How Startups Can Make the Best Use of Lawyers
No startup wants to get bogged down in legal management. A principled proactive approach can keep your legal house in order and avoid pitfalls that will slow the company down. Apply the framework described in this blog post to strike a balance between cost, speed and quality for legal services.
I'm John Gauch, a consultant with extensive experience in business operations and growth. I specialize in helping startups implement both strategies effectively. As a fractional COO, I work with founders and CEOs through each step, tailoring solutions to your unique needs and objectives.
If you’re spending a ton of time and money on legal management, that’s probably too much. But little to no time or money at all is probably not enough.
In this post I’ll lay out a simple tried-and-true framework startup CEOs and founders can use to help you decide what kind of legal advice and support you need to keep your legal house in order and avoid pitfalls that will slow the company down.
The typical startup requires responsive and informed legal advice and a flexible and lean framework for getting it. I won’t dwell on the first two points. This is not the time to have your uncle who does real estate law draft and negotiate your $8 million Seed-round financing documents. And you’ll go mad waiting to hear back from a sloth-like advisor when the business is not yet breaking even and every second counts. Enough said.
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At my prior employer Axiom (a venture-backed innovator in the legal space), we collaborated with the General Counsel of Fortune 500 companies to restructure and reorganize the work of their legal departments. The same basic principles offer an excellent framework for startups that can evolve as the business grows, from the early days through Seed and Series A financings and beyond.
Check out the three-step approach and an example of how you might organize your legal operations.
But first, legal AI is captured in the model under “Alternative Model Providers.” This category captures any alternative to traditional law. Watch this space. There’s no doubt in my mind that legal AI specifically will be moving from the Efficiency category to the Experience category over time. It’s just a question of how fast.
Additional factors to consider:
Account for the complexity and costs of coordinating these legal activities. Theoretically, it might be more effective to split up projects among three tiers of providers, but if that’s going to add a ton of overhead to your operations, you might want to keep it to two.
A single project can be split across multiple categories. For example, you need an immigration visa for a new team member. Your Chief Financial Officer or Chief Operations Officer is comfortable navigating complex regulatory schemes. One of them might prepare the visa application, and then you could have an immigration lawyer review it to make corrections and suggestions.
There are functional and emotional elements to the decisions you make in building your framework. Let’s say you’re the CEO of a post-Series A company. You have several top-tier VCs in your cap table and have blown past the $10M revenue mark. For your bet-the-company matters, you may want to select an AmLaw 100 law firm with startup credentials not only to benefit from their expertise and infrastructure. You may also choose them to benefit from their brand and the imprimatur the firm brings with its counsel and work product.
From the beginning of your company’s life, pay particular attention to company formation, founders’ agreements and equity matters generally; intellectual property (IP); and fundamental regulatory and compliance issues. To take one specific example, having people sign confidentiality and IP assignment agreements is critical. If you neglect ongoing corporate formalities, you might be able to fix that up later, but it will be a nuisance, and it could lead to problems—if you were to issue more equity than you have authorized, for instance. Commercial agreements might fall in any tier of the framework above, depending on your business and the individual transactions, and should be treated accordingly.
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There’s always a chance a legal issue can arise that knocks your startup journey off track. Still, a proactive and reasoned approach to handling legal services can optimize the quality and cost of the advice you receive--improving the odds of long-term startup success.
Use the illustration above and consult your trusted legal advisor(s) to devise a legal management strategy specific to your company and its lifecycle stage.
I’m always happy to chat about how I help startups. I’m also glad to be in touch purely for information sharing and networking purposes.
Nothing in this blog is intended to be a substitute for legal advice from an attorney knowledgeable about your unique situation.Axiom: Discovering the Benefits of Fractional Talent
Whoever said we have to hire people in arbitrarily determined long-term, 40-hour-per-week blocks of time? Axiom has been a pioneering innovator in the legal industry and the way we work. Their experience shows the benefits of new work approaches such as bringing on fractional talent that are especially valuable in challenging economic times.
Photo by Fox from Pexels.
Are you new here? I’m John Gauch – a seasoned fractional COO, sales coach and mentor. Over 20+ years, I have applied my growth and operations skills to help dozens of startups, building one high-impact venture to nearly $100M in revenue and a second to exceed that benchmark. I began my career as a tech lawyer in New York City. I developed my expertise in progressive roles in business development, finance, sales, marketing and product, working along the way with companies like Amazon, IBM and Microsoft.
I hope anyone dissatisfied with their work—and company leaders everywhere who aren't satisfied with how they and their teams are doing—are exploring the different options available today for bringing talent into an organization.
I didn't know it then, but my path to working as a fractional COO began over 10 years ago when I joined the Benchmark-backed startup Axiom.
Axiom was a pioneering innovator in the legal services industry when I opened the Boston office as General Manager. We offered attorneys—alums of top law schools and leading law firms—a compelling alternative to the daily grind of traditional law firms and the conventional employee-employer relationship (working for a single company full-time).
We offered attorneys a new career option. They could work in-house part-time or full-time:
For one or more companies simultaneously (or “fractionally”).
For one company for a length of time, then another, and so on.
This approach gave them way more control over their lives. Our attorneys learned faster than other in-house lawyers by drawing insights from one client that sparked creative solutions for another. Freed from the sometimes problematic boss-subordinate power dynamic, they could also be more objective and honest than employees often feel they can be.
Attorneys loved it.
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Because our attorneys were so busy (working, not idling on the bench), and our operational model was so lean, it was economical for our clients to hire them. Our rates approximated what a company might spend to hire and employ a full-time attorney.
Clients received top-quality support for an economical price. Sometimes our clients had struggled to hire attorneys for full-time positions of the same caliber we provided. Clients could bring on just the right talent for just the right amount of time to close capability and capacity gaps. They didn't have to only hire people in arbitrary long-term, 40-hour-per-week blocks.
Clients were thrilled.
Read also: How Startups Can Make the Best Use of Lawyers
Fast-forward to 2019, and I found myself living and working the Axiom way as a fractional COO.
I never doubted the approach's benefits when I recruited Axiom attorneys or sold our services to Fortune 500 General Counsels (GCs). Our attorneys and corporate clients talked about the advantages all of the time. Now that I've been working this way for several years, I've experienced the benefits firsthand and know how helpful it is to companies, especially in challenging economic times when bringing on new employees can be an expensive risk.
A ton could be better about work today, and I'm not advocating for throwing away the traditional employment relationship. But it's exhilarating to have been, and to be, a part of the movement innovating work models. I encourage more CEOs and founding teams to explore what Axiom's clients have known for over a decade.
If you’re a founder, and you feel it would be interesting to chat, I’d love to connect. Learn about my services and please reach out any time that it makes sense.