Verified Startup Lawyer: Stephane Levy

Stephane Levy got his start in the days of Silicon Alley almost two decades ago, and built up his practice with New York startups and beyond through all the ups and downs since then.

Today, as a partner at Cooley LLP, he works with a wide range of companies, from company formation, seed and later stage rounds, all the way through to M&A transactions and IPOs. He also teaches at Cornell University Law School as an adjunct professor, on legal matters affecting emerging companies and venture capital transactions.

“We met him in the very early days, and his help on all things relating to the company, investors, corporate decisions, fundraising, and just simple strategy has been spot on. He’s always someone I can rely on to give me honest feedback that will eventually play out to be true.” Sachin Kamdar, New York City, CEO, Parsely


On the New York startup scene

“I was probably one of a handful of tech lawyers in NY, at least of my vintage, working with startups and venture funds in the early and mid 2000s, so I kind of grew up doing that stuff in New York when most of the other corporate lawyers in the city were focused on more traditional M&A, private equity, capital markets, etc.”

When a client is having a rough time

“I’m not going to drop a company just because they are going through hard times or treat them any different. It’s a mixed bag out there, and at the end of the day you’ll have some really successful companies and some that are having a tougher time, but you have to take a long view. If a company is going through a really tough time — for example, they’re having trouble raising money — them not getting any attention from their lawyer will really compound some of the issues.”

What makes startup lawyers good

“The key is to try to bring your judgment to bare and say, “Listen, there’s going to be some risk. I’m not going to advocate you do everything on my punch list of ideal things you can be doing from a legal perspective, but if you have to focus on a few things to stay out of trouble for now, these would be them.” Not every lawyer is able to give that type of guidance or has, I guess, the experience or the judgment to be able to do that, but that’s something that entrepreneurs really value.”

Sample horror story

“Let’s say three founders take a third each and they don’t impose vesting. A year later, one of the founders leaves to go get a job somewhere and doesn’t want to give a portion of the equity back. Those are potentially really significant errors that could cost the company and the founders.  I just feel bad because the reality is we’ve automated a lot of our formation processes up front such that it really doesn’t cost much for founders to get state of the art documents in place from the get go.”

Below, you’ll find the rest of the founder reviews, the full interview, and more details like pricing and fee structures. This article is part of our ongoing series covering great lawyers and other experts who founders love to work with. More details here.

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The Interview

Eric Eldon: You’ve been a lawyer in New York for many years — since before the city had much of a tech startup scene. Tell me more about how you ended up working in this sector, as opposed to say, banking or media or the other big local industries?

Stephane Levy: I grew up in Canada and went to law school there, and came to New York to have an experience working at a big law firm.  This was in the summer of 2000.

But I’ve always been interested in technology, from having my first computer at a really young age in the mid 80s, an Apple IIc, to a non-graphic interfaced PC where I had to type out commands in DOS, to assembling my own computers when I was in my early teens.

New York didn’t necessarily have a ton of tech activity, but “Silicon Alley” was alive and well at the time, and I started working with a partner who was representing startups. The idea of working with young and ambitious entrepreneurs as clients, who wore jeans and T-shirts to work, appealed to me a lot more than working with the Fortune 500 to be quite honest.

I’d done an undergrad in finance and entrepreneurship, so I spent a big chunk of my summer helping a company put together a private placement memorandum.  We don’t see those very often anymore, but in 2000 in New York they were still fairly common for companies that wanted to fundraise. So I spent a chunk of my summer basically writing a business plan with a client when my colleagues were working on what I considered to be boring legal memos.

That’s when I fell in love with the idea of potentially working with entrepreneurs. It was the best of both worlds for me. The idea that I could be working at a big law firm but also advise companies not only on legal stuff but also on business matters, and growing into that proverbial “trusted advisor”, was really appealing to me.

Then obviously 2000/2001 happened, and New York kind of faded as a tech hub — short of few local startups and funds that were still fairly active in New York, including Union Square Ventures, First Round Capital, RRE Ventures and Rho Ventures.

