How to Find the Best Lawyer for Your Startup
Early-stage startups seldom have the money for the top-tier law firms serving the unicorns of the world.
That doesn’t mean you need to stay stuck in the void between Big Law budgets and hoping that Google got it right.
There are plenty of great lawyers and law firms that are accessible to your early-stage company.
Here’s my approach to finding the right one (or ones) for you, including:
How much you should expect to spend on a startup lawyer
In which situations you really need one
How to make sure you find a startup lawyer who’s the best fit for your business at whatever stage it's in.
How much does a startup lawyer cost?
This is the first question that comes to mind for a lot of founders.
But if getting the most value for your legal spend is important, then I think a better first question to ask is:
“What price range of attorney can your startup reasonably afford?”
Then (which I’ll discuss in more detail below), can they do the
job and will they do it well for your company in particular.
In New York, average attorney’s fees can range anywhere from $1,000/hr+ for a partner at a big-name national law firm down to $350 (or even less) for a solo lawyer handing her or his own shingle. With this in mind, you have to face the facts about what price range of lawyer you can afford.
Serial entrepreneurs with a track record of success will likely be privy to big firm discounts that make their services more affordable at the outset. For everyone else, that Big Law firm partner is probably going to be out of reach.
The good news is that a city like New York (or really any big city in the U.S.) is going to have a lot of great lawyers working by themselves or as part of a very small firm (think 2-20 lawyers) who can take you your business pretty far. And it’s not unreasonable to expect and to receive great legal advice even without hundreds of lawyers on the team—the big firms generally make their margins on big deals where sizable teams of lawyers have to meet deadlines and where money is less of an object. These are great professionals, but not necessarily what you need to pay for when you are looking for a new stock option plan or to do a Series Seed round.
So, in short, your startup may be best served by one lawyer or a small team where you are high on their priority list and their fees are pretty reasonable.
If and when you need a specialist…
Along with all the challenges that come with any startup, some businesses may be in an especially complicated, super regulated, or rapidly evolving industry–e.g. commercial banking, pharmaceuticals, cryptocurrency. There are lots of great lawyers to assist you in these areas; they might even be lawyers who do just that kind of work. But often they charge a premium for doing so.
Even if you decide you need to engage a “higher-priced” specialist, you can still be smart about legal spend: engage that specialist to do what she/he is great at handling, even at the higher price point. Then maximize the rest of your budget by going to that excellent startup “generalist” who will be able to keep your company on track through everything else.
Still, there is a limit to how much benefit you get from adding more cooks to the kitchen–using multiple separate law firms can lead to inevitable coordination and work duplication issues. You’ll likely end up paying more than you need to and risk important things falling through the cracks.
If you do use multiple sets of counsel, you should set clear expectations about how you expect them to work together. Oftentimes the quickest way for a specialist lawyer to get the answers she needs is by talking directly with your general counsel, or vice versa. But the two might be hesitant to communicate for scrutiny over billable hours. Likewise, you should ensure that both sets of counsel have clear communication protocols so that a legal strategy employed by one set of counsel doesn’t interfere with that of another.
When do you need a lawyer and when can you do it yourself?
Many founders and co-founders opt for DIY legal solutions–it’s easy to find all sorts of legal agreements in five minutes or less on Google, so I totally get it.
But you don’t know what you don’t know. And when it comes to legal, that can cost you big in the long run.
A trusted lawyer should be willing to help you understand when you really need one, what you can do yourself, and the risks that might ensue if you do opt for a DIY solution.
Then, you can make an informed guess as to what you want and expect to spend on legal advice at each stage of your startup’s growth.
Legal costs in your first year of operation don’t have to be super high. Depending on what your business does, you should be able to find a very capable attorney to handle the essentials, like company formation, founders agreements, template NDA’s, and template consulting agreements, for less than $5,000.
As you look to increase your footprint, hire more employees, issue stock options, and bring on new investors, your legal needs—and your costs, will grow. But don’t make the budgeting mistake I often see, which is budgeting to years in business rather than where you’re at in your growth trajectory. The latter is what’s most important when anticipating changes to your legal spend over time.
