By Marc Duke
Given that this is an article about law, let’s lighten the mood with a joke:
A lawyer dies and goes to heaven. “There must be some mistake. I’m only 55.” Saint Peter checks his book. “Actually, you’re late – we added up your billable hours and you’re 110 years old.”
If you are building your business, there a few certainties that you know you are going to have to contend with: ‘death and taxes’, as the saying goes. So you know at some point you will need to call upon the services of an accountant and, yes you’ve guessed it a lawyer.
And that of course is where the fun starts.
The trouble is if you are working in a startup the urge to ‘get things done’ is strong. If you are an entrepreneur you are likely to be a trend setter, comfortable with blazing a trail, quick to shrug off a ‘no, you can’t’ the last thing you want are the lawyers to stop you in your tracks.
As we all know laws are there to protect us, so whether it be IP, contract, data protection, share ownership or tax, regulation is there to ensure business can get done safely.
Additionally getting some decent legal support when big business decisions are being made can make a big difference.
A stat for you to consider: 62% percent of all startups fail due to co-founder conflict, so a solid founder agreement - while not my idea of a good night out - will certainly save a lot of pain if the idea you are working on doesn’t pan out in the way you and your co-founder had planned.
If you are develop something new having the right IP protection in place could pay big dividends in the long term.
So where do you start when you need legal support?
As with most things you ask your peers or friends for recommendations, which is a sensible enough. One thing you need to consider is do you want to risk a friendship by asking someone close to you to lend a hand or pay for a professional relationship which is strictly business? The choice is yours, but as the old adage goes ‘you get what you pay for’.
It’s likely that if you are part of an incubator, accelerator or shared workspace there will be support of sorts on offer and a quick search on Google will generate a fair few templates. However you need to ask yourself the following: is it worth my time doing this or should I pay someone else so I can focus on what will really secure my future?
Namely winning new customers, finishing developing a product or securing funding. The next hurdle is the c word – cost – as a startup you are likely to be bootstrapping your way to success but there are some things you have to spend money on. Or should I say invest in. If you are develop something new having the right IP protection in place could pay big dividends in the long term.
The trouble is how much does it cost to hire a lawyer? Yes, ask them; if you don’t get a clear answer maybe they are not the ones to help you.
I have started consulting for a startup called Lexoo; they have done something pretty revolutionary for lawyers (not two words you find close to each other). They have created a curated marketplace where lawyers provide quotes to businesses looking for specific pieces of work they need done. The service is free to use and you select the lawyer that meets your criteria most closely. The service can be a lot cheaper than Magic Circle firms, because most of the Lexoo lawyers have (for lifestyle reasons) left the larger, brand name firms to set up boutique practices charging a fraction of the cost for the same expertise. And as it’s web based it can save you a lot of time. It can also act as a great sanity check if you have asked a friend or contact for a quote too.
Whichever way you decide to go you need define the scope of work carefully and ask for a fixed quote.
For example a pre-investment startup approached Lexoo looking to have a limited company incorporated and a shareholders agreement drawn up. The quotes submitted on the platform ranged between £1,000 and £1,800. Larger firms will usually quote between £3,000 and £6,000 for this type of work. Obvious as to why you would consider the service.
However there might be times when you are not able to make that choice, for example if legal services is part of the accelerator package that you signed up to. If an investor insists that legal work is undertaken by a firm that has a strong track record in your industry, that’s fine... so long as it’s not for the investment round itself, because the firm will be duty-bound to represent the investor’s interests. You’d be wise to seek your own legal representation in this case.
Whichever way you decide to go you need define the scope of work carefully and ask for a fixed quote. You probably know more stories about lawyers billing that I have had dinners so keeping things focused means your lawyers will act as a support they should be rather than the roadblock they can be.
Ultimately the law is the law but if you know who to talk to, what to ask for and what to expect, chances are you not only great at handling lawyers but you're probably well on your way to making your business a success.
Find out about Lexoo here