But as an associate in ’04, ’05, ’06, ’07, there really weren’t that many corporate lawyers working full time in venture and tech in New York City. I was probably one of a handful of tech lawyers, at least of my vintage, working with startups and venture funds, so I kind of grew up doing that stuff in New York when most of the other corporate lawyers in New York City were focused on more traditional M&A, private equity, capital markets, etc.

When 2008/2009 came along, which is when New York really started to take off and get on the map, I was a senior associate, young and ambitious enough to really hit the pavement and start building relationships with entrepreneurs or deepening relationships with existing clients, and old enough to also know what I was doing at that point.

I started working with a few startups, partnered with a few accelerator programs, and started building my practice in that way. A lot of those companies are actually still my clients.

One example is SeatGeek, which came out of the DreamIt program in 2009 I believe. I did their first angel round, which, at the time, was lawyered as if it was a $20 million Series B — but that’s just kind of how things were at the time.  Fast forward a few years and multiple venture rounds, I travelled to Israel with the Jack Groetzinger, the CEO, and Brad Tacy, the CFO, last year to negotiate the acquisition of an Israeli software company, which was a pivotal moment for the company. This is just one example of a long-lasting and deep relationship that I’ve built with a client, which is ultimately the biggest reward for me as a startup lawyer.

So ultimately, this is what I do day in, day out. I don’t “dabble” in startup law. I pretty much only work within the tech sector, with a heavier weighting on the company side versus the venture side. I also teach venture capital at Cornell, where I’m an adjunct professor, and teach a class on startup and venture capital law to law and business grad students.

Eldon: I think I mentioned, but I actually know one of your clients very well, and got a strong recommendation about you from them, based on how you helped them through some bad times and eventually an acquisition — even though the exit wasn’t that big in the scheme of things.

Levy: Yeah, I guess that’s been my approach at building my practice — doing good work and being true to the clients that I work with. I think most of the clients I work with will probably tell you that I genuinely care, because I do.

I’m not going to drop a company just because they are going through hard times or treat them any differently. It’s a mixed bag out there, and at the end of the day you’ll have some really successful companies and some that are having a tougher time, but you have to take a long view. If a company is going through a really tough time — for example, they’re having trouble raising money — them not getting any attention from their lawyer will really compound some of the issues.

This is where it’s a bit more art than science. As a startup lawyer, the whole trick here is you have to master formation and venture financings. But you also have to be A+ on a lot of the other stuff that comes up. You can’t loop in a specialist every time you get an employment or a tax-related question. It gets clunky and it gets expensive, so that’s what I think differentiates a lot of startup lawyers from your average transactional corporate lawyer — a lot of the startup lawyers out there that grow up representing numerous startup companies will be fairly well versed in a lot of these other related areas.

A good startup lawyer will be able to answer most of the questions that founders will have without needing to research the answer or rope in an expert. That means founders get answers in real time. Chances are you’re not even going to get billed for it because a lot of startup lawyers including myself won’t bill every conversation, especially when we’re at a big firm where we’re taking on nascent startups because we’re banking on them growing and so we’re not making a living on the early stage work.

The reality is we have more wiggle room to write time off or not bill for some of our time in the beginning. I think if I were at a smaller firm, I would face more pressure to monetize early stage clients because I would expect to lose them to bigger firms when they actually start to scale. That’s the dynamic that I think a lot of companies sometimes don’t appreciate — “Oh, I’ll just go to a smaller firm and get a lower billing rate,” but you’ll see that lawyers smaller firms may turn on the clock more often and may not be as flexible in writing time off. It’s not a knock against them, it’s just the reality that they need to maximize their economics with early stage companies as they will often lose these clients when they become Series B, C, D+ companies and start looking for a firm with a deeper bench to advise on more complex transactions. That said, I’ve got lots of friends at smaller firms that are great lawyers and do excellent work.  More often than not, the best fit will come down to the relationship the startup founder feels he or she can build with that particular lawyer. 

Eric Eldon: Speaking of decisions that you see startups make, what are the biggest mistakes that you see when founders come in, especially the early stage? What are the kind of mistakes that you’re constantly having to warn people against?