A final word on what to budget for your startup’s legal needs—don’t rely on your peers to gauge your anticipated spend.
Two different companies, even if they are at the same age and are generating the same sort of revenue, might have completely different profiles for the legal work they need done. Legal needs that can increase your legal costs include:
Needing online terms of service agreements that aren’t boilerplate
B2B Master Services Agreements that will cover a significant part of what your business will do in a given year
Trademark and copyright needs
Working with large clients or vendors who likely want to use their own agreements (and as a result must be reviewed individually)
Having a large number of employees or team members
Operations that involve real estate
Doing business in an industry with complex compliance issues, like cannabis, crypto, or real estate
Negotiations with multiple investors and needing fundraising documentation to secure venture capital
Complicated agreements between multiple founders
Restricted stock purchase/share agreements
How to find a lawyer that’s the best fit for your startup
Aside from determining what price range you can afford, the next most important thing is finding a lawyer who is the right fit for your company at whatever particular stage you’re at.
Here are six questions to help you in making your decision.
1. Do they have experience with the startup essentials?
It goes without saying, but your startup lawyers should have demonstrated competency in all of the typical areas that are likely to touch your startup and emerging growth business. This includes formations, founders agreements, fundraising rounds, employment matters, tax law matters, intellectual property, data protection and privacy, online services and information technology, and stock options and other forms of equity compensation.
2. Do they demonstrate a passion for continuous learning?
By definition, startups are made up of really smart people doing smart and interesting things. Your lawyer should be a fast learner and in step with industry developments.
That said, don’t expect them to know everything there is to know about your industry and business from the start. But they should demonstrate the capacity to find the answers to your questions and legal problems, whether through research or consulting their internal experts or a network of outside consultants.
3. Their perspective should be complementary to yours.
Good fit is not about finding a lawyer who thinks exactly like you do. It’s about finding a lawyer who, like your rearview mirror, exposes risks and opportunities that aren’t obvious in your line of sight. But unlike a backseat driver, while informing you of your blind spots, they leave the ultimate business decisions in your capable hands.
4. Do you have a similar approach to risk?
Lawyers by default are obligated to be cautious. But lawyers still fall within a wide spectrum in their approach to risk.
Do you want them to err on the side of caution, or just be as quick and efficient as possible? Or perhaps you want them to be cautious about only a few things but not the rest.
While your lawyer should ideally have a similar approach to risk as you, the most important thing here is to be clear about it. Lawyers can adapt. But the sooner we have a sense of your risk profile and tolerances, the more quickly we can begin to provide the best legal advice tailored to your situation.
5. What’s their work style?
This goes far beyond measuring your lawyer’s responsiveness to urgent issues (which of course, they should be). Here are a few things to think about in gauging the symmetry of your work style with potential counsel:
Do you prefer to communicate by text and email or do you prefer a good old-fashioned conversation by phone or Zoom?
Is it important for you to have flat fees and fee caps to tightly manage costs, or are you more interested in getting thorough and complete advice?
Do you want your lawyer to give you the quick answer or the one that will help you thoroughly understand the issues so can make your own judgment call the next time?
These matters might seem trivial, but nuances in your respective work styles can add up to big friction over time and a less than happy lawyer-client relationship.
6. Are you important to them?
If you want the best from your lawyer, you need to make sure you’re the type of client that they want to serve. Many firms cast a wide net but are only interested in accommodating a very narrow range of client types.
Does your law firm candidate express a sense of enthusiasm and excitement about your business’s legal and strategic challenges? Are they eager to brainstorm specific ways to make your deals look better?
A lack of enthusiasm and interest in your business and its specific legal challenges is a sure sign to look elsewhere.
Investing time in finding the right lawyer for your startup is worth it.
Taking the time to find the right legal team for your startup at whatever stage you're in is undoubtedly worth the effort.
Asking, and answering, the right questions will ensure you get the most value out of your investment in counsel and successfully navigate potential mishaps in an area that can make or break your company’s future success.
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Disclaimer: This article constitutes attorney advertising. Prior results do not guarantee a similar outcome. MGLS publishes this article for information purposes only. Nothing within is intended as legal advice.