There are a number of key variables that should go into your assessment of which law firm to engage as company counsel for your startup, including their specialization, experience, reputation, rates, etc. For more on that, read the first linked post above.
But one very key issue that too often goes undiscussed in startup ecosystems – and that’s because often very influential market players benefit from not discussing it – is the trustworthiness of a set of lawyers, and the credibility of their counsel.
You can put the general advice you’re going to rely on startup lawyers for into two broad categories: (i) legal compliance (box checking, not breaking the law), and (ii) strategic advisory. For the latter, the areas where strategic advisory will be most impactful for a founder team is helping them negotiate and navigate their relationships with investors, particularly institutional VCs.
There are countless aspects of fundraising and corporate governance where a small tweak in language, or a slight change in an action, can have extremely material consequences for a founding team, including economic consequences (who makes money and how much) and power consequences (who has the authority to make or veto a decision). Professional investors have spent years dealing with these issues, and know how to navigate and use them. First-time founders do not.
For that reason, seasoned startup lawyers are often the most consequential advisors that founders rely on for “equalizing” the experience imbalance with investors. As your VCs make X offer, or take Y action, trustworthy counsel – who has observed hundreds of these situations – can be there to tell you how to respond and protect your team.
That is, of course, unless that counsel has deep dependencies on those same VCs.
A lot of startup lawyers and law firms have cleverly built referral relationships with institutional VCs, whereby those VCs sing the praises of those lawyers and recommend them to founders to be used as company counsel. Between a lawyer who does his/her job in pushing back against unreasonable VC demands and one who happily does what the VCs want, which one do you think is going to get the referrals and praise from the VC?
This is a total conflict of interest, and it harms many companies. You want lawyers who’ve worked across from high-profile investors, but who don’t work for them. Ask a law firm what tech VCs they represent. The answer will be very helpful in telling you which firms to not hire.