Ask any attorney what kind of lawyer they are and they’re likely to respond, “the good kind.” Certainly, there are “good” lawyers and there are “bad” lawyers, but aside from avoiding the truly unscrupulous scriveners, much of the issue here is simply making sure you have grabbed the right tool for the job by selecting counsel knowledgeable in matters pertinent to your situation. That’s ultimately on you.
Beyond that, founders need to understand that there are also “good” clients and “bad” clients — lawyers want the former. It might even be said that good clients on average receive higher quality and more consistent legal services at a lower overall cost than do bad clients; so it is certainly worth the effort to engage with your lawyer thoughtfully. I say this both as an attorney myself and the co-founder of a venture-backed startup that ultimately made it across the finish line, so I can personally appreciate the position of both founders and lawyers here.
That said, this is my roadmap for how founders can work with most lawyers effectively. It’s part of TechCrunch’s new membership product, Extra Crunch. Along with deep company profiles, events and other features, we’re profiling great lawyers and other outside experts, and providing guidance on how to work with them to make your company successful.
The attorney-founder relationship
In the journey of a startup founder, few things are more valuable than a truly excellent startup lawyer. Why is this the case? First, ownership of your company will largely be determined by the legal documents drafted at initial formation and the subsequent terms your lawyer helps to negotiate with investors. Sure, market forces, product development and burn rate provide the context, but lawyers draft the definitive documents, which can be outcome-determinative in many exit scenarios.
Moreover, in the early days, when the founders’ common stock composes perhaps the entire capitalization of the company (often right up until the day funds are wired in your seed round), your startup lawyer is essentially representing the collective interests of the founders as a whole, while also setting up precedent for all subsequent investment rounds. Did you get stuck with a large liquidation preference or “participating preferred” in your seed round? Well, you are likely stuck with those or similar terms in all subsequent rounds, too.
Of course, startup lawyers represent the company as a whole and not the interests of any individual founder per se, but from the very beginning, when founder and company interests do not widely diverge, your startup lawyer is truly setting the legal foundation for the next three to seven years of your life, maybe more. And in cases where the interests of founder(s) and the company do begin to diverge, a truly excellent startup lawyer will let founder(s) know this is happening and recommend independent, personal counsel be retained.
Second, few other advisers in a founder’s professional orbit will have the same formal ethical duties to your company with respect to confidentiality, conflicts of interest, competence and communication as your startup lawyer. While I understand society views lawyers largely as opportunistic sycophants, believe it or not, most lawyers are real people who at some point relatively early in life were attracted to the legal profession due to some deep-seated philosophical interest in the rule of law, the importance of using reason and rational argument to resolve conflict, and of course, in making good money for hard work.
If that strains credulity, think of it this way: Most lawyers have invested several years and $150,000 to $250,000 in law school tuition and cumulative living expenses simply to receive their law license. From that point on, they are bound by the ethical duties mentioned above in representing every single client they serve, bar none. The penalty for breaching these duties can include disbarment, which would mean throwing away that expensive self-investment, or perhaps in the best case some lighter discipline or malpractice claim, both of which are still devastating from a reputational standpoint and sufficient for termination from most any well-paying law firm (and good luck finding a new job).
All of this is simply to say that practicing law at a high level is not a get-rich-quick scheme. It takes years even after law school to develop the necessary experience and expertise, so if your lawyer knows what they are doing, don’t treat them like they are trying to scam you — that is the first step here.
Next steps: time management
Lawyers are often under two competing pressures: bill enough hours and keep clients happy. Law firm associates will have a very specific billables requirement, anywhere from 1,700 hours per year (at the boutique “lifestyle” firms) up to perhaps 2,400 hours per year (the large international firms). While most non-lawyers assume this creates a one-way incentive to keep the clock running for as long as possible, my own experience has been that when assignments take longer than they should, which can happen, most lawyers are willing to ‘write-down’ that time to some degree in order to keep the client happy. Partners’ schedules are generally more flexible than an associate’s schedule, but in any case, as the client, you have a role to play in this equation by effectively managing the time required to service you well.
Plan in advance. Monitor what is happening in your business and give your lawyer(s) a heads-up when it looks like something big or time-sensitive is coming down the pipe. Your lawyer has multiple clients and owes each the exact same professional duties mentioned above. If you can give your lawyer advance notice that a time-sensitive matter is brewing, she can manage her calendar more effectively, reserving the time necessary to devote full attention to you as soon as your matter is ripe.
Budget reasonable time for legal review. Related to the above, all too often business or investment deals are negotiated with firm deadlines and zero buffer or allowance for legal review. When planning delivery schedules that depend on commencing work at a certain time, or closing a bridge round in light of cash burn, you also need to budget for reasonable turnaround on legal review from both sides, generally at least 7-10 days for 2-3 passes — and that’s fairly quick.
