Choosing the right lawyer for your startup can be overwhelming, given the important role that relationship will play in the evolution of your company. However, finding the right fit at the earliest stages can save you lots of pain (and cost) down the road. Accordingly, I thought it would be helpful to share my observations on how to optimize the selection process and ensure a strong long-term relationship with your lawyer.
While all of the below considerations are obviously important, in my experience, individual founders put different weight on each of these factors. Considering which of these factors is the most important to you and indexing your selection process accordingly can help streamline the process. And consulting with several different attorneys can also help elucidate subtle differences in the more qualitative factors.
Experience and Expertise
In the context of working with a startup company, the concept of experience and expertise has two distinct layers. As a threshold matter, I think it is critical to ensure that the attorneys you are considering are bona fide startup lawyers – that is lawyers who exclusively (or nearly exclusively) work with emerging high growth companies and the venture capital investors in those companies, as opposed to mere small business lawyers. Many lawyers in the latter category may try to paint themselves as capable of working with startups, but those lawyers may not have the volume of deal flow to help you efficiently and strategically navigate the critical early phases. Relatedly, finding a lawyer with extensive experience advising clients at all stages of a startup company’s life-cycle (i.e. not just formation and seed financing, but also later-stage venture and growth financings, M&A exits and IPOs) can help ensure that your long-term legal solution is establishing valuable institutional knowledge early and save you the significant costs associated with switching counsel at later stages and/or on the eve of an important milestone (such as a financing or M&A event).
The second layer then is specific industry (or sector) expertise. In my experience, how much weight you should place on this second layer depends in large part upon the nature of your industry. For example, in life sciences, a lawyer with significant sector expertise may be better equipped to assist with regulatory issues, licensing and collaboration arrangements and critical intellectual property matters. However, even an experienced life sciences startup lawyer will bring in highly specialized colleagues to assist with each of the above areas. And the core corporate governance and financing work done by your startup lawyer doesn’t materially vary between a life sciences company and a SaaS company. Accordingly, I think it is possible to over-index this layer of expertise at the expense of the other qualitative factors.
Work and Communication Style
I find that clients often undervalue their lawyer’s alignment with their own work and communication styles, which I actually think may be the most critical factor in a fruitful long-term relationship with your lawyer. Obviously most great service providers will say that they are (and they generally will be) available at all times. But on a more granular level, if you like to resolve issues in real-time with a quick phone call, you probably want to know whether your attorney is someone who regularly picks up phone calls (rather than screening and responding via email). And if so, are they in the office and available early in the morning (if you are a morning person) or late in the evening (if you are a night owl). And conversely, if you prefer detailed emails outlining all of the issues related to a particular matter so that you can digest and respond at your own convenience, you’ll likely want a different lawyer than the one who prefers phone calls and quick pithy emails.
Another critical factor with respect to work style is your attorney’s existing workload and staffing expectations for your relationship (and particular deals). Obviously all lawyers will leverage associates, paralegals and assistants to keep costs in check, but understanding the extent of that delegation and meeting the associates that will be working on the matter alongside the partner you are considering can help you avoid the feeling of a “bait-and-switch” scenario where you hire a partner that you work well with but ultimately end up only talking to an associate with whom the relationship is not as smooth.
On these types of more subjective issues, one of the best ways to get realistic (and non sales-y) feedback is to talk with past and current clients regarding their experiences with a particular lawyer and firm. Obviously any client referral that an attorney provides will likely be glowing, but those referral sources may have a more objective, outsider’s perspective on the stylistic qualities that make the lawyer “great” in their mind.
Every good startup lawyer understands that efficiency is paramount for early stage companies, and most law firms should, as a baseline matter, offer a startup discount to their standard hourly rates for promising emerging growth companies. However, hourly rates are only a portion of the efficiency story – and, in my experience, can sometimes be inversely correlated with overall cost, as firms with lower rates may have less expertise and thus need to spend significantly more hours on a project.
Many firms also offer fee deferral arrangements in connection with the formation of and early organizational work for a new startup. While certainly useful in punting legal costs until a financing event provides a company with the cash to pay those costs, deferrals obviously don’t reduce overall legal spend and can, when done in exchange for a small equity stake, ultimately prove quite costly in a successful exit. In addition, in my experience, deferral arrangements can sometimes cause misaligned incentives and hinder the development, at the earliest and most critical stages of the relationship, of strong communication channels that promote long-term efficiency. Specifically, fee deferrals can cause all parties (clients and lawyers alike) to be less fee sensitive at the outset, which then reduces the pressure on the parties to develop the open and frequent lines of communication on costs that ultimately prove most valuable in keeping long-term costs in check.
Rather than kicking the can down the road, in my experience, it can be better for the client-lawyer relationship to force both parties to deal with legal fees at an early stage of their engagement through open and honest dialogue, ensuring that expectations and cost for each project are carefully managed. A great way to facilitate that dialogue is to establish an effective meeting cadence through non-billable check-ins (i.e. free monthly / quarterly calls, lunches or coffees) to discuss forward-looking issues with your lawyer, so that they can both be informed and prepared when those issues arise and also help you consider alternative approaches that achieve your business goals but keep legal costs in check.
As noted above, with all of these considerations to weigh, reflecting on your own style and needs before diving in to the process of selecting a lawyer can help you avoid common pitfalls. Because at the end of the day, the key to the relationship will be whether your lawyer provides client service in a way that truly “serves” your needs.