Stephane Levy: So I teach all over the city on this stuff, including in accelerator programs, etc…I’d say it’s a lot better than it used to be but it’s not quite there yet.  Common mistakes as you know are not filing an 83b election, divvying up equity and not subjecting it to vesting, not getting proper IP assignments upfront from contributors to the business.  Those could be very expensive and complex to fix.  Let’s say three founders take a third each and they don’t impose vesting. A year later, one of the founders leaves to go get a job somewhere and doesn’t want to give a portion of the equity back. That’s one example of a really significant problem that could arise without the proper advice.  I just feel bad because the reality is that we at Cooley have automated a lot of the formation processes up front such that it really doesn’t cost much for founders to get state of the art documents in place from the get go.  So some founders trying to save a few bucks up front (literally a few hundred dollars) could find themselves with really big headaches if they have any kind of traction.

The other examples are with LLCs…. They’re first-time founders. They ask a family friend who’s a lawyer or an accountant, and the advice they’ll often get is, “Oh, well, just set up an LLC. It’s super simple and super quick and cheap.” Again, they probably don’t do it right. They probably don’t issue units properly, and then we inherit them when they’re sitting on a term sheet, at which point we have to merge the company out of New York into Delaware, and deal with potential tax issues from it having signed a SAFE or convertible note as an LLC that the founder grabbed online.

It’s just so much unnecessary added complexity. The founder could have gone to Cooley Go, read a blog post, put in some information in a drop-down menu and generated a full suite of incorporation documents literally for free. We typically suggest the founder team up with a Cooley at the very beginning to have a quick call with a lawyer to add a human touch and help with the process but it’s otherwise that easy.  In this day and age where there’s so much information out there, it’s just really too bad for founders to be ignoring this access.  I’m bummed to hear about these founders that get misguided, but it is trending in the right direction.

In terms of my own approach on fees, we don’t have to get into too much detail, but I’ll typically defer some amount of fees, so that I can set a company up I decide to take on as a client without them going out of pocket on incorporation at the outset. 

Eric Eldon: Do you have an example — and no names unless you have permission to use them or can use them or whatever — but what’s an example of a time you steered an early-stage startup through an especially messy problem successfully?

Levy: I just got off a call 30 minutes ago doing exactly that…. I suspect it happens more for us in New York than it does for you guys in the Bay Area.  Probably because the average corporate lawyer in the Bay Area is a startup lawyer or has at least dealt with startups. That’s not the case in New York. We really only have a small handful of people that live and breathe startup law in New York day in and day out. It’s not a big number though and so there’s a higher risk of stuff just not being done properly.

I actually had two calls today with two promising companies. One of them, basically the two founders were like, “Oh, we’ve just had friends that are lawyers help us up until now.” They’re an LLC without an operating agreement that was signed with an accelerator program, and haven’t subjected any of their units to vesting. It’s too bad because something that would’ve taken literally 30 minutes to an hour to get them properly set up will now take a few hours to understand what they’ve done and clean it up.

Eric Eldon: Let’s say someone has done all of that successfully. What are the kinds of things you’re giving, let’s say a seed or A stage company? What’s the key advice you give that a person who’s gone through the first hoops, but now they’re figuring out their cap table and their first contracts and dealing with their investors and forming a board.

Levy: I try to be proactive and try to strike the right balance in how I advise them.  While I help them stay out of trouble from a legal perspective, I try to have them focus on the most important things at the outset – the things that are harder to unwind or fix down the road.

At the same time, I realize all of my clients are running a million miles an hour, and the idea that they’re going to be slowed down by legal is not something they have a lot of appetite for. The key is to try to bring your judgment to bare and say, “Listen, there’s going to be some risk. I’m not going to advocate you do everything on my punch list of ideal things you can be doing from a legal perspective, but if you have to focus on a few things to stay out of trouble for now, these would be them.” Not every lawyer is able to give that type of guidance or has, I guess, the experience or the judgment to be able to do that, but that’s something that entrepreneurs really value.

