Startup Legal 101

Hacking Law Firms(we know legal kung fu)

500 STARTUPS PRESENTS

DO’S AND DON’TS• DON’T use Legal Zoom or DIY (except maybe Clerky, with some assistance)

• DON’T go for the fancy stuff you saw online (blogs, etc.)

• DON’T ‘delegate and forget’

• DON’T pay everything up front

• DO engage experienced startup lawyers, someone you feel comfortable with

• DO understand how law firms staff your account

• DO shop around, compare quotes [and negotiate rates before engaging]

• DO learn how best to interact with your lawyers to minimize ‘fee creep’

• DO use electronic signature platforms whenever possible

• DO get and review invoices monthly, even if on fee deferral

• DO learn how to read and understand term sheets and cap tables

WHAT SHOULD STANDARD STUFF COST?• Incorporation

• $2.5k - $5k

• Conversions from foreign structures are NOT STANDARD and cost more $$

• Note Financing

• $5k - $15k

• Seed Financing

• $10k - $20k

• Series A Financing

• $15k - $25k +

• Will often depend on what fee cap investor counsel negotiates

QUESTIONS TO ASK BEFORE ENGAGING!• Startup experience? Get a list of clients/references.

• Industry experience? Represent VCs as well? Can make connections?

• Full list of services that will be charged?

• Rates for lawyers and other staff members?

• Full service or specialty?

• Who will be your main point of contact?

LAW FIRM HIERARCHY; YOUR GO-TO PERSON• Partner

• Negotiate term sheets

• Strategy decisions

• Introductions

• Associate

• Most everything else• Paralegal/Legal Assistant

• Records and paperwork

• Cap table maintenance

• Logistics questions

• Secretary

• Scheduling

WHAT WILL COST MORE BUT MAY BE NEEDED?• Cleanup of previously screwed up work (big one!!)

• Deviations from standard documents

• International work (can be time consuming and expensive)

• Converting corporate structures (really varies by country)

• Intellectual Property work

• Employment work

• Other custom work (e.g., fancy vesting schedules)

THE MORE CUSTOM WORK, THE MORE EXPENSES!

STUFF TO NEGOTIATE NOT PAYING FOR!• Internal conferences or discussions

• Copies and general office services

• Standard postal services

• Records maintenance

• Standard geographic area travel expenses for meetings

• Training of junior associates

FREE 500 FORM FINANCING DOCS (THE KISS)• 500.co/KISS

• Two forms:

• Convertible Equity (no interest, not callable on maturity). Similar to YC SAFE.

• Convertible Note (interest and repayment features)

• Designed to be used as a “series” so you can raise a round on same terms

• Designed to be a bit more balanced from an investor/company standpoint

• Available on Clerky, CooleyGO and Shake, but you should complete with your lawyer

THE END

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