Birds: Not A Love Story

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On Being An Entrepreneur's Lawyer: Mark MacLeod's Requirements

Fellow blogger Mark MacLeod, who just joined Tungle, has some definite thoughts on this subject. Thanks to Mark for sharing them so eloquently:


"The ideal startup lawyer:

Wants to do business: Great startup lawyers balance the need to protect their clients while enabling them to do what they want. The conversation goes something like this: “Here’s what I need to do. Now how do I do it and stay out of jail?”

Speaks plainly: Great lawyers speak in plain English (or whatever language you speak natively). Those that speak in legalese rarely rise to great heights.

Is committed to the startup community: During the dot com phase, all the big firms started trolling for startups, when the bust came, they ran for the covers. I want to work with firms and lawyers that are truly committed to startups. That commitment manifests itself through i.) The people they assign to your file (if you get junior people only, it’s not a good sign); and ii.) Their billings (see below).


Charges “reasonable” fees: Startup lawyers need to take a life cycle view to their client relationships. They should expect major discounts early on and hope to make these up as the company builds towards an exit.

Is connected: This is especially relevant for new entrepreneurs. Your lawyer should provide more than just legal advice. They should also be able to connect you either to VCs or to potential partners, etc.

Has domain expertise: i.e., in fundraising. It’s not enough for your lawyer to come from the corporate finance department in their firm. They must have relevant and recent deal flow expertise in the venture space. They should know the NVCA templates cold and should know what current market standards are for deal terms like liquidation preferences."

On Being An Entrepreneur's Lawyer: What Alec Saunders Wants

When I asked Alec Saunders, VOIP god, CEO of iotum and all-round start-up evangelist, what he thought it meant to be an entrepreneur's lawyer, he had some thoughts. Lots of them. Here's his reply:

(Alec)
" I think there's a culture shift that has to happen for lawyers and law firms to be great partners for entrepreneurs. I used that term partner specifically too, because that's what's really needed. When an entrepreneur starts up a company, he or she can really only afford a few key roles at the executive level: development, business development, and perhaps marketing. Everything else has to outsourced or fractionalized. Finance and legal are two of the most expensive, as well as being two of the biggest things that have to be "right", or the entrepreneur is screwed down the road.

So, when I say culture shift, I mean:

1. People who have experience. That means either a solid business law firm, or (my preference) a few smaller really smart individual practitioners. Theoreticians or people fresh out of school aren't going to do it. My nightmare is getting stuck working with a junior in a large firm. The biggest value to me is practicality. The two kinds of experience most needed are real world securities experience and contract knowledge. Real world negotiating experience is also highly valuable.

2. People who get things done and done fast. Startups are always operating in the mode that things need to be done yesterday. A lawyer with a file of solid precedents, and a practical sense of how to make them into the documents I need is gold. The last I want to pay for is drafting a document from scratch.

3. People who understand that I have to control costs, without sacrificing quality. A relationship with a law firm where the clock is always running just isn't going to work. A relationship with a firm that will quote me a firm or capped price is killer. An advisor that I can phone and ask a few quick questions of is a necessity.

There's a lot of give and take between an entrepreneur and his / her advisors. That relationship gets built over time, and frankly, I think it should be recognized appropriately as well -- with equity if it makes sense."

What It Means to be an Entrepreneur’s Lawyer

From time to time, we search for lawyers to expand our practice. Those discussions almost always end up focused on what it means to be a lawyer for entrepreneurs. Here are what I’ve come to believe are the fundamental requirements:

1. You can represent VCs or their portfolio companies, but not both. It is theoretically possible to work with both VCs and startups, but the economics incent lawyers to please VCs first. A staggering amount of money is made by lawyers when a VC raises a fund. By contrast, portfolio companies represent an average of $100 – $60,000 a year in legal fees for much of their pre-exit years. Can a lawyer be aggressive enough on behalf of a startup client if in so doing he might upset the sensibilities of a VC client worth significantly more in revenue? (Of course he can, but will he?) It’s a dilemma that is only growing in size in the current cycle, as more and more entrepreneurs deal with conflicts arising with investors that are winding down their funds. As a startup lawyer, you need to pick a side and stick with it. You can maintain just as much goodwill with the VC community by being a member of Her Majesty’s Loyal Opposition.

2. It’s never just business. It’s ALWAYS personal. You relationship with an entrepreneur will last through several companies, and well beyond the time he/she hits a home run. His/her personal goals and needs for each business must be at the forefront of everything you do for the corporation, unless and until those goals and needs clearly diverge with those of the business.
Because this kind of practice is always personal, you need to be prepared to go to the mat for your client when necessary. If another lawyer has two other deals going on, your job is to ensure that it’s the other two deals that wait. You must do everything reasonably necessary to ensure that everyone else treats your client’s needs with the required priority, because the only person who suffers when a deal slows down is your client. Most importantly, no one ever gets to be discourteous to or disparaging about your client. Your own brand is only as good as your client base. An entrepreneur’s lawyer must be a cheerleader and avenger to the extent the client allows. If necessary, you may have to duel.

3. There’s no such thing as a risk-free result. There is no document that you can draft, negotiate or successfully close that will provide the gold-plated protection those large banks and enterprises require. Your client simply does not have the leverage or the financial means to keep you playing a zero-sum game on their behalf. Entrepreneurial law requires that you assist your client in making the best decision in an environment with constrained resources.

I also asked some entrepreneurs and VCs for their thoughts on this. Answers to follow in the next post.

Questions I Haven't Answered

Not all questions that bring you to the blog are answered. To make up for it, I've taken some time this afternoon to get to the bottom of some of the most frequently asked. I hope this helps:

A non –compete covenant given in connection with the sale of a business is enforceable in Canada.

Original Penguin shirts may be purchased in Toronto at Sporting Life.

The general counsel of Limelight is Phillip Maynard.

Home Depot occasionally does seminars on replacing windows in a low rise building.

The canary dog, or perro de presa canario, is twice as big as a pit bull and weighs up to 48 kilograms


Have a good weekend.