Five Reasons to Be Your Startup’s Own Lawyer

Five Reasons to Be Your Startup’s Own LawyerGuest blog post from Josh King. 

Of course you need a lawyer if you’re raising funds (and Joe is a brilliant choice for that).  And you need a lawyer if your business model revolves around something risky and untried – like publicly rating every lawyer in America.  But if you’re a startup founder, you owe it to yourself to get at least minimally educated on legal issues, so you can choose where to devote your carefully marshaled cash to legal fees, and get better value in the process.

  1. You Can Read Your Own Contracts.
    You need to read and understand your own contracts.  For the vast majority of contracts that newly-formed startups will enter into (with the notable exception of formation, investment, and loan docs), the business terms matter far more than the “legalese.”  As long as the financial terms are right and there aren’t any long-term commitments, exclusivities or other terms that could complicate a future strategic deal, there’s likely little to worry about legally.  Sure, a lot of lawyers will tell you that something could still come up and bite you.  And it could.  It absolutely could.  But that’s why you’re the entrepreneur; you’re taking that risk in exchange for not having to spend the time, legal fees and negotiating uncertainty in getting lawyers involved.
  2. You Know What’s At Stake.
    Here’s a shock: many lawyers aren’t well-trained to differentiate between those issues that matter and those that don’t.  For every lawyer who will scale his or her work to the size and complexity of the deal, some will happily spend hours arguing over and re-crafting minor provisions in small contracts.  I can’t emphasize enough that for most agreements your startup enters into, you don’t want “perfect” documents.  You want things that generally work for you, don’t unduly tie your hands, and let you get back to your business.  That’s all.
  3. It’s Easier to Be Friendly.
    Here’s a radical thought – don’t look for maximum contractual advantage in your business deals.  While many attorneys are trained to get “the best possible deal” in the form of contract terms most advantageous to their client, this is often NOT the best possible deal for your startup.  It’s highly unlikely that the legal terms in your agreement will ever matter.  But what’s 100% likely to matter is getting deals in place, having fair business terms, and establishing relationships that can help your business grow.  In the early days of your startup, that’s best accomplished using simple, fair contracts.  You’ll build trust and minimize friction – all at a minimal cost in added legal risk.
  4. Coaching is Available.
    If you’re engaged with the issues facing your business, you’ll know when you need a little legal guidance.  You’ll be far better-positioned to get that coaching – and have it laser-focused on the exact issue you’re addressing – if you’ve been the one dealing with the issues.  It’s a more cost-effective approach than tossing everything that’s vaguely “legal” over to your lawyers for review.
  5. You’ll Know What to Look for in a Lawyer.
    As your business grows, it will at some point make sense to hire a lawyer to help guide the business.  If you’ve been actively involved in the legal work for your startup, you’ll be able to tell if the lawyer you are hiring a) has the ability to differentiate between important and non-important and issues; and b) shares your attitude toward risk.

Oh, one final piece of advice – if you go this route, just don’t call yourself a lawyer.  The Bar frowns on that . . .

Josh King is Vice President – Business Development & General Counsel of Avvo in Seattle.

About Joe Wallin

Joe Wallin focuses on emerging, high growth, and startup companies. Joe frequently represents companies in angel and venture financings, mergers and acquisitions, and other significant business transactions. Joe also represents investors in U.S. businesses, and provides general counsel services for companies from startup to post-public.
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  • Jay Parkhill

    I wrestle with these issues as outside counsel all the time. As one client said to me: we used [BIGFIRM], who were very good and detail-oriented, but extremely slow and expensive, then we used [SOLOGUY], who was a bit too loose. Staying in the “careful in every deal with a broad perspective” sweet spot is tricky!

    • Josh King

      Yeah, if there’s one thing a business owner and their counsel need to be aligned on it’s approach to risk.

    • Joe Wallin

      Thanks Jay. Yeah, I agree.

  • lunarmobiscuit

    Nice to see this advice in print, and even better to see it on a law blog. Yes, the legalese matters, when all goes wrong…. which is rarely. And in my experience, even when it comes to blows, every contract has multiple interpretations, no matter how well crafted by lawyer or businessman.

    If nothing else, if you are inexperienced reading contracts, get experienced by writing the first drafts of all contracts before having a lawyer do a review. This way you’ll know the details of the terms and see where the boilerplate legalese shows up.

    • Joe Wallin

      Thanks Luni. Yeah, I frequently recommend clients write down all of the business points of a deal, in plain English. Then the lawyers can efficiently put legal terms as necessary around it.

  • Martin Ramirez

    As a first time entrepreneur, the legal aspect of my business is one of the most challenging things I have to deal with. I do want to avoid putting our company in a messy legal situation but at the same time I want to be able to understand every aspect of it (or as much as I can) and do as much as I can myself.

    I do agree with this post, we as business owners should make a conscious effort to play this role. And having a great attorney that can back you up and help you better understand the details is key.

    • Joe Wallin

      Thanks for your comment Martin. There are definitely circumstances where it makes sense for the lawyer to take the lead, but there are also circumstances where the business person ought to sketch out the key deal points in bullet point fashion first–before the lawyers get too heavily into the drafting…

  •‎ Matthews Bark Attorney

    Of course you need a lawyer if you’re raising funds (and Joe is a
    brilliant choice for that). And you need a lawyer if your business
    model revolves around something risky and untried, great reasons to start-ups own lawyer..