Are they specialized in Startup Law?
“Startup Lawyer” is an informal name for an “emerging companies” focused corporate and securities lawyer. This means lawyers who have all of the deep background knowledge of broad corporate and securities law, but have further sub-specialized in the application of that law to early-stage companies raising angel and venture capital. Generalist corporate lawyers who work in lots of industries may be very smart, but will not have the domain-specific understanding of norms and expectations within the startup ecosystem. Hiring those kinds of generalists can get expensive fast, because you’ll end up paying to “reinvent the wheel” when a true specialist can often grab a template form from their library of industry-standard documents.
For more on this topic, see: Startups Need Specialist Lawyers.
Is your main contact sufficiently experienced (senior level)?
It’s a common tactic of “BigLaw” (very large firms that serve unicorns) to do a “bait and switch” with respect to startup clients. A partner or senior associate will hook you in as a client, and then you’ll spend virtually all of your time talking to junior attorneys with only a couple of years (if that) of experience. This can be a disaster for companies needing real, complex strategic guidance from their counsel.
Get clarity with the firm on how communication will be handled, and how quickly you can expect to get access to your main advisor.
For more on this topic, see How Junior Lawyers Can Hurt Your Startup.
Is their cost structure right-sized for the level of scalability you need?
There’s a common myth in certain startup ecosystems that only the very largest, most expensive law firms are worth working with. In reality, for early-stage companies in particular those firms can be not just overkill on their rate structure (a Partner can be $800-1200/hr, while boutiques are hundreds per hour lower), but you’ll also be competing with SPACs, IPOs, and unicorn deals for the lawyers’ attention. Responsiveness can be a big problem when you hire firms that are over-sized and over-kill for your near to mid-term needs.
Are they trustworthy and not conflicted with your potential investors?
This is one of the most impactful variables in assessing counsel, and yet so often overlooked by inexperienced founders. The job of counsel is to be your “equalizer” in navigating a startup ecosystem and venture market full of people who are far more experienced and knowledgeable at the “game” than you are. But that counsel can’t play that role if, because of long-standing relationships and referral arrangements, they have dependencies with your investors.
Ask the law firm what VC funds they represent. If many of their clients might write you a check, steer clear or you’ll end up with lawyers who are “captive” to the money.
For deeper dives into the selection process of engaging a startup law firm, we recommend Startup Lawyers – Explained.