Startup founders are often a bit reluctant to engage with lawyers early on because they are afraid it might cost them too much. However, there are startup friendly lawyers out there and they can add value to an early stage business in numerous ways. Most good startup lawyers are prepared to invest a bit of their time into helping founders on the basis that they could well be the success stories of the future.
However, not all lawyers are suitable for startups. Many simply do not have the expertise to help or do not have a fee structure that works for the startup community. It usually comes down to a firm that has one or two partners that are passionate about startups and are prepared to provide initial support on a pro bono basis.
The reasons that I like to involve a lawyer very early on are as follow;
- They are usually very bright people with good business knowledge. I increasingly believe that they can make suggestions for business models and other complex issues. They can also do this from the perspective of knowing what is and isn’t legal.
- They can protect the company by making sure that sensible shareholder agreements are in place. They are able to get the various partners to agree something between themselves and therefore act as honest brokers.
- They can ensure that the company doesn’t inadvertently miss out on tax breaks such as SEIS and EIS. They can also ensure that they don’t fail to qualify by falling in one of the many traps.
- They can help to ensure that your company owns it’s own IP by putting the right contracts in place with employees and subcontractors and by helping with patent and trademark applications.
- They can help with the legal aspects of fundraising and support negotiations with potential investors.
So I would recommend finding a good lawyer very early in the startup process. The best will outline the ‘must do’ list and take a pragmatic view that will allow you to spread your legal costs.
Blog by Paul Dowling – Co-Founder of Dreamstake the world’s first tech startup platform to match founders with the most appropriate investors using a unique startup rating system. This allows entrepreneurs and investors to monitor startup progress and inject capital and support when most needed. Startup founders can create profiles on the platform and get direct introductions to investors. We are constantly looking for great early stage tech startups. Join here Dreamstake.