What It Means to be an Entrepreneur’s Lawyer
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.