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How to manage legal expenses?

We are a B2B SaaS business in proof-of-concept stage, and I'm trying to budget for legal expenses. I recently had 2 consultations with my lawyer about drafting sales contracts, and those alone took out a material bite from my working capital (~$1000). What should I expect to spend on legal at this stage? What are some strategies to manage these costs intelligently?

22 Replies

Mark Buckle
1
0
Mark Buckle Entrepreneur
Co-founder and CEO at Amondo Ltd
I suspect the principles are no different between the US and the UK - work with a firm that is used to the start-up environment and on that basis offers up fixed price menus for most things. And distinguish between company secretarial matters and supporting deals. Not everyone that is on-price for the day-to-day will necessarily have the skills/experience to back your corner during a major fundraise.

And avoid the vanity of Top Tier legal firms for as long as possible!
Chicke Fitzgerald
1
0
Chicke Fitzgerald Entrepreneur • Advisor
Game Changing Strategist, Advisor & Technologist | Board Candidate | Zigging where others Zag
Oh John, that is just way too much for a consultation. I have an attorney on my advisory board that is doing work for a reduced rate and taking equity as well for his advisory role. He brings a ton of business experience to the table as he had been the Chief Legal Counsel for an international telecoms company (we worked there together on a merger).

Another option is to go to the local incubators and find out who they use for legal work. You want someone that understands start ups.

AVVO is a great resource to ask legal questions without paying for the advice. You may have to wait 24 hours or so to get the advice, and you still have to vet the advice that you get (often you get 5 or 6 responses), but it is a terrific resource. It was founded by a guy that I worked with on a project with the Board of Directors of Orbitz.

Also, there are many agreement templates available on the Internet and so you can start from that point, rather than from a blank sheet of paper. That saves legal costs.
Lisa Pomerantz
0
2
Lisa Pomerantz Entrepreneur
Business and Employment Attorney, Arbitrator, Mediator and Trainer
To manage legal costs there are several factors to consider: the attorney's experience and competence, billing rates and policies, and most importantly, whether that attorney can be a valuable trusted advisor. -- Lisa Renee Pomerantz Attorney at Law 80 Orville Drive Suite 100 Bohemia, NY 11716 Tel: [removed to protect privacy] Fax: [removed to protect privacy] [removed to protect privacy] www.lisapom.com The attorney you need to help you succeed!
Dan Gagliardi, P.Eng.
0
0
Startup guy - Customer success, Product Strategy, Operations
John, are there any entrepreneurship centres in your city, state that might be able to help with standard templates, etc? Other startups can be a great source of "been there, done that". I've had success in the past by reaching out to similar startups either in my area or through LinkedIN, etc. I normally reach out to learn more about them, how they operate, how they mitigate costs and in some cases, that discussion led to a discussion about documents and resulted in some sharing between companies. Maybe your lawyer is too senior for you right now when a junior lawyer may be more appropriate. In the past, my lawyer gave some of my requests to one of his subordinates which would result in more cost effective fees and still yield legal language and documents that protected my company's interests, etc. At the end of the day, it's a necessary expense. Good luck! -- Dan Dan Gagliardi, P.Eng. Http://ca.linkedin.com/in/dgagliardi Sent from Outlook
Joe Albano, PhD
0
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Joe Albano, PhD Advisor
Using the business of entrepreneurialism to turn ideas into products and products into sustainable businesses.
It's easy to lose track of the fact that your ability to enter into contracts (receive money for your products and services in a way that protects your IP) is as much a part of your product as any code. It sounds like the legal work you are seeking can best be characterized as "product development" - then budgeted for and managed appropriately.
Greg Gerik
0
0
Greg Gerik Entrepreneur • Advisor
Growth & Revenue Marketing, Product Marketing, Data Fusion, Speaker
I agree with Dan. Also make sure the attorney or firm has experience with SaaS and B2B startups. In the early phase where you are you can use the minimal work you need to set the stage for a longer term relationship.
Your business model will require constant attorney guidance for B2B SaaS especially with your target customer. It will need to be built into the cost of sale and either you can find an attorney willing to take equity or join your board, or find a firm that will work on a fee basis. At my last start-up, we hired a jr. attorney in-house that had guidance for larger issues from an outside firm. This saved thousands in terms of costs as almost every deal required attorney review - and your model will end up being the same.
If you try cheap alternatives to experienced SaaS, start-up legal advice and the deal does not work out well, it can cost you a lot of money. I have seen this from both sides of the vendor, customer relationship - and as an attorney representing one. If I can help point you towards some potential sources of advice, let me know! Good luck and congrats for getting started!
Tim Parks
2
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Tim Parks Advisor
VP of Growth at UpCounsel, Inc.
Hi John- There are some great threads on this topic already, but if you are looking for options you can also try using services like UpCounsel to get free quotes from attorneys for specific or ongoing needs. Full disclosure I work at UpCounsel, but your use case is one of the most common we come across. While there are other, more complex ways to manage your legal budget, (deferred fees, equity kickers, etc) I will let the rest of the community handle those. If you have any questions happy to connect you with someone on our team who works with tech founders to map out their legal budgets.
Chicke Fitzgerald
1
1
Chicke Fitzgerald Entrepreneur • Advisor
Game Changing Strategist, Advisor & Technologist | Board Candidate | Zigging where others Zag
Further to my comments before, even during the 20+ years that I worked in corporate life (mostly in international joint ventures), I did the bulk of my own contracts work, then submitted it to the legal department for their review. I formed deep relationships with those lawyers and they appreciated the time that I took to educate them on the business issues and goals of the agreement and that they didn't have to start from a blank sheet of paper every time.

Annick Fuchs
0
0
Annick Fuchs Advisor
Startup lawyer in the Silicon Valley and Europe, ex Director Legal PayPal
Hi John - adding my two cents: agree with others here to try to find a model that gets away from hourly charge - at least for your more day to day work. I offer for example a monthly retainer that covers ANY legal work of my clients in that particular month. Or flat fees for any given task. I focus on legal for startups. If I were you - and I am a startup just like you right now- I would look for these models. They give you security of expense.
Let me know if we can help in any other way. Happy to advise. Best Annick
Suzie Dingwall Williams
1
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Lawyer for Entrepreneurs and Investors
The answer to this question depends in large part in how you assess your legal needs. Are they "typical" needs for a startup, or are there nuanced founder issues or legal risks associated with your business model? If you believe legal services are a commodity, then you are price elastic and you can manage your legal costs by price shopping or by finding a lawyer who does a "review" function. This means you will do a lot of heavy lifting yourself.For me, that kind of legal work holds no interest. Like most seasoned startup lawyers, I like to work with companies that have interesting business models, ones that have legs and may be around for longer than 24 months. We're looking for relationships, not 24-month flings, and we are a lot more flexible on price and when we are paid when we think we've found The One. For that kind of opportunity, I will dig in, understand revenue model and draft contracts and work out the price - either in equity and cash, or cash. So, my advice is - pick a lane. Either you are willing to invest in a committed relationship with a lawyer (in which you both are mutually incented to keep legal costs as low as is practicable) or it's last call and the lawyer still standing at the club will do, as long as the price is right.
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