Send summary memos before calls. In order to reduce the amount of time and money billed on “telephone conferences” (as we lawyers call them), it can help to summarize relevant facts and issues, and pose questions via an email memo sent a few hours (or days) before the call. This will likely increase the quality of the answers you receive, both because your lawyer will have more time to consider the issues and because with the stage set, you can dig more deeply into the matters at hand. And of course, on the call itself, be direct and get to the point as much as possible. I promise your lawyer won’t be offended if you open with, “Hi Dan, hope you had a great weekend, so the purpose of this call is….” and get right to the point.
Know your DIY limits. There is no question, in certain areas, armed with a well-drafted form or template agreement, some basic “legal” drafting can be done by almost any literate person; this includes in most cases simple consultant or independent contractor agreements that do not implicate core intellectual property of the company; employment offer letters for rank and file employees; mutual NDAs for certain non-critical business partnerships, etc. However, beyond these relatively simple items, avoid the temptation to draft ‘Do-It-Yourself’ redlines in direct negotiation with counsel on the other side. More often than not, you will eventually reach the realization that you are out of your depth. When you finally throw that lifeline to your lawyer, you have by then likely made their job more difficult — and therefore more expensive — as it is quite hard and very inefficient to backtrack on bad drafting in the middle of a negotiation.
Communication is a two-way street
While attorneys are under a duty to keep clients reasonably informed, clients can reduce their own legal fees by upholding their end of the bargain and communicating promptly and effectively.
Be organized and responsive. Complex legal tasks involve many moving parts that often require review of detailed documents, analysis of unique fact patterns, and synthesis of unstructured information, much of which may not be available from the outset. As the client, you can actually ask your lawyer directly before starting a new assignment, “is there anything I can do to help organize this information to make it easier for you to complete this more quickly?” Sometimes just putting things in chronological order can be a huge help.
Also, if your lawyer needs more information or additional documents during an assignment, make sure you get this information to them quickly. If an assignment is shelved for several weeks because a client isn’t providing necessary information or documents, then by the time the lawyer can pick it up again, working knowledge may be stale. At that point, it will take additional time for the attorney to get back up to speed before completing the assignment. That additional time will certainly be billed to you and as the information bottleneck — it’s your own fault.
Try getting time “off the clock.” This may or may not be common practice, but most startup lawyers really do enjoy opportunities to engage in strategic thinking with visionary founders and in certain contexts may be happy to do so “off the clock.” This is probably more true for partners of a firm, for whom the job entails keeping clients satisfied and growing the firm’s business more so than reaching a specific billables benchmark. For that reason, don’t hesitate to: (1) propose holding a quarterly meeting over coffee, lunch, or even dinner to discuss how your business and the investment landscape is changing and to help “issue spot” regarding new directions your company may go; and (2) ask whether this meeting can be done “off the clock” while at the very same time offering to buy the coffee, lunch, or dinner. If your lawyer agrees, odds are they will pick up the bill anyway.
Firing your lawyer
Despite best efforts of those involved, sometimes the best thing for the parties of a bad relationship is for it to end. Remember, as the client you are in the driver’s seat — you can fire your attorney in almost all cases any time you wish. Of course, there are switching costs, new lawyers will need time to get up to speed on things and it would certainly be unwise to dump corporate counsel in the middle of a financing round.
Yet in the ordinary course of business, if your attorney does not communicate well, consistently takes too long to turn around assignments (even when reasonable lead time is given), or repeatedly surprises you with large bills for what seems like relatively simple work, then it may be appropriate to find alternative counsel. At the very least, you can consult with another attorney and get a second opinion before jumping ship completely.
The final step
Perhaps the most important factor in becoming a “good client” is also the most simple: pay your bills on time. If a lawyer has two assignments, both of equal urgency, one from a client who always pays on time, the other from a client already two months in arrears, can you guess which one gets picked up first? Indeed, lawyers love clients who pay their bills on time and will work quite hard to keep those clients around for as long as possible.
Finding a great startup lawyer is not necessarily easy. The resources available through Extra Crunch will certainly help; and soon we’ll have an article dedicated to this specific task as well. That said, when you do find a truly excellent startup lawyer, he or she will be among your most valuable assets as a founder, so it is absolutely worth fostering your “good client” reputation right from the start.
Daniel T. McKenzie, Esq., manages the Law Office of Daniel McKenzie, specializing in the representation of startups and startup founders. Prior to establishing his law office, Daniel McKenzie co-founded and served as lead in-house counsel for Reelio, Inc., backed by eVentures, and acquired in 2018 by Fullscreen (a subsidiary of Otter Media and AT&T).
DISCLAIMER: This post discusses general legal issues, but it does not constitute legal advice in any respect. No reader should act or refrain from acting on the basis of any information presented herein without seeking the advice of counsel in the relevant jurisdiction. TechCrunch, the author and the author’s law firm, expressly disclaim all liability in respect of any actions taken or not taken based on any contents of this post.