Startups · Lawyer

How should startups compensate lawyers?

Nikola Aleksić QA Tester

October 27th, 2016

Our team has an attorney that would like to work with us for a combination of cash and stock. I feel as if we should solely go the cash route. What arrangements have other startups arrived at with legal counsel for services - cash, stock, warrants, options, etc. and what stage was the startup at when the deal was agreed?

I would like to go down the personal relationship route, build some strong trust and a good relationship to potentially defer some of the big fees later on down the road once we can afford them. What have your experiences with attorneys been like in your startup journey, what worked & what didn't?

Arthur Lipper Chairman of British Far East Holdings Ltd.

October 27th, 2016

Lawyers should not be compensated with equity. Try to negotiate a royalty of x% of revenues over Y amount per year until paid. The Y amount can be greater than the normal billing schedule.

Steve Getman Partner/CTO/CIO at Flash Point Communications

October 27th, 2016

Pay them cash.  I've done equity in the past and it turned out...messy. The attorney you have may not be the one you want/need in the future.

If they want equity, they can participate in your next raise if you so desire.

Rod Abbamonte Co Founder at STARTREK / @startupHunter / @startupWay / @CoFounderFound / @GOcapital / @startupClub / @lastminute

October 27th, 2016

The better way to compensate lawyers is pay there fee. If your can not to pay enough negotiate but without stock offer.

Alyssa Martina Founder and CEO, Memloom, a digital storytelling company; Brand & Nonprofit Storyteller; Tech & Media Entrepreneur

October 27th, 2016

Deferred compensation is always an option for startups.

Irwin Stein Very experienced (40 years) corporate,securities and real estate attorney.

October 27th, 2016

Lawyers who take equity tend to be younger and less experienced. Your lawyer should be an advisor, not a partner.  If you cannot afford a good lawyer you are probably short on cash. Sell teh stock that you were going to give the lawyer to an investor and pay the lawyer's fee. 

Ian Shearer Executive Chairman at Parakeetplay

October 27th, 2016

I agree with the others. You really dont want a lawyer on the share register..for lots of reasons. If your lawyer is keen on your company they will surely do a sweet deal on your first round on the basis that they are likely to get the later stage stuff...

Rob G

October 27th, 2016

Nikola, first get really clear on what you absolutely must have a lawyer for at this stage and later stages.  Unless you are doing something unusual there should not be a whole lot that requires custom legal work. Keep the list of deliverables and hours to a minimum and work to arrange a reasonable rate and defer what you can to agreed tangible goals such as funding or revenue.