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As an entrepreneur, when do I retain a lawyer and how do I find a good one? October 13, 2010

Posted by Jim Price in Business, Entrepreneurship.
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One of the most common missteps I see entrepreneurs make is to undervalue the contribution of attorneys.  Here’s the thing: entrepreneurs are natively cheap people who are always looking for ways to cut corners, save a dime and speed things up;  meanwhile,  they automatically assume lawyers are expensive, and that legal fees are something to be postponed and avoided.  Big mistake.    

It’s important to seek out an attorney when you’re ready to launch your startup business, but before you’ve legally formed the entity, distributed equity, or established complex contractual or legal relationships with others.  A good attorney can make sure you do those things correctly, and don’t make mistakes that will be expensive or painful to unwind later.

If you have already launched the business and set other legal details in place, it’s never too late to bring in an attorney and ask her to review the existing structure and contractual arrangements, and provide advice as to where things might be strengthened from a legal protection perspective. 

How to I find the right attorney?

When I launched my first business from scratch, I sought out coaching from veteran entrepreneurs.  One of the best nuggets of advice I received was from Steven Walske, the CEO who took PTC public and to several billion dollars in market cap.  Steve advised me to only retain service providers – such as law firms, accounting firms, ad agencies and the like – for whom my tiny startup would be their most important client; to seek out small, talented, hungry firms and avoid the big brand-names for whom my account would never amount to a hill of beans.

It’s not that an attorney from a big firm might not be a good fit.  But remember that you are retaining an individual attorney, not an entire law firm.  Beware of the fancy-reputation firm who may have a senior partner schmooze you – or just dazzle you on their website – noting that they helped these startups raise tens of millions, or guided those startups through successful liquidity events.  Understand that, once you’ve retained them, the partner almost always disappears, and you’ll be assigned an associate one to four years out of law school who’s got an unreasonably high billing rate, is working 80-hour weeks, and is under immense pressure from the firm to bill your account for 1/10th of an hour possible.

The attorney you retain should not only be focused in business law, but should be an individual with extensive practice experience with startups

In the ideal, she or he should have experience with startups in your particular industry – whether that be high fashion, consumer mobile apps, commodity import/export, online retail, specialty chemicals, B2B software, or alternative energy technology.

Personal references are very important, so ask people in your local startup community whom they would recommend and why.  When you contact attorneys to screen them by phone, ask them to name and describe other representative current and past startup company clients, and to describe the work they do for those clients.  I insist on meeting and interviewing an attorney face-to-face before retaining him or her; and I make clear that, as long as I’m not asking for legal advice during that, say, 20-30 minute interview, I don’t expect to be billed for the lawyer’s time.  The purpose of the meeting is to decide whether they and their firm are a good fit for our startup company.  If I’m conducting similar face-to-face interviews with more than one attorney or firm, I’m up-front with that information, and clear about the nature and timing of my company’s decision-making process regarding retaining an attorney.  During these exchanges, tell the lawyer your story; if she/he seems disinterested in listening to your story, that’s a clear red flag that this person would be poor fit for your startup business.

It’s helpful to have your attorney be located in the local geographic area, and that’s my strong preference.  But in this age of excellent communications technology, it’s reasonable to trade off remote location in order to get a lawyer who is deeply experienced with your startup domain.

[As with my previous post on entrepreneurs and lawyers, I want to acknowledge the contributions of Jim Schriemer, Partner at Conlin, McKenney and Philbrick, a first-rate, deeply-experienced startup business attorney with whom I’ve worked on a number of entrepreneurial situations.  He can be reached at www.cmplaw.com, or schriemer@cmplaw.com  734-761-9000]

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1. Tweets that mention As an entrepreneur, when do I retain a lawyer and how do I find a good one? « Starting Up with Jim Price -- Topsy.com - October 14, 2010

[…] This post was mentioned on Twitter by Colleen Gibney, Lisa Kurek. Lisa Kurek said: When should entrepreneurs secure legal counsel? Good advice from Jim Price at http://cot.ag/d5tMf8 […]

2. Jim Chiang - October 25, 2010

I think that if attorneys are incented in the same way as entrepreneurs, perhaps through equity sharing, as opposed to an hourly rate, it works out better for all involved.

Jim
http://www.neocontext.com
Blog at: http://blog.neocontext.com


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