When a Startup Lawyer can’t scale.
When I talk to seasoned founders about what they really want out of their company counsel, their responses largely boil down to 3 things: quality, responsiveness, and cost-effectiveness. Any good, single lawyer can at some point in time deliver all 3 of those, but not consistently, and not at scale. To do that it takes what I call, broadly, “infrastructure.” If you hire a lawyer who doesn’t have infrastructure — no matter how good they may be — you can expect a world of pain at the very moment that you need him/her most.
Law firm infrastructure includes:
- Paralegals / Professional staff (like word processing) to handle necessary tasks that you don’t want a lawyer billing hundreds of dollars an hour for (like signature collection, option grants, state filings, etc.);
- Technology and institutional knowledge, like automated templates, form libraries, etc. to streamline standardized processes to ensure lawyer time is spent on higher-value work;
- Junior attorneys and appropriate training/compensation infrastructure for them, to keep work moving that is too complex for paralegals/staff, but not cost-effective for Partners to manage;
- Other partners/senior attorneys to keep work moving when the main partner isn’t available (on another deal, on vacation, sick, etc.);
- Access to niche specialists (IP, Tax, Employment, Commercial, etc.) to ensure answers on complex issues get the right subject matter expertise;
- Experienced M&A (Mergers & Acquisitions) attorneys who specialize in high-stakes exit transactions, which require different expertise from venture capital/angel financing experts.
The clearest symptom of a startup lawyer who can’t scale is slowness, and as anyone with experience in the startup game knows, time kills deals. To a lawyer who’s seen hundreds of deals, your $500,000 seed financing may seem like just another small deal, but to you it’ll feel like life and death, and you can’t wait days for your lawyer to get on it because he’s on vacation, out sick, or stuck in another deal without the right support infrastructure to ensure yours gets handled as well.
I’ve known lawyers who dramatically underestimate how time consuming and expensive it can be to build legal infrastructure. They think they’ll just wait until they get busy enough and “just find someone.” It always blows up in their faces. Hiring specialized, highly qualified staff and attorneys is hard in any specialty area. Building a compensation structure that works mathematically but will attract and retain the people you need is even harder. Many lawyers can’t actually afford it. There is a world of difference between a single lawyer handling his own little portfolio of clients v. building a real firm that can handle hundreds of clients, day in and day out, with minimal hiccups.
Even within very large firms, you might run into lawyers who are, effectively, solos. By this I mean that they lack the relationships/connections within their large firm to really ensure their clients will get served properly. Again, the clearest symptom is slowness. If clients are regularly having to follow up with a lawyer, solo or within a firm, because stuff is not getting done, that is a clear sign that you have a startup lawyer who can’t scale.
An easy way to vet a startup lawyer for whether she/he can scale is:
- Analyze their website: are their other lawyers/professionals with similar experience on their roster? Some solo lawyers, sensing that smart clients know they can’t scale, will brand themselves as a firm, when really their “firm” is nothing more than… a website.
- Ask them: when you’re not available, who else do you have quick access to do ensure my work gets done? Ask for names, and diligence.
- Talk to their clients: find out what companies in your network already work with them, and ping them for feedback (on your own).
Small businesses who may need their lawyer for one non-urgent thing every year or so don’t need to worry about their lawyer’s scalability. But tech startups are, by nature, high-growth and need regular, consistent legal bandwidth. And changing lawyers/firms can be a serious pain, and lead to mistakes.
Hire a startup lawyer that can scale to the level you expect your company to be within the next 5 years, or you’ll regret it.
Originally published at Silicon Hills Lawyer.