While James Alonso has worked at big law firms for much of his career, he’s been working with startups the entire time. He’s also an engineer by training — and by practice. He recently founded a new startup-focused law firm (Magnolia) that incorporates document automation software (Docasaurus) that he built himself and also licenses to other law firms.
On startup law
“It just kind of is who I am. I’ve been a programmer and have worked on my own companies since before I was a lawyer, so I naturally gravitated towards representing this kind of company. Being part of the startup community and helping founders navigate high-stakes issues is just fun and I’m lucky that this is what I get to do.”
On his approach
“It’s all based on understanding the client’s perspective. They want really expert legal advice, but the way most firms provide and package that advice is just not what the clients need. It’s not just the outrageous fees, but even the way they communicate and overcomplicate things.
“James has helped me with several company formations, fundings, employee disputes, and dozens of other issues. He’s awesome.” Derek Andersen, Palo Alto, founder, Startup Grind
On common startup legal problems
“Maybe half of the advice I give early stage companies is about how to avoid mistakes that will slow down or threaten your next round of financing. Most mistakes are fixable, but you are just so much better off if we address them early on rather than waiting for your investor’s counsel to find them in the middle of a round. The really bad ones tend to have to do with stock options or anything with irreversible tax consequences like missing an 83(b) election.”
Below, you’ll find more founder reviews about James, the full interview, and more details about his pricing and fee structures.
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The Interview
Eric Eldon: What’s your background in law and the tech industry?
James Alonso: I’ve been a lawyer in Silicon Valley since graduating law school in 2009. My early years were at big firms, I worked for a big place called Latham & Watkins, but then my more formative years were at Gunderson Dettmer. And then just a year and a half ago I eventually went out on my own. There was a brief interlude in there where I started my own company, which I still run, called Docasaurus.com. It’s a document automation platform that I started working on just to streamline my own practice. Now there are a number of law firms around Silicon Valley paying to use it as well, but I also am my own biggest customer.
So that kind of ties in to who I am and what I do. My practice is very, very streamlined. I hear from people all the time about legal fees that are just outrageous, like paying $30,000 to do a first round of financing, or $5,000 to incorporate a company, et cetera.
I really do believe if it can be automated, it should be automated, and I automate everything that is able to be automated. So, for example, if I’m going to form a company, then I spend hardly any time actually drafting the documents. I spend my time talking to the client, and I spend my time revising the docs to put in special terms that the client requests to fit into their business. There’s no value in filling out the same form over and over again.
Eldon: Can you tell me any more about the companies you’ve worked with?
Alonso: Yeah, I work with about thirty-five startups and a handful of funds now, and it’s just a really carefully curated list. Some of them you may know, like Everlaw, Sendoso, Startup Grind, and Forethought Technologies who just won Techcrunch Disrupt. That’s one of the best things about running my own firm — I only take on companies that I really want to work with, and that makes it the whole practice a lot of fun.
Eldon: Why are you focused on startups? What’s interesting about it and what’s the biggest misconception about the work you do?
Alonso: It just kind of is who I am. I’ve been a programmer and have worked on my own companiesy since before I was a lawyer, so I naturally gravitated towards representing this kind of company. Being part of the startup community and helping founders navigate high-stakes issues is just fun and I’m lucky that this is what I get to do.
Eldon: What was a specific legal challenge you helped a client successfully navigate?
Alonso: The most common problem I help solve is streamlining deals. People come in with a term sheet and investor counsel is just ripping them apart on diligence, prolonging the process to try to earn an oversize fee. And a good early-stage attorney helps avoid that, making sure the formation is done cleanly so that the investor counsel’s eyes just kind of glaze over with how boring and normal your formation documents are. Then they can just kind of check the boxes and say yes, this is clean, this company has a lawyer who knows what he or she is doing. And that cuts weeks off the timeline for a financing and is really valuable. On more day-to-day work, we also help a lot with understanding risk in contracts and knowing what risks are actual problems for your company and what risks can be safely taken on if it helps get a deal done
The other thing that’s just kind of different about what we do, is we go to the mat hard for our clients when things happen. Particularly in financings – we understand it’s an absolutely the crucial event for our client and are just extremely accessible to them in those moments so that they are 100% well taken care of. I don’t know if I can give a specific example, but that sort of level of attention is the point of what we’re doing and is what builds great relationships over time.
Eldon: What’s the biggest mistake you see startup founders make, especially early on?
Alonso: One big mistake that some founders will make is over-complicating things. I’m often just helping people understand the way things are typically done, and just what are market-standard terms.
Another similar thing I help with is making sure that founders understand the leverage they have. Especially with the market dynamics right now, where VCs are kind of bending over backwards to give founders favorable terms. I sometimes have to help people understand, especially the earlier stages, like, well sure you think you maybe will go out and ask for X valuation, but really it should be X plus one or two million because that’s kind of where the market is. So help people just understand market terms and where they can push a little harder.
Eldon: What’s the biggest legal disaster you’ve seen a startup get into?
