CORPORATE ATTORNEY

An entrepreneur should secure a good corporate attorney in the early stages of venture creation. Corporate law covers contracts and agreements, including licenses and options, confidentiality agreements, employment contracts, equity distributions, leases, etc. Experienced corporate attorneys are also qualified to assist with business plans, assembling management teams, intellectual property issues, product development strategies, and business models. Because corporate attorneys are involved in the process of corporate financing, most are well connected to venture capitalists and angel investors. Introducing entrepreneurs to investors is an unofficial service that most corporate attorneys will gladly provide, though they are not obligated to do so.

Those unfamiliar with the legal and business world often assume that lawyers merely serve a bureaucratic function, intentionally complicating matters to justify charging their clients for the extra work. In fact, good attorneys have more work than they can handle and do their best to be efficient. Attorneys generally try to keep complexity to a minimum.

Firms vary in size, location, expertise, and industry focus. Partners at larger firms are typically more expensive per hour than their counterparts at smaller firms. You may have heard that smaller firms give their clients more personal attention than larger firms, but this is not always the case. When comparing firms against each other, consider factors such as partner/intern ratio, client/partner ratio, and whether you are a client of the firm or just a client of whichever partner you first sign with. Some firms encourage partners to sign on more clients by paying them more for doing work for their own clients than for working with clients recruited by other partners. Partners at such firms are less likely to fill in for each other when one of them is momentarily over-committed. Other firms have policies that foster greater cooperation among partners; the signing partner serves as primary contact and handles most of the work while other partners are likely to help out when necessary.

Having a respected counsel gives your company credibility and facilitates not only fundraising but also recruiting of management and directors. These individuals have large networks and can open doors that others may not know exist. Not surprisingly, the best attorneys are extremely busy and their time is very expensive. They are selective about the companies they take on as clients, and passing their screening process may be a challenge. Some will only look at a startup that comes to them through a trusted source or has a credible reference. They may want to look at an executive summary or a full business plan and will meet with you before deciding to take you on. They are interested in establishing long-term relationships with clients and are not as eager to get involved with companies they feel are likely to fail in the short-term, even those able to pay up-front. Attorney may also decline to take on a client if they are already working with a competing company.

An estimated $10K - $25K in corporate legal fees will get most startups through their first financing. Almost all corporate law firms with experience working with startups will consider deferring collection of fees until the company has secured financing. Because the law firm bills the startup, not the entrepreneur, it risks not being paid if the startup fails to secure financing. Consequently, the law firm and the attorney take on startup clients cautiously and may ask the startup to pay an up-front retainer of a few thousand dollars as a sign of commitment. Law firms may also ask for a small equity stake to compensate them for the risks inherent in deferring fees. The equity percentage is rarely more than 1% of the company's shares, though a few of the most prominent corporate law firms may request 2%-5%. This kind of deal is likely to be done with common shares (see Equity section).

Smaller firms may lack a large firm's prestige but may have other strengths to offer. Partners at smaller firms may have the flexibility to work with startups that larger firms consider too risky and may be more willing to defer fees without a retainer. The partners may give each client more personal attention and do more of the actual legal work themselves rather than assign it to a less-experienced junior attorney or intern.

A large firm is not necessarily more expensive than a smaller firm if the larger firm works more efficiently. All legal work is costly and most attorneys will recommend that their cash-conscious clients do a considerably amount of background research before picking up the phone to ask them a question.