Looking for A Lawyer? Choose wisely, your business is at stake, says Louis Lehot
Louis Lehot, business lawyer and partner at Foley & Lardner LLP in Silicon Valley, and formerly the founder of L2 Counsel, P.C.
By Louis Lehot
Choosing the right lawyer that fits your business is one of the most important steps you can take in today’s litigious world. Whether you are launching a new venture, pivoting to reposition your current business or have a “bet the company” challenge or opportunity, finding the lawyer that fits your unique situation is critical.
Sometimes, the best lawyer for you is the person you have known for years. He/she returns your calls promptly and has your best interest at heart. Other times, a referral from a trusted third party may be right for your situation. Whatever your situation and legal requirements, the right lawyer may be a different person at the formation of your start-up from when your company changes direction or scales to the larger size. Ask yourself, am I partnered with an attorney who can help my business grow to the next level, or fix the legal issues in the foreseeable future?
Your need for a lawyer that fits your unique business starts early on in the process. It will be well before you conceive your idea and pitch it to your friends and family, other technologists, investors, team members, and customers. Asking the right questions is critical.
What sort of entity is right for the business? Where should you incorporate? Should you establish an LLC, C Corp, S corp, partnership, or sole proprietorship?
How you set up your capital structure will matter more as time goes on. With each round of capital that you raise, you are diluted, and the stakes get higher. What you do at the outset may well determine the ultimate reckoning when you go to sell your company. How should you capitalize on your business? How should you evidence the capital that is put into the industry? Is it for common stock, is it for a convertible note? What is SAFE or a KISS? What are the terms of this security? What are the relative rights between you and your co-founders and angel investors? Your venture capital investors? How much stock should you grant for a CTO or a CEO? How much for a CFO? How much for a new head of sales?
Even before you capitalize on your business, how will you protect the intellectual property that is created? Have you filed a provisional patent application? Do you need a trademark or copyright? What sort of trade secret protections do you need? When should you put these protections in place? Do you need a domain name that matches your trademark? Is it available? What about a logo?
Just as you would not see an oncologist for a heart condition, there are different types of lawyers for various problems… How to make sense of it all? The following are important considerations that I think every entrepreneur should consider before engaging counsel to ensure the best fit for the problem to be solved.
Bandwidth & Availability
Your lawyer should promptly respond to your emails and phone calls and have a team that can service your matters on demand. Your preliminary interactions should demonstrate this. Ask, who is working on my account, and how do I reach them? Your lawyer should be available to meet with you in person or on the phone, as needed, and at a cadence to suit your budget.
You want your lawyer to be well known within the industry, to have formed hundreds of new start-ups, and helped them obtain financing, achieve revenue, enabled scaling, and brought them to exit, whether via IPO or sale. An experienced lawyer will also have seen her fair share of business failures and will steer you clear of apparent pitfalls in the journey.
The right attorney for your business will have expertise and experience relevant to the prevailing industry and environment that you hope to operate in. If you plan to disrupt an industry with brand new technology, your attorney should be eager to dive in headfirst and immerse herself in what regulatory pitfalls might lie ahead, what statutes exist or could be created, what are the risks, where is the upside, and how to optimize your chances for success.
Just as no single doctor could solve every medical problem you may encounter, no one lawyer will have every expertise. Your lawyer should have a deep network of colleagues who can address most of the legal issues your company may encounter. She should know the investor community that invests in your geography, in your industry vertical and at your stage of growth. Ideally, your lawyer also can demonstrate a network of non-legal talent that you will need, from accountants to financial professionals to engineers. Ideally, your lawyer will have clients and connections with businesses in adjacent verticals and your geography.
Your lawyer should be recognized by people you know, her peers, or organizations you understand as having some knowledge, awareness, experience, and network to help you know that your business will be in expert legal hands.
Clients of your relative size and stage of growth
Whether your company is at ideation, formation, hypergrowth stage, or getting ready for exit, your lawyer should have experience in serving companies with your problem set.
· At the start-up stage, you need more advice than at any other time, just when you have no money, and your lawyer will need to know how to get you what you need efficiently, helping you minimize cash outflows, spending legal dollars only where it counts. Most problems should be solved with three-to-five bullets of one-line answers, not multi-page legal memos. Your lawyer should have access to technology-enabled vendors and solutions so you can self-help as much as possible.
· At the financing stage, your lawyer should have a deep network and access to software tools to help you find investors while guiding you on the information an investor will expect to see in a financing process.
· At the exit stage, your lawyer should be proactively anticipating what a buyer will expect to see in due diligence, and finding and cleaning up messes before they are discovered. Your lawyer should have negotiated against the buyer and their lawyers, or at least similarly situated buyers.
Fees and Other Business Arrangements
When choosing a lawyer, some point, the discussion will inevitably turn to billing and fees. You’ll want a thorough explanation of the attorney or firm’s billing procedures. Are you more comfortable with attorneys who will bill by the hour or by the project? Are They open to contingency arrangements and alternative billing methods, both of which are increasingly popular? Also, would they consider a reduced rate as the volume of work increases? Have a good understanding of who else will be billing on the project, their fee, and what other charges you can expect. What will the attorney be handling your case, charge for travel, copying, postage, etc.
Competition among attorneys is fierce, and it is impressive how accommodating attorneys will be to get new work. However, never decide on cost alone which attorney is best for your company.
Now that you have done your due diligence it is time to engaged an attorney, sign the written engagement letter addressing the billing method and other aspects of the working relationship.
This list will not and is not intended to cover every situation or to be exhaustive. There will be other factors relevant to individual circumstances. Nevertheless, this brief list should serve as a guide in selecting an attorney. One that best fits your needs and circumstances.
To gain insights for new growth read more articles by Louis Lehot
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Louis Lehot is a partner and business lawyer with Foley & Lardner LLP, based in the firm’s Silicon Valley, San Francisco and Los Angeles offices, where he is a member of the Private Equity & Venture Capital, M&A and Transactions Practices and the Technology, Health Care, and Energy Industry Teams. Louis focuses his practice on advising entrepreneurs and their management teams, investors and financial advisors at all stages of growth, from garage to global. Louis especially enjoys being able to help his clients achieve hyper-growth, go public and to successfully obtain optimal liquidity events. Louis was the founder of a Silicon Valley boutique law firm called L2 Counsel. He previously served as both the co-managing partner and co-chair of the emerging growth and venture capital practice of a global law firm in Silicon Valley.
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