How to choose the best lawyer for your tech startup

startup lawyer

Daniel Van Binsbergen is the CEO and co-founder at Lexoo, a curated legal marketplace, which helps businesses find fixed-fee quotes from independent lawyers. In this article, he explains what tech startup founders should look for in a lawyer.

As the CEO of Lexoo, and a City lawyer for more than five years, I was often struck by the lack of transparency for startups seeking legal work.

For large companies with in-house legal teams, it was fine – but startups would often have to navigate very different proposals from firms with little explanation as to why they were charging different fees or what results they could expect.

Since co-founding my company, I’ve seen a huge rise in the number of lawyers specialising in startups – but there are still plenty of pitfalls founders can find themselves in. Here is my advice on how to choose the best lawyer for your startup:

Be careful with DIY law

Often, entrepreneurs want to handle the law themselves. Sometimes that’s fine. But often it’s a mistake.

When you’re building a startup, it’s worth getting the right help in at the start.

There are many examples of this: not taking the time to have proper contracts drawn up can be a costly mistake. It is especially important when it comes to raising investment that you have the right shareholder agreement in place to minimise the risk of a dispute at a critical time. (For more information on this topic, download UKTN’s Investment Agreement guide, here.)

Law is fundamentally a specialty field. And entrepreneurs should – for the most part – leave it to the specialists.

Independent lawyers

Generally speaking, when you’re starting out you don’t need a lawyer from a top City firm.

You need an expert in that field who can do the job for a reasonable price.

A smart move is to find an ex-senior associate or partner from a top tier firm who – for lifestyle reasons – has started out for themselves or joined a small ‘boutique’ law firm.

Their overheads are likely to be far lower. As a result they can offer the same quality service but charge much lower rates.

Avoid ‘super lawyers’

If you need help with two different legal matters, say shareholder agreements and visa applications, you should look for separate specialists in those fields.

I’d also check if they’ve worked with a startup before. Ask for examples of other clients with your profile they’ve helped perform the same legal task.

For example, what other startups have they helped through their first Seed investment round? This way, you know it should be a smooth process, and that the lawyer is more likely to understand your mindset.

Avoid ‘super lawyers’ – if they claim they do corporate law, employment law, intellectual property law, international law, human rights, and immigration I would treat this as a huge red flag.

Go fixed-fee

Many lawyers still like to charge by the billable hour but when you’re bootstrapping, this simply doesn’t make sense.

When you contact a lawyer, I’d recommend defining the scope of work carefully and asking for a fixed quote.

Some lawyers may refuse but many won’t, particularly if they’ve worked with startups before. I’d also ask for an estimate of disbursements – any costs the solicitor will incur in helping you – since depending on the type of work, these disbursements can be quite large, such as with commercial property leases.

This is a common way for fees to rack up when you’re new to dealing with lawyers. Asking for an estimate upfront should ensure you don’t run into any expensive surprises.

As with any purchase, it’s always worth asking for multiple quotes. That said, the cheapest quote isn’t necessarily the best. I’d focus on the lawyer’s experience with similar companies and legal work first and price second.

Beyond the Magic Circle

Some people are attracted to big law firms.

If you are thinking of using one of these, there’s a few things to be aware of. The obvious thing is that big law firms cost a lot of money, which should be no surprise. They hire exceptionally talented lawyers, but the way they’re structured means the majority of your matter will be carried by a talented but less experienced junior lawyer, who will be learning on your time (for the most part these firms charge by the billable hour rather than fixed fee).

A good tip if you do meet with a partner at a large law firm is to ask to meet with the person who’ll be predominantly handling your case.

That said, large firms might offer you deferred fees or put your founder agreements on credit, in the hope that you’ll come back to them for when you IPO.

I’ve heard cases of big firms asking for equity in lieu of payment – although this is more common in the US than in the UK.

Do your own research on whether that makes sense in your situation – unless your business has unusually complex legal needs, it usually doesn’t.