Your startup needs to engage the right venture capital attorney to be successful, especially if your startup plans to raise money from investors and be acquired in the future. No ands, ifs or buts.
Whether you already have hired an attorney for your startup or are in the process of engaging one, ask these questions to make sure that you hire the right venture capital lawyer for your team:
1. Does Your Venture Capital Attorney Have The Right Experience And Judgment?
When it comes to startup legal advice, experience and judgment really matter a lot.
The right venture capital attorney, who has broad experience coupled with seasoned judgment, will save your startup time and money.
A venture capital lawyer who works with startups on a daily basis will be battle-tested. She will know how to deal with a variety of startup legal and business issues and challenges, good and bad. She will help you determine how to structure your company and contracts, how to work with co-founders and other team members, which financing and commercial deals to pursue, and when it’s time to press hard on key deal issues and when you can pull back or let things go.
Please do not hire a “Door Lawyer,” because an attorney who takes on any matter that comes in the door will not help your startup succeed.
Instead, work with a venture capital attorney who has been there and done that already, with the track record and judgment that will make your life easier and point your business in the right direction.
2. Is Your Venture Capital Lawyer Practical And Efficient?
Time is money. And money is money. Your venture capital lawyer should know how to get projects and deals done quickly.
Once again, there are no substitutes for experience and judgment. While your startup may change the world, your lawyer needs to know how to keep your startup on the rails and navigate deal and legal matters in a straight line.
Review these issues to assess your attorney’s efficiency:
- How projects will be staffed – the lawyer that you choose should not hand off your projects to a rookie attorney who is learning on the job;
- How your projects will be billed – big law partners who bill their time at $1,000+ per hour or first-year associates who bill at $500+ per hour do not make sense. Smart lawyers will have fixed-fee arrangements and know how to work with you efficiently over the long term; and
- How technology will be used to keep your business organized and on track – your venture capital attorney should use the latest tools such as online cap tables, virtual access to documents, DocuSign, etc.
3. Does Your Counsel Communicate Effectively?
Not everyone is a serial entrepreneur who has already been around the startup block many times before. Your venture capital lawyer must be accessible and know how to explain legal and business concepts in a straightforward and digestible manner.
As an entrepreneur, you have a million things to do, including many complex legal and business issues on the daily.
The right lawyer will describe the situation and related legal issues at hand, present practical solutions and help you get to the right decision.
4. Will Your Venture Capital Attorney Prioritize Your Projects And Move Quickly?
As a founder, your startup is your main focus and priority. It needs to be nimble and move quickly to take advantage of financing and other opportunities as soon as they arise.
The right venture capital lawyer understands this and knows how to keep pace with the urgent demands of your startup.
5. Is Your Lawyer Organized?
Your lawyer needs to be organized with your corporate finance projects, documents and information, especially because founders often do not have the time or focus to do so.
Your lawyer needs to access your documents and information and answer your questions promptly.
This organization issue is especially important when your startup needs to enter the due diligence process for a financing or acquisition transaction.
6. Can Your Counsel Help You Start, Fund, Grow, And Exit?
Not surprisingly, it is best for your startup to select the right lawyer who can tell you how to incorporate a business in the right way, lead it through rounds of funding, and help prepare and advance it for eventual sale.
If you choose the wrong attorney, then you eventually will need to switch to the lawyer when you have a financing, M&A, or other deal that requires a different level of expertise and experience.
There are switching costs when moving to new legal counsel, especially when corporate cleanup is required to get your startup ready for its next deal.
7. Does Your Venture Capital Lawyer Reflect Well On Your Startup?
Your investors will conduct extensive due diligence on you and your company. And who you select as your venture capital lawyer will reflect on your business judgment and your ability to build a team and run your company.
Does your lawyer have the experience, resume and credentials such that you would highlight him as a key member of your startup team?
Would you be willing to feature your lawyer on your startup’s website or in its executive summary or business plan? You certainly are not required to do so, but you should consider a change if you are not comfortable doing so.
As you launch your startup, I encourage you to review the Top Ten Legal Mistakes Made by Entrepreneurs from Harvard Business School, especially mistakes 1, 2, 6, and 8.
We are venture capital lawyers and have been answering and delivering on the above questions for many clients over many years.
Contact us to discuss how we can work together and advance your startup. We look forward to speaking with you about your business plans and how we can help.