You want to set up your new start up company. You need to incorporate, get funding, protect of your intellectual property, confirm your arrangements with your co-founders, early employees and consultants. You may need agreements with developers, partners, vendors, customers, or others.
How do you find the right attorney for you? Since I have been a consumer of legal services as well as a provider during my career, I have a checklist of questions or topics that I find useful:
• Your Future (your “exit” goal). What are your plans – personally and for your company? Do you plan to build and sell your company to a larger company? If it is possible, would you want to go public? Do you want to move on to something new in a couple of years? Or, do you plan to keep your company – and derive profits from it someday? Are you not sure, but want to keep all options open?
Why Goals Matter. Your attorney should consider your goals before he tells you what kind of entity you should form (LLC or corporation, subchapter S corporation, which state to incorporate in, etc.). Making good decisions early is more efficient. You save time, money and hassle trying to make adjustments to better fit you and your co-founders later on. Some of your early decisions cannot be changed – and workarounds to get your company to better fit your goals may be difficult. Your attorney should take time to get to know you and understand your business and your goals.
• Your Timing. Your attorney should consider “when” you want to achieve your goals. Projecting the timetable for your “success,” requires you to make assumptions about your business, available capital, development or ramp up costs and available people resources. When will you achieve your first customer sale and cash flow breakeven point? What about other key milestones? If you are typical, you likely have multiple possible “success” time-tables, with the timing of your “success” dependent on funding or other critical inputs.
• Your Immediate Needs. Do you need to meet people outside of your own networks? Are you primarily focused on introductions to investors? Are you targeting certain groups, like specific venture capital firms or angel investor groups? Will you be operating in secrecy (stealth mode) for awhile? Is your first priority development – and IP protection? How many employees will your start up have in the first few months? The first year? What are your thoughts about the sharing of ownership among your co-founders, employees, others?
What is the Best Fit for you? After you interview a few attorneys, how do you decide between them? When I outsource work to other firms for my clients – I look for these competencies:
• Listening – am I being heard? I look for someone who is fully present with me and get nervous with endless multi-tasking (attorneys checking their blackberry, responding to email, answering calls during time with me raises a red flag about efficient billing practices… How could that hour billed to one client be worth the high price asked, if the attorney was interrupted 15 times during that hour to respond to text messages, email, calls, you know what I mean)? Do I have a working rapport with her?
• Experience – can I be sure they have the experience needed to help me? If so, are the attorneys able to explain the issues and outcomes relating to my matter, so that their relevant experience is accessible to me, the client? Do I feel confident in their skills and experience? What do their other clients say about them?
• Responsiveness – do they have time for me? Is my company a priority for them? Who will I interact with in a firm, the partner, an associate, and/or a paralegal? Am I comfortable with the team or the senior attorneys who will be interacting with me? Often a firm is responsive by having very junior staff members “respond.” The challenge is reaching the senior advisor when you need her.
• Cost – will the firm work with me to control legal costs? Or am I cost-insensitive, but cash flow challenged? Some larger firms offer fee deferrals for periods of time, but the trade-off is that the fees for the services performed are probably higher than they could otherwise be because of this deferral – sometimes significantly higher. Does this matter to me? Do I want a fixed fee arrangement (called a “fee cap”) or a discount for the volume or type of work I am seeking? Am I willing to provide incentives, or premiums, for certain types of performance (e.g. finishing in a certain time-frame). Is my attorney sensitive to my financial situation?
• Resources – is the firm’s area of skill and expertise what I need? Will I need to assemble a team of other experts? Will I be inhibited from seeking the best expertise, if that “expertise” is found in different firms? How resourceful are the individuals I will be working with? Do I think that the networks of those in the firm are useful to me? Will the firm actually use their networks for me?
After considering these factors, I move to a final “gut” test, which I call the “Foxhole Test.” Is my selected attorney someone that I would want in a foxhole with me during tough times? How much do I trust him? Do I feel sure that he will watch out for me and provide me with the assistance I need, when I need it. Will she stick with me during difficult times or turn her attention to others? The more serious or “bet the company” my matter is – the more important this Foxhole Test.
The first several bullet points are things about my startup that I should tell my prospective lawyer… but how do you approach this in a meeting? Should I be looking for the lawyer to ask me these questions, to gauge how much interest they have in me? Or should I be guiding the conversation in that direction to make sure that the points are covered?
Thanks for this post. I really liked your “foxhole” and “listening” ideas and will be sure to pay attention to those qualities in my next meeting!
Hi Lee,
Your first meeting is like an interview, so yes, you should ask your attorney questions about their practice (to elicit answers about his relevant experience) and you should also be attuned to his behavior during your meeting (is he giving you full attention?). If your attorney doesn’t appear interested in your business – you may be talking with a lawyer who thinks of his role in more (legal) technical terms and less as the role of an advisor or counselor. You should come out of your meeting with your prospective attorney with a good understanding of her capabilities, resources and interest in your business – and she should have a good understanding of your current needs, goals and circumstances. And you should both have a sense of trust and confidence in each other.