For most entrepreneurs, hiring a lawyer is a new concept! At the start, the two professionals you will need to hire are an accountant and a business lawyer. Hiring the right lawyer for your startup is an important decision because your lawyer will help you with almost every step along the way. Your lawyer will guide you through some of your highest highs (raising your first round of funding) and your lowest lows (firing your first employee). Hopefully, the first lawyer you hire is around through the startup lifecycle, but not everyone gets it right the first time. It is important to hire a lawyer that you trust, like, and can afford.
Hiring in-house or outside counsel?
It is up to you to decide whether your startup will require an outside counsel (a law firm) or inside counsel (an employee of the startup). Typically, startups hire outside counsel at the onset, and eventually hire an in-house counsel to assist with business operations and regulatory matters while continuing to retain outside counsel for more specialized legal matters.
Do your research.
Conduct a LinkedIn and website search. Read the attorney’s biography, professional experience, and narrow your list down to four attorneys that might be a good fit to meet with for an initial interview. When researching, key indicators you should look for include:
- Is the attorney specialized in business law? Hiring a business lawyer is essential to getting it right the first time. We’ve seen it time and again that startup founders hire a litigator to carry out a transaction, and it never ends with sunshine and rainbows. Make sure your lawyer is a specialized transactional business lawyer. This next step will help you narrow down the search.
- Do any of these terms appear in the attorney’s bio: business law; corporate law; transactional; fundraising; emerging growth; startups; venture capital; securities; mergers and acquisitions; intellectual property; tax?
- If yes, you’re on the right track!
- If not, and you’re finding practice areas like litigation, insurance, and family law, nix that one off your list!
- Who are the attorney’s clients? Sometimes, attorneys will disclose their clients on their websites through testimonials. If the attorney is marketing that she worked with a startup similar to yours (or in the same industry), she might be a good fit!
Schedule an in-person interview.
Set up a coffee or office meeting with the attorneys you selected from your research. Most attorneys will meet at no cost for an initial interview. The conversation is two-sided because attorneys want to work with great clients, too! While at the initial meeting, the questions you should ask include:
- What is your law firm’s philosophy with clients? You should understand how the law firm works, what kind of clients it serves, and whether or not its methodology will mesh with your startup’s needs.
- Followup question: Do you have an innovative approach to legal work?
- Who will be doing the bulk of my startup’s legal work? Law firms are typically composed of partners, associates, paralegals, and interns. Not all are structured this way, but most are. It is essential that you understand whether the attorney you’re interviewing or a first-year associate will be doing your legal work; and, whether or not that matters to you!
- How much experience do you having working with startups? If the attorney has no experience with startups, run for the hills! Just kidding, but you should probably end the interview early. You want an attorney that understands the startup lifecycle and meets your fast-paced, budgeted needs.
- Have you ever worked with a startup similar to mine? Same industry? This question will help you gauge whether the lawyer understands your startup from the get-go, or might have to dive into more research (which leads to more billable hours) to help solve your problems. A lack of industry-experience isn’t necessarily a reason to not hire a lawyer, but if you can find someone who understands your industry, it might help your bottom line.
- What is your fee structure?
- Hourly fee. Most lawyers charge an hourly fee for their work. Make sure you understand the pay rate and structure ahead of time to avoid receiving a hefty bill at the end of the first month.
- Flat fee. Most startup lawyers charge flat fees for simpler projects like setting up your entity and drafting short contracts. Flat fees are typically cheaper than being charged an hourly rate for the same project.
- Monthly retainer fee. Some law firms provide the option of a monthly retainer to pay in advance for services you use throughout the month. Monthly retainers can help you budget and feel at ease for the hour phone call or simple contract you need drafted because you already budgeted for the time.
- Do you charge for phone calls? Startup lawyers should be flexible on this question. Most will not charge for a fifteen to twenty minute phone call, but when you use up an hour of the lawyer’s time, you might get a bill.
- Future tip: when you call make sure you have the specific facts and questions; that way, you can help your lawyer get to the punchline quicker, without having to dig for all the details.
- Are you a good teacher? If it is important for you to understand the legal work, you’ll want a lawyer that is willing to explain the legal documents in layman terms. How do you know? If you’re already confused during the interview, the person is probably not the right fit.
- Why should I hire you? This question is essential. It puts the attorney on the spot to give you his/her elevator pitch and express the value that he/she will bring to your startup.
Reflect and decide!
After the initial interview, you should understand whether or not you want to hire the attorney for your startup. Similar to dating, hiring an employee, or choosing the right sweater, you must feel comfortable with the decision and that the chosen lawyer is the right fit for your startup. We hope this article helps you get it right the first time!
Read our article on 10 legal failures startups make often (hint: one of the failures is hiring the wrong lawyer)!