Quality legal representation is crucial to a startup’s success.
The legal team helps the company manage risks around employment issues, data privacy compliance, stock insurance, and importantly, negotiating terms for the company’s future financing rounds. Great legal partners are not only good at executing legal matters, but they’re also business savvy, and able to make sound recommendations that thread the balance between meeting critical compliance requirements and the speed and operating efficiency demanded at early-stage startups.
Selecting a Corporate Law Firm
Not all law firms are equipped to meet the needs of a startup, but several reputable firms offer startup programs focused on cost efficiency while having breadth (i.e. can they help you with global employment issues?) and depth (i.e. specialized patent review for your domain) to help companies scale, including supporting through an initial public offering (IPO) event and beyond.
We recommend law firms with a strong presence in Silicon Valley. These attorneys tend to be in tune with the latest venture sentiment, have seen cycles of boom and bust, and can provide insights and advice on how to navigate the current venture landscape because they have worked with hundreds, if not thousands, of startups before.
Here are some sample questions to ask when interviewing law firms from CooleyGo: “How to Choose a Lawyer for Your Startup”.
When working with attorneys (and any professionals that charge by the hour), it’s always a good idea to establish scope (in terms of estimated time required) in advance.
Working with the Legal Team
During the pre-Seed stage, OCV works with a single law firm to streamline legal functions. The team is highly experienced and understands how OCV companies operate. While the team commands “big law firm” hourly rate, we have established processes, templates, internal documentation to keep billable hours reasonable for OCV companies. When a legal question comes up (especially one that is not unique to your business), we recommend checking OCV’s Handbook for guidance first. If additional legal review is required, scope out the need with a specific ask:
As an example: “Would you be able to provide high level review for this customer contract in an hour by EOD tomorrow?” If there’s significant risk with this ask, Legal team would flag so.
Non-scoped asks and rounds of Q&A with Legal (especially when there is existing documentation in the Handbook) can result in a high bill the following month. We ask founders to exercise judgement and consider cost vs. risks when engaging with the Legal team directly.
Switching Law Firms
When switching law firms, the new legal counsel may ask the company to convert certain corporate documents such as the bylaw and equity incentive plan into the new firm’s standard template. The rationale for adopting the new corporate forms is to increase efficiency on future legal review since the team is already familiar with their in-house templates. Keeping the existing set of documents from the previous law firm will likely result in inefficiencies (i.e. time and costs) and unnecessary complications in the future.
There’s no harm in switching corporate forms at the recommendation of the new counsel. Founders should agree on expected costs for the change in advance.