Alonso: They almost always have to do with stock options and not granting options properly. Screwing up an option grant by not having the right exercise price, and then having investor counsel come back and make you redo your grants at massively higher prices, or cancel grants. You can really screw up your early employee competition if you don’t handle that just right.
Eldon: Can you tell me more about your fee structure and how you operate? Since you’re using automation and you say you go faster I imagine you’re aiming to have fewer hours. But do you do flat fee, do you do time based, how does that work?
Alonso: We do flat fees for anything where a flat fee is possible – most often that’s formation and financing. Any time where that makes sense to the client, that’s what I prefer to do. Hourly rates make sense for things that are more variable, like you’ll charge hourly for doing sales contracts where you might have one in a month or you might have ten and there’s no flat fee that would cover all those scenarios. We do have some clients that pay us a monthly retainer, but that’s not the typical model that I’m really advertising or anything.
But for any fee structure, the fees are something around half to two thirds of what a bigger firm would charge. We have extremely low overhead and so we’re not interested in charging the extravagant rates that big firms charge. I wouldn’t feel comfortable sending a bill with outrageous numbers on it and I’m not trying to make a million dollars by forming a company. I’m definitely playing the long game with building relationships where somebody’s gonna be with us for the long life of their company and we’re gonna do many deals together.
Founder reviews
“James has an incredible sense of practicality because he’s founded a small legal tech startup himself. He also works as an advisor, making concrete recommendations rather than just laying out options and asking us to pick between them, which is really helpful because he usually has deeper knowledge of a specific legal issue than we do.” — Alex Moore, CEO of Boomerang, Mountain View CA.
“James is a business-minded attorney who works in a collaborative way, and is especially knowledgeable about the intricacies of startup legal issues. He has been an invaluable resource to the Everlaw team regarding everything from day-to-day commercial and deal support, funding rounds (most recently, Series B), to advising on incident response planning and other privacy, security and compliance matters.” – Lisa Hawke, VP Security & Compliance, Everlaw, Oakland, CA
“He’s just the best, not only a smart and a great lawyer he understands how business works. He’s fantastic with other lawyers (in sales contract situations for example). We were using him at one point to help negotiate contracts, then out of the blue he offered to rewrite our terms and conditions so that negotiations could go smoother. Boy did he deliver, it changed the velocity of our sales process dramatically. Also things like regulatory requirements and SLA’s was just a huge help, prompt and easy to work with.”— Justin Smith, Danville, CA, VP of Sales, SendBird
“James was the very first lawyer we worked with when founding our company. Since then, James has been our personal counsel for 5+ years. James led point in our negotiations for contracts worth more than $30m each. He’s the perfect mix of business sense and legal protection.” — David Blonski, Mountain View, CA, CFO
“Helping us close a fundraising round in record time and fixed cost!” — A startup founder in San Francisco
“Super efficient at getting formations, and financings done. Good attention to detail.” – Dr. Manu Kumar, Palo Alto, CA, Chief Firestarter at K9 Ventures
“James is a business driven lawyer, with practical advice that does not focus only on legal, but also on the business impact. James is independent and needs little direction to deliver great results.” — Gadi Shamia, San Francisco, Co-founder and CEO, Replicant.ai
“James has the unique ability to weigh what is legally required to manage risk and what is a concession that can be made for a business. He has turned multiple commercial agreements in the 11th hour with a keen focus on the issues that matter while not letting the distracting legal nits get in the way. He is articulate with opposing counsel and has an ability to get to appropriate give and take quickly.” — A startup COO in San Francisco
“Magnolia Law is by far the easiest and most well-versed law firm for new and very early-stage startups. Rather than through boilerplate information at you, they listen to your business needs and hone in on your specific needs. Having worked with many firms across my career, Magnolia Law is the one I have recommended the most to people who are at early stage companies or just starting out.” — Nathaniel Jewell, San Francisco, founder Dryft, former COO STRIVR, CFO/COO Super Evil Mega Corp
“James Alonso is a thoughtful business-oriented attorney, a rare occurrence in the Silicon Valley legal sphere. He is able to break down complex legal issues for us in accessible forms for rapidly making business decisions. James’ work on our contracts has been critical as we’ve encountered issues in contracting with large established companies engaged in the autonomous driving and automated driving spaces. He has helped us sign several deals that contain complex business models, issues of IP/ data sharing/ ownership, and privacy.” — Sid Misra, CEO, Perceptive Automata
“James is the perfect startup attorney and our go-to person for a range of issues. He is incredibly responsive, has a broad range of experience in startup matters, and has a progressive approach to billing that is much more aligned with startups than your standard firm (which we used to use).” – A startup CEO in San Francisco
“1. We’re startup newbies. James understands what we want to do and guides us based on the end goal, not just on the words we throw at him. 2. His rates are incredibly reasonable. 3. He accepts payments over the internet. This seems trivial, but it is such a godsend. No one else comes even close when it comes to this “feature” of James. 4. He knows how to work with Carta.” – Yuvraaj Kelkar, Palo Alto, CA, CEO and cofounder, Crave.io Inc