Then there are a few other things we’ll often speak to clients about, not necessarily legal.  Investor relations for one: a lot of companies and entrepreneurs don’t necessarily have a lot of experience working with institutional investors. Maybe it’s their first rodeo, so managing that process, getting into the mode of being mindful about not over-promising and under-delivering, or at least being aware of that dial and where you want to set it, vis-a-vis your investors… the kind of nuanced issues founders should be thinking about as entrepreneurs.

Then when the founder goes out to fundraise: the cadence of it, who they’re talking to and when, who they may want to prioritize over who, all of that, which is more art than science. Again, we’re lawyers, but I’ve done hundreds of venture transactions, so you obviously get pattern recognition, and it’s a question of sharing that with the entrepreneurs. More often than not, they value that stuff a ton.

Eric Eldon: The issues are changing all the time — like privacy is a big one now, that every startup has to think about whether or not they want to. What are you advising people about creating your first terms of service and making sure you’re thinking through the fundamentals of where the law’s at these days and where it’s going?

Levy: So we at Cooley have one of the leading privacy practices out there (I think we’re privacy law firm of the year). We’re kind of on the front lines of those debates, and I think we have pretty strong cues as to where we think things are going, etc. But again, we’re very focused on our clients deriving good economy scale in terms of putting together a privacy policy and terms of service or terms of use. So we build a privacy policy generator on our CooleyGo site.

This is just in line with our overall approach at Cooley, where we’re trying to get that information out there and democratize it. It’s a philosophical shift that we made years ago of basically saying, “Here are all of our form documents, and we’re going to keep updating them and sharing them with you. Here’s all this content so you can kind of teach yourself if you’d like.” With my own clients, it’s all about striking the right balance.  I like to teach them how to fish, especially in the early stages, instead of doing all the fishing for them, which can get expensive.  We’re laser focused at Cooley on adding real value for our clients, not just pushing paper

Eric Eldon: You kind of mentioned your fee structure. It sounds like you do a lot of the deferred payments for fundraising. You have CooleyGo that helps with formation and sort of the initial paperwork, and then it sounds like you have a flat rate fee structure for the early-stage work. Is there any nuance there that you can share?

Levy: Yeah, happy to share directionally.

At the end of the day, I don’t look to make money off of an incorporation or a seed round, so the incorporation for us is a loss leader. We have a very well-oiled process for setting companies up, including, again, internal automation tools that we’ve built to basically facilitate that. Suffice it to say the vast majority of founders that I work with will not go out of pocket on a formation or incorporation fees until they raise a decent first round, and even then it’ll be a fairly small amount that they would potentially have to pay.

In terms of overall deferral, I’m not a spray and pray type of lawyer where I’m going to defer a bunch of fees across a ton of companies and not then give them love and attention and wait and see if they end up being successful.

Whoever I take on as a client, I will tend to do a fair bit of the hand-holding myself, especially in the beginning. Because I think that’s a critical point at which you then build the relationship with the founders.  So I will probably be more picky upfront, but the ones I do take on, I’ll try to spend the right amount of time with them, and again, teach them how to fish instead of fishing for them.

I’m not a fan of deferring tens of thousands of dollars, which will then be spent inefficiently by the client — because if a client is sitting on tens of thousands of dollars of a deferral, they’re just going to use their big expensive law firm in an undisciplined way.  I’d rather do a smaller deferral, which then motivates me to keep their fees down and aligns our incentives.

Eric Eldon: Tell me more about how automation fits into all of this. You now have more online competitors who can credibly provide great startup legal advice.

Levy: We at Cooley develop our own automation tools to make our jobs more efficient. Let me give you an example. Three years ago, a client would call and say, “Hey, I want to do a convertible note round.” We then hop on a call go through what the terms look like (cap, discount, conversion, etc), and then I would email my associate and say, “Hey, can you put together a convertible note for me?” The associate would grab a precedent that we did a week or two weeks ago, mark it up with what the client wants, then send me the markup, and then I would review it and then send the documents out to the client. That’s how the sausage used to be made.

