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Ask HN: Does having the right corp lawyer help you find investors?

7 points by ucdaz ↗ HN
I was recently approached by some lawyers in the Valley telling me that I should incorp my startup. The told me they'll defer the cost until we get funded, and they'll introduce us to their investor community. With that said, do lawyers really help you get funded or is it just a bunch of horse Sh$%!?

13 comments

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pg
That's true. A lot of intros to investors come through lawyers.
ucdaz
Thanks Paul. Oh and I know you like to eat cheese. Anyways, so should I be picky about which firm to go with? Does anyone have any good law firm recommendations in the Silicon Valley?
pg
http://www.paulgraham.com/angelinvesting.html#f2n
ucdaz
Any cons with large firms like Wilson Sonsini, meaning would they charge an arm and a leg once a startup gets funded?
ivankirigin
Large firms have done a lot of business with a lot of companies. When we needed some urgent advice, our big firm couldn't give advice specific to the situation before a conflict waiver, which delayed things significantly.

We don't use them anymore, and I don't think there is much value added to justify the added cost of a large firm.

Do go with vanilla docs though.

pg
The top firms are expensive, but worth it. It's usually not worth trying to economize on lawyers unless you really know what you're doing. Once a startup is established, it can make sense to try cut down one's legal bills by e.g. hiring an in-house counsel, but when you're inexperienced you don't want to be cutting corners in the legal dept. Better to overpay your lawyers than end up with some disastrous term in your funding agreement.
robg
Isn't there a conflict of interest if a firm is introducing you to their investor network but then helping to craft the agreements? Or is this degree of cross-fertilization common and even necessary?

Still, if there's that prior relationship between the firm and some investors, how can we be sure our interests are being best represented?

pg
If they're representing you, they're legally required to act in your interest, and they take that pretty seriously. I can't think of a case among all the startups we've funded where the startup felt their lawyers were selling out to the investors. There have been all sorts of disputes with lawyers (excessive bills, slowness, incompetence), but never that.
ivankirigin
Technically, they are representing the company, not you personally. It is an important difference that doesn't really come up often AFAIK
icey
You should be picky. I've had an instance where a lawyer ruined the prospects of getting a startup funded by acting in a very inappropriate fashion while "helping out" during fund seeking.
grellas
The VC introductions are an invaluable asset offered by the large law firms in the startup area - if your business model is capital-intensive, you will find no better way to open doors to this type of funding.

The big-firm model is highly VC-focused, though, and can be somewhat inflexible for bootstrapping types of ventures. It all depends on where your company is at.

alain94040
The best introductions to VCs come from entrepreneurs who made them millions. Lawyer intros are definitely lower on the list, but far better than cold calling.

Deferred costs is a fair deal. Of course, the bill will be large once you have to pay it, but at least it's deferred. Just make sure that it's truly deferred forever. If it's deferred for 6 months or funding (whichever comes first), it's a bad, bad, deal. Debt bankrupts companies.

eagle
Lawyers and investors aren't particularly tightly linked in Silicon Valley, so I wouldn't consider their investor community in making a decision about using them. Besides, if the investor were tightly linked to the lawyer, you couldn't count on the lawyer to represent your best interests in a financing with that investor.

Larry Sonsini can help you meet investors, but if you can get Sonsini to represent you, you're probably already past the hurdle of meeting investors. Look instead at the quality of their work and what they will cost you.