect to be an expert on the law. That’s why you talk to a lawyer. But it’s a great first step to making sure you understand the possible legal pressure points for your business. If you are a consumer-facing startup, you’ll need to know your obligations under the Australian Consumer Law. If you are an e-commerce business, it will be important to have solid legal documentation for your website. If intellectual property (IP) will drive your business, protecting those assets is critical to your success. Getting informed about the issues facing your business puts you in control when speaking to lawyers and helps you prioritise your legal projects.
2. Don’t Waste Money on Things You Don’t Need
When I was a law student, a friend running a creative studio asked me to attend a meeting with a new client who wanted to build an online platform. When the client arrived at the meeting, he was accompanied by a top IP lawyer. Even if you think you are sitting on the next Facebook, there are always better things to spend your money on in the early stages. So, don’t be frivolous with legal spend.
3. Invest In Things You Need
On the other hand, once you have identified a legal task that is important to your business, invest in doing it properly. For example, a new business driven by a valuable innovation will be worthless if you don’t get patent protection.
4. Act Early
Entrepreneurs will always be tempted to put the legal stuff off until later. But, as long as you have followed the two rules above and identified a key legal issue for your business, you should feel confident that it’s a good idea to get it done early. I previously acted for an online deals website that had grown from a startup to a relatively large business in a short space of time. Without much warning, the Australian Competition and Consumer Commission started looking into their relationships with consumers. But the business had grown far quicker than its legal systems could handle. So, they then had to spend a large amount of money cleaning things up.
5. Talk to a Lawyer That Understands Startups
Startups are different to other businesses. In the same way that an ASX 100 company wants a lawyer that understands their needs, startups should find a lawyer that knows their aims, strategies and resources. Luckily for you and your business, there is a growing number of lawyers dedicated to assisting startups – so pick one of them!
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At LegalVision, we have helped a large number of startups and as a startup ourselves, we understand what you expect from your lawyers. Our lawyers can draft your shareholders agreement, provide documents for your online business, assist with capital raising and plenty more.
Questions? Get in touch on 1300 544 755.