Here’s some real advice about hiring a lawyer for your startup

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Photo via Umjanedoan

No, not here.  This is going to be good advice.  The headline above refers to this GeekWire post from last week, where a number of young entrepreneurs — with varying levels of fluency in the subject — offer their thoughts on what to consider when hiring a lawyer for a technology startup.  While some of the advice is worthwhile, some of it is downright counterproductive.

One thing to keep in mind: No one would confuse me with a young entrepreneur.  I’ve been a lawyer for 20 years, the last 17 of which I’ve spent working in technology companies, large and small.  I’ve spent time in legal non-legal and mixed legal/non-legal roles. Over the years, I’ve hired and worked with A LOT of attorneys.

I am currently the general counsel of Avvo, a Seattle startup where one of the core things we do is make it easier for people to choose the right lawyer. So I know a thing or two about choosing counsel for a business.

Why Startups Need Lawyers

One reason the advice is of limited help is that the considerations that go into hiring a lawyer are different depending on what you are hiring them to do (and when I say “hiring” I’m talking about outside counsel – very few startups need a lawyer on the payroll when they’re just getting started).  There are four broad categories of legal need that startups will typically encounter in the early stages:

1) Corporate Formation

2) Financing

3) Website/Customer Agreements

4) Day-to-Day Legal

Yes, some companies will have issues around intellectual property, industry regulation, litigation and M&A even in the early days.  But these four are the predictable areas that nearly every technology startup will contend with.

With these areas in mind, let’s dissect the advice from the members of the Young Entrepreneur Council which ran on GeekWire:

For starters, both Eric Koester and David Ehrenberg recommend looking for lawyers who work with comparable companies.  This is generally good advice, but what you’re looking for is different depending on the legal need.  As most technology startups either are planning on taking some outside investment (or want to maintain the option to do so), you should look to hire an attorney who can handle both formation and financing.

And what you really want here is someone who helps companies get set up every day, who has done a ton of seed-stage and VC financing, and who knows all of the industry regulars. An attorney like that will give you better advice, you’ll probably get a better deal quicker, and you may get a lower bill, even if the hourly rate is higher than attorneys who don’t regularly deal with this area.  The single biggest factor in choosing a lawyer for this need is deep expertise in startup financing.  All other considerations are secondary.

This is the same consideration set when choosing a lawyer for specialty areas like immigration, patents or FCC regulatory work – you want the lawyer equivalent of a LASIK specialist; someone who does that work – and pretty much ONLY that work – every single day.

You’ll most likely need a different lawyer for your website and customer agreements. In this case, you want someone who is very familiar with the industry you operate in.  This is also an area where it’s increasingly important that the lawyer have a business orientation and understand your company’s attitude toward risk.  This, by the way, is one of the biggest frustrations entrepreneurs have with lawyers.  Attorneys are trained to spot risks and try to eliminate them.  Businesspeople succeed by spotting opportunities and by taking smart risks.  When it comes to building your agreements – and providing ongoing legal advice – having an attorney who understands your level of risk aversion is the single most important factor.

Finally, there’s the rest of the day-to-day legal stuff that every startup encounters – vendor agreements, employment issues, threatened litigation, etc.  While it’s true that you want specialists for many things, you may also want a generalist to quarterback the process.  This is a difficult attorney to find and hire, and it’s the challenge every company faces when they make their first internal legal hire. For your company’s general counsel – whether inside or outside – business orientation and communication/rapport are the most important factors.

The “Best” Attorney?

In the GeekWire piece, Jordan Fliegel says don’t ever settle for less than the best attorney, ever.  If you’re wondering why I haven’t advised hiring the “best” lawyer, it’s because the term is incredibly subjective. The “best” lawyer for your financing is someone who does startup formation and financing every day.  The best lawyer for vendor litigation is someone who understands your cost constraints and need to get back to business. Etc.

But Fliegal seems to be saying you want the “best” from a more objective, competence or peer assessment perspective. That’s usually going to be overkill. For most legal needs, having a fit on cost, rapport, responsiveness and approach is far more important than ensuring the person you are hiring is considered to be “the best.”  You really only need to think hard about having an attorney who is objectively “the best” when facing bet-the-company litigation, handling appeals, or doing super-strategic M&A.

Young, Tech-Savvy Attorneys

Josh King

Josh King

I can see why young entrepreneurs may be drawn to young attorneys, but Jim Belosic’s advice to think young when hiring attorneys for a tech startup is misguided. Knowledge of social media and technology is an important consideration in hiring the attorneys who help guide your business (and less important for one-off matters), but youth is a weak proxy for such tech-savviness. In my work at Avvo, I talk to attorneys old and young every day – and I can tell you that Luddites and technophiles persist at every age level.

Same goes for Rachel Rodgers’ advice to hire attorneys who operate online law offices (which, shockingly, is the business that young entrepreneur Rogers runs). There’s nothing necessarily to knock such businesses, but there’s no inherent advantage to them either.  It’s no basis for choosing counsel.

Again, the better advice is this: Understand that the basis for choosing an attorney will differ depending on your legal need.  As you grow, you will undoubtedly need the services of several different attorneys.  And when you do hire an attorney to do more than provide guidance on a one-time transaction, think most about finding someone who aligns with your business approach, is responsive, shows good judgment, and understands your level of risk aversion.

Josh King is general counsel and vice president of business development at Avvo. You can follow him on Twitter @joshuamking.

  • Jarndyce v Jarndyce

    Be wary of getting a lawyer that is overly close to your investors — especially VC’s. The lawyer you’re paying should working for you and not your board.

  • Cliff Rudolph

    Great advice Josh. One other thing- tell your insurance broker and ask that your counsel be “pre approved” by your insurance carrier. Best to negotiate this at renewal rather than in the middle of a claim.

  • gseattle

    Seemingly irreducible complexity, I just wanted to sell widgets–I mean–hmm. Maybe I might have to consider writing into the investor pitch business plan paying someone to spend the time to pick out the attorney.

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  • Vishakha Gupta

    You should be comfortable with your lawyer. There should be no hesitation from your lawyer. You must share everything regarding the case to keep things in control of the lawyer.
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  • Thiago

    It makes perfect sense, especially the LASIK specialist comparison. There are people who hound on startups. You have to be able to defend yourself and your business. Thiago | http://intermountaineyecare.net