TL;DR: Entrepreneurs need to be aware of the growing trend of lawyers from random backgrounds re-branding themselves as “startup lawyers,” despite having only the thinnest understanding of the subject.
Background reading:
There are two trends worth discussing in this post, both of which I’ve seen seriously hurt entrepreneurs and startups.
Thrown to the juniors.
First, one reason many entrepreneurs are dropping very large law firms for more “right sized” boutiques is that those law firms have become so unaffordable for almost any early-stage company that entrepreneurs end up working almost exclusively with very young, junior lawyers. I touched on this issue briefly in The Problem with Chasing Whales. One partner in our firm worked on a seed financing in which his BigLaw counterparty literally said on their phone call “I only have 15 minutes to spend on this deal; otherwise I start having to write off time.”
The firm you engage may have a marquee brand, but if to that firm you are small potatoes, you will end up working with that firm’s B or C-team, which will put you much worse off than having hired a set of lawyers that take your company more seriously.
Junior professionals absolutely have a place in law, but that place is not working directly with CEOs on their most strategic decisions, no matter the size of the company. It’s working mostly in the background, with real senior level involvement and oversight. When an entrepreneur is thrown to junior lawyers, it reflects how the firm has prioritized (or not) that work, even if to the entrepreneur the project is extremely important.
Fake “startup lawyers.”
But the title of this post is really about a second, even more troubling, trend. I’ve been seeing an increasing number of litigators, real estate lawyers, patent lawyers, and lawyers with all kinds of backgrounds who have suddenly decided to brand themselves as “startup lawyers.” A little tweak to the website, read a few blog posts, perhaps host a free session at a co-working space or two, and voila, now they’re ready to help entrepreneurs.
Holy crap is this dangerous. Imagine if you were talking to a doctor about a potentially serious heart condition, inquired about their experience, and then got back the following response: “well, I’ve been a dermatologist for the past 5 years, but after reading a few blog posts I decided I’d try my hand at cardiology.” Walk out the door, fast.
In the “thrown to the juniors” case, at least those juniors have some accurate, up-to-date institutional infrastructure (templates, checklists, internal firm training, partner review, etc.) to rely on as they try to help startups. But these random re-branded lawyers are essentially training on early-stage companies, while relying on extremely generalized resources (like this blog) as guidance. We see mistakes everywhere, often because we get hired to clean up the mess.
In every serious law firm with a real reputation for representing emerging companies, lawyers who call themselves “startup lawyers” are corporate/securities specialists with a strong understanding of early-stage financing, tax, commercial, IP, M&A, and labor law as they typically relate to early-stage companies. They have the depth and breadth of expertise to properly serve as an early-stage company’s “outside general counsel,” of sorts, while relying on deeper subject matter specialists when needed.
But a litigator or patent lawyer who read a few blog posts and stayed at a holiday inn express? Disaster. As I’ve written many times before, “startup law” is largely built on contracts, and the entire point of contracts is that they are permanent unless everyone involved agrees to “fix them.” There’s no “v1.1” update to fix bugs. That means the iterative, “move fast and break things” “we can fix it later” culture of software development is the last approach anyone in their right mind will apply to legal issues.
Stop treating entrepreneurs like suckers.
Ultimately, what these developments reflect is an underlying mindset among lawyers (and other market players) that “startup” is synonymous with “little shit companies.” First-time entrepreneurs may be very smart, but they don’t know what they don’t know, and they rely on their ecosystems and advisors for guidance in almost every area. It’s the same problem that leads them to get pushed to hire captive lawyers who really work for their investors, instead of hiring independent counsel that will actually do its job.
Just throw a junior, or a random lawyer who managed to maneuver into a few referrals, to them; they’ll figure it out. They’re just a tiny company anyway. Whatever.
So my request to the broader ecosystem is: please, stop referring entrepreneurs to your random, local lawyer friend who decided to take a stab at this “startup law” thing. That’s not how this works, and you are hurting real people, building real companies with long futures built on the foundations put in place by these fake advisors.
And to entrepreneurs: be careful out there, and do your diligence. Many of us know that you wouldn’t quit your job for, or pour your life savings into, a “little shit company,” so align yourself with an inner circle of people who think accordingly.