Are you looking for a corporate lawyer to help with formation, debt & equity, financings? A commercial lawyer for contracts, terms of service, redlines? A litigator, for a dispute? Tax advice? Privacy counsel?
Many fall into the category of needing a generalist (or general counsel) who acts as a first line of resort for a little bit of all of these things.
It’s okay if you don’t have all the answers yet; if no one comes to mind, just ask around in the startup communities you’re a part of.
The legal principles that apply to many businesses that are closely held, sell services, or highly cash-flowing, tend to differ from those that apply to SaaS companies; that’s in part because of their capitalization model, but also the nature of their “product.”
Therefore, you could be a great transactional attorney for a project finance deal, but be less familiar with market parameters, nuanced lookouts, and industry idiosyncrasies. Therefore, it’s super powerful to look at how long an attorney has spent practicing with startups as one of your first assessments.
It’s likely that if they’ve worked with startups extensively, they know how SaaS works. But there are some things you can and questions you can ask to get comfortable with their expertise.
In your experience, what are the most intensely negotiated terms in a term sheet for a financing? How about in Cloud Service Agreements? What are the most common mistakes you see SaaS founders making? What kind of adjacent work do you *not* do?
If, for example, your contracts lawyer hasn’t worked with a lot of startups, they don’t know what typical investor lawyers will scrutinize. If your corporate lawyer doesn’t know what’s typical in a software company’s exit, they won’t know the ideal way to structure your company in the context of venture. Therefore, finding lawyers who work with an eye towards not just your own risk appetite but that of future investors, they may be the “stitch in time” that saves nine.
Big law firms with deep benches of experts definitely have a time and a place; that is, in all-in situations, highly complex fact patterns, and times when the name brand matters; like litigation. Often, using that incredible tool for *every task* will be impractical financially (and sometimes, early on, because your startup doesn’t get the attention it needs).
That’s why working with a fractional general counsel can be such an effective tool; the triage to handle all your day to day stuff–or even tell you how to DIY–combined with a network of the specialists at not just big law firms, but boutiques that have ex-big law backgrounds (the dream)!
Lots of big law firms will defer on collecting legal fees until you hit a certain cap or do a financing. That can be a great option, though usually ends up more expensive.
If they’ve given you rates for multiple folks; like a partner, associate, and paralegal, ask who you can expect to be doing which work, and whether that work then requires review.
Some law firms will offer fixed pricing for things like formation or financing rounds; if this is important to you, definitely inquire! Personally, we feel that tasks that are predictable in scope, should be predictable and time and cost. That means all the fixed-scope stuff your startup–and every startup–does all the time; like hiring, engaging consultants, issuing stock, sending a SAFE, or redlining an agreement. This is not just sensible as an economic matter, it’s also the right way to incentivize your attorney; they should get paid the best for being the most efficient, holding results equal.
This is not to say that every task should be fixed in price or turnaround time; for bespoke projects, unique fact patterns, or complex issues; in those cases, automation brings less opportunity, and you want your lawyer to spend the time it takes to do it according to your objectives. This is where we think hourly work makes more sense.
Few law firms offer a turnaround time guarantee or Service Level Agreement, but get aligned early on expectations for how long things like correspondence, document drafting, and redlines will typically take. Often you have to “choose two” between Good, Fast, and Cheap–and we don’t recommend compromising on “Good”!
First and foremost, you should ask your lawyer if they have any testimonials or references from existing clients. Most good lawyers will have folks delighted enough that they’d be happy to share more; that being said, understand that confidentiality around legal matters tends to be more sensitive, and your lawyer values their client’s time, so try to be respectful of boundaries.
Back door references are also great–maybe a mutual LinkedIn connection has something to say?
You likely don’t need to make an in-house counsel hire until at least Series B or C. Until then, work with, ideally, a fractional General Counsel and his or her team of adjacent specialists. You should have conversations with that GC at least before (1) IP being created for the company, unless you’re sure it’s being assigned properly; (2) changes in your valuation, like a term sheet, profitability, or acquisition of assets–this one is hard to predict; (3) you start working with customers; or (4) you raise money!
In an ideal world, you check in with a lawyer before you sign any contracts you’re not totally comfortable with.
Communication
Billing
Expertise
At the end of the day, chemistry matters a lot, and you can only find out if it exists by trying to work with a lawyer (especially one that doesn’t charge a retainer)! You can filter out a lot of leads by ensuring your expectations are aligned as far as communication, billing, and expertise; and from that point, try working together on a small project to see how it goes!
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