Today, thanks to our automation tools, I would basically hop on a call with the client. While I’m talking to the client, I have my software open and walk the client through the various terms all the while entering them on our system.  At the end of the call, the client asks, “Well, when can I expect the documents?”….And the answer now is “They’re in your inbox.” That’s huge.   Four years ago, even though my billing rate was lower, it would cost $3,000, $4,000, $5,000 to do a convertible note round, and it would take a few days to draft the paperwork.

Right now, it can cost a fraction of that and the drafting is literally done in real time while I’m on the call with the client explaining to them what all of the terms are about. To me, this a good example of striking the right balance between the generic automation tool that isn’t getting you the overlay and the judgment, and the visibility into what’s market, etc, and the traditional law firm (do it all for you) model.  While my billing rate is higher than a smaller firm, I’m often taking a fraction of the time that a lot of these smaller shops would take to do this because of the investments in automation that we’ve made at Cooley.

We at Cooley don’t see technology as a threat to our business. We see it as a huge opportunity that will enable our work and allow us to deliver service to our clients in an increasingly efficient way, which will free us up to work on the value-add work, which is often what our clients value us the most for. 


Founder recommendations:

“At SeatGeek we’ve worked with Stephane for over a decade, and over that time he’s been an incredible collaborator who has played a meaningful role in building our company. When we were our raising our first seed round, Stephane was so intimately involved that my co-founders and I began to refer to Stephane as our fourth co-founder (we were only half joking). It isn’t typical to have stories of heroism about your attorney, but with Stephane I have many. One in particular comes to mind: A few years ago we were doing a high-stakes deal to acquire an Israeli company. We had reached an impasse at a critical time. Stephane volunteered to fly to Israel to help, but didn’t have the necessary visa, so in a 24 hour period he heroically flew to Canada, got the visa at the consulate, came back to the US, and then flew to Tel Aviv. Over the subsequent week there he saved the deal.” — Jack Groetzinger, Founder, New York City, SeatGeek

“Stephane has been like a partner since we founded our company in 2013, and through four rounds of funding.” — A cofounder of a New York City startup

“Stephane has always been a source of sound advice that makes clear what the risks are and plainly interprets documents in terms of friendliness to the company, founders, or other parties. But what makes Stephane so great to work with is his focus on his client’s success, which manifests in humility, efficiency, and lack of greed. Stephane is always open to questions and feedback. Where Stephane thinks it would be more efficient to go out of house to a specialty firm (e.g. immigration or unique trade matters) he is happy to do so, and will make introductions or even facilitate an introductory call. Stephane is also sensitive to avoiding surprises for clients when it comes to billing. Even when working with other partners at Cooley, Stephane takes charge of our success with the firm and will review bills and reach out to ensure that project costs align with our expectations.” — Jason Green, Brooklyn, New York City, cofounder and CEO, Edenworks

“Literally taught all the junior VCs in NYC about term sheets. Gave my colleagues and I a huge advantage over others who didn’t know it.” — Jason Shuman, New York City, principal, Primary Venture Partners

“Great advice on all things that early stage companies need to think about.” — A founder and CEO of a New York City startup

“Stephane has been hugely helpful in the success of our company. We met him in the very early days, and his help on all things relating to the company, investors, corporate decisions, fundraising, and just simple strategy has been spot on. He’s always someone I can rely on to give me honest feedback that will eventually play out to be true. Unfortunately, since I’m identifying myself, I won’t be able to give specific examples, but couldn’t recommend him enough.” — Sachin Kamdar, NYC, CEO, Parsely

“He has been our corporate lawyer since forming the company in 2013. He helped me navigate several big contract negotiations and legal hurdles.” — A founder in CEO in New York City

“We would have been lost without Stephane. From helping us wade through the waters of negotiations at different funding rounds, to giving advice/drafting our customer agreements and MSAs, to countless other instances of not knowing what we didn’t know and having an ear to bend, he was knowledgeable and personable about every step of the process.” — A cofounder in New York City