World Business

It’s expensive but will pay off in pitfalls avoided. Find an attorney you trust and who will pay close courtesy to your case

by Tom Taulli

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When I raised the capital in favor of my first gathering, I didn’t use a lawyer. My main reason was the cost. Why spend $400 an hour? How could somebody be cost that much? And how could a small party pay for it? Well, it was a huge mistake. In the end, as of my sloppiness, I had to spend thousands other thing in legal fees than I would have had I hired an substitute at the start. In fact, my company toward fell into two parts. Bottom line, I strongly recommend you hire an lawyer to help you with the fund-raising process (BusinessWeek.com, 7/14/08). In this column, I explain how to find one and what to look for in the hiring process.

Relationships and Internet resources. As a great deal of as possible, talk to entrepreneurs to get some advice and contact names. You might even talk to venture capitalists. After all, they know the top jurisprudence firms.

And be sure to leverage online networking services, of the like kind as LinkedIn and TheFunded.com. Another great device is Avvo. By typing in your incorporated town and "venture capital," you’ll get a listel of suitable attorneys. The profiles include number of years in the profession, disciplinary remembrance, awards, speaking engagements, publications, and memberships. There is even a chart that has an estimate of the time the lawyer currently spends in a specific legal area.

I would focus attached lawyers that have the following:

•An "Avvo rating" of 8 or better.

•At least 10 years experience.

•No disciplinary actions.

Of course, it’s also a good idea to do a Google search on the attorney. Any negative articles or blog posts? Also see if the lawyer has been quoted in publications or has a blog. Some startup attorneys have incredibly valuable blogs, such as Yokum Taku’s Startup Company Lawyer and Ryan Roberts’ The Startup Lawyer.

Interviews. Once you desire a short list of three or four lawyers, it’s time to set up interviews. Be careful. You should focus on the senior associate who will subsist on your account, not the partner. That’s because a more advanced partner is likely not to be highly involved in the assurance. And, this is a good thing. A senior partner should converging-point on high-level issues—not with tiny draft changes. Besides, a senior member of a firm may charge $600 to $700 through hour.

It’s also significant to do some homework adhering the basics of term sheets (BusinessWeek.com, 8/22/08) to prepare for the interviews. Consider asking the following questions:

•How important are liquidation preferences and anti-dilution clauses? Such clauses are a big mete out. Ask the attorney respecting different strategies to pine plank with them.

•What terms are not important to negotiate? Why? Clauses such as "registry rights" are not worth wasting time without interruption. But does the attorney perceive?

•Do you represent companies despite example considerably as venture capital firms? I want a lawyer who understands the one and the other sides. This should allow for a smoother trial. Besides, the VCs should be reassured.

•What are some of the companies that you have represented that are similar to mine? What worked? What were the challenges?

Hopefully, these questions be disposed give an indication of whether the advocate is capable of and creative in dealing with major issues. Feel disengage to squander one hour or in greater song on the interview. If you feel rushed, then this is a red flag. Moreover, is the attorney providing valuable feedback—or holding back on things? In other words, try to get a reason of the lawyer’s personality and style. Is this a person you can trust? A living body who will help you bestow with stressful situations?

Fees. For a Series A round, the fee is likely to range from $25,000 to $50,000. Yes, it’s a big amount, and similar to a originate, it’s tempting to pay in noncash forms, so as bartering for services or providing options or shares in the venture. However, this can get complicated. What’s more, by paying cash, it shows that you are serious. At the same time, you be entitled to high-quality service and draw on responses to your questions and concerns.

Consider the example of David Kidder, CEO of Clickable (he recently raised a $14.5 million Series B round). While edifice his company, he puts in long hours. He also expects his lawyers to be enough the sort. To this end, he has their home phone numbers. Granted, he finely makes a late-night designate. But he likes knowing he can get by heart a quick response at what time it’s needed.

Finally, it’s best to hire a lawyer considered in the state of early in the fund-raising process as feasible. Essentially, you want to make sure your company’s legal arrangements are weighty—such considered in the state of with contracts, option plans, intellectual-property protection, founder arrangements, and so on. This makes the due diligence process (BusinessWeek.com, 11/5/07) smoother, which should go a long practice in helping your company land a good deal.