- Checklist for Choosing a Startup Lawyer
- When a Startup Lawyer can’t scale
- Lies about Startup Legal Fees
Assuming you are a brand new startup that hasn’t even incorporated yet, you face really four options for your first interface with the legal market. Those four options are:
Automated Legal Services – like Clerky, Stripe Atlas, and Gust Launch.
Solo Lawyers – Lawyers who are self-employed and are not integrated with a firm. They might still be part of an entity with “LLP” or even “so and so Partners” on the title, but they are still one lawyer or a handful of loosely associated lawyers.
Boutique Firms – Specialized firms (with a handful of targeted practice areas) typically with 20-100 lawyers.
BigLaw – Large, multi-national law firms with hundreds of lawyers and staff.
Each of these options presents pros and cons.
For Automated Legal Services, the obvious pro is low cost. Because they cut out humans from the process, they reach price points no professional can ever meet. The con of course is inflexibility. What allows them to achieve maximum automation efficiencies is dramatically narrowing the customization available in your legal document. For very cookie-cutter scenarios with parties who just want to sign something vaguely “standard,” and move on, this can work. In many contexts, however, it doesn’t.
We think automated startup law services like Clerky, Stripe Atlas, and Gust Launch fill a valuable need in the market for very early-stage companies who simply can’t afford a firm yet, or haven’t built up enough “signals” to attract the attention of a serious set of ECVC lawyers. But their limitations are still very real, and worth recognizing.
Solo lawyers are usually a bump up in cost from automated services, but cheaper than firms. Thus their main “pro” is giving you some human oversight, and thus ability to customize. The cons are typically lack of scalability, and also quality concerns. Solo practice is a very sub-optimal structure for serious lawyers, because most good lawyers have clients who scale and end up needing a team of legal professionals to serve their needs.
So solo lawyers, at least in Startup Law, tend to lack the team resources and infrastructure to represent growing companies, which means they often focus on very small (highly budget-conscious) clients. This produces a “negative selection” issue because really good lawyers have no interest in only working with tiny clients all the time. Thus when you see a corporate lawyer who’s chosen to stay solo, there are often quality reasons behind why they aren’t part of a credible firm. The solo market is unfortunately full of lawyers who either never were able to get jobs at serious firms, or ended up being dismissed from those firms because of poor quality work. There are of course exceptions, but they are rare.
I know I may have offended a few people, but I’m just telling it like it is. Hopefully you’re the exception. Solo law works fine for practice areas with very compartmentalized projects, but not for areas where clients need scalable legal services. Emerging companies work is squarely in the latter category.
Boutique firms (E/N, our firm, is a boutique) present a step up in scalability and infrastructure from solos. The boutique market spans the scope of lower-tier firms that target very budget conscious clients and higher-end firms that attract high-caliber attorneys for high-stakes strategic guidance.
In our case, we recruit from top law schools and the country’s largest, most elite firms, but (i) our rates are about $300-400/hr lower than our top-tier competitors because we have a “lean” overhead model, and (ii) our lawyers work more humane hours, which improves their quality of life and is a big draw to get them out of BigLaw. A typical ECVC (Startup) partner at our firm bills in the $400s/hr (discounted to $300s pre-Series A), and credentials and experience wise will be equivalent (or superior) to a partner billing $800-900/hr in BigLaw. Non-partners bill in the $200s-300s per hour, with discounts for pre-Series A companies.
Our M&A lawyers are a bit higher, because M&A deals are more fast-paced and complex, but they still maintain the $300-400/hr differential with BigLaw for similar experience.
Boutiques replicate “full service” by collaborating among an ecosystem of curated specialty firms (patents, privacy, labor, etc.) instead of trying to have every kind of lawyer under one roof. Again, the lean, focused operations of these firms allow them to operate with efficiencies that multi-national, multi-specialty BigLaw simply can’t replicate.
Silicon Valley in particular is dominated by a handful of very large, very expensive firms generally referred to as “BigLaw.” These firms draw clients by publicizing their very high-profile clientele: the unicorns and decacorns that make headlines on a regular basis, and the VC firms that fund them. A bit of info on why you should be cautious about firms that represent lots of VC funds: Relationships and Power in Startup Ecosystems.
The big “pro” of BigLaw is very high scalability. These firms work on IPOs, high-profile SPACs, and very large deals requiring armies of lawyers, and scale down only for clients clearly intending to be on that track.
The “con” of BigLaw is simply that a significant segment of the tech ecosystem isn’t going to be a unicorn anytime soon. Many serious startups who are raising funding and scaling, but don’t have the elite signals and budgets to establish themselves as the “cream” of the market, end up struggling when they engage BigLaw. The rates ($800-1,000/hr for Partners, $400-700/hr for non-Partners) can crush your runway, and make you afraid to even reach out to a lawyer when you really should.
Poor responsiveness and attention is also often an issue because as an early-stage company you are competing for attention with the firm’s marquee clients. When early-stage companies end up engaging BigLaw, they often interact mostly with inexperienced junior lawyers for most matters, while the firm’s more experienced lawyers allocate most of their time to the largest projects. A 1st-2nd year lawyer in BigLaw can cost, per hour, what a Partner (with ~10+ yrs of experience) does at a boutique, which also drives BigLaw to put juniors in front of startups, because otherwise those startups simply can’t afford the bill.
It’s important to emphasize that the difference between BigLaw and high-end boutiques is often not the quality of the lawyers. Many boutique lawyers actually earn more than their BigLaw counterparts, and thus boutiques can have very high quality rosters. The difference is in infrastructure (overhead) for very high scalability and housing many specialties under one firm. Corporate boutiques, with their streamlined organizational structures and focused client profiles, typically max out at client enterprise values around $300-500 million (~Series D or larger exits), while BigLaw is designed for the largest companies and deals in the world.
The emergence of the high-end boutique law market is the first credible competitor to BigLaw in the startup space. It doesn’t mean BigLaw is going to be “disrupted.” There is absolutely a very high-end “Ferrari” tier of the startup ecosystem that needs precisely what BigLaw is designed to deliver, and boutiques can’t (and don’t want to) deliver. But BigLaw has over-shot the needs of a significant segment of the startup ecosystem. That’s left room for boutique firms to establish themselves by serving companies tired of working exclusively with mega-firms that they see as overkill, and recruiting top-tier lawyers for whom IPOs and SPACs are the last thing they want to spend their time on.