Inc Well | Small Business Advice for Chicago Entrepreneurs
A how-to blog for Chicago business

How to Lawyer Up Your Startup

View Comments (
)
|
Email
|
Print
How to Lawyer Up Your Startup

Getty Images/Tetra images RF

Located within Chicago's most prominent universities, the legal clinics are run by experienced legal counsel and staffed by upper-level law students. In terms of fees, these clinics are by far the cheapest option but the scope of legal issues these clinics can handle is relatively small. If you're simply looking to setup an LLC, or have a contract to review, look no further. However, don't expect complex, multi-tier venture capital deals to be structured at your local clinic.

Esther Barron

"We provide excellent legal services at an affordable rate."

Firm: The Entrepreneurship Law Center, Northwestern University School of Law's Bluhm Clinic

Focus: Provides transactional legal services to entrepreneurs in the Chicagoland area. Serves for profit businesses as well as not for profit organizations.

Education: JD, Northwestern University School of Law '95

Notable Clients: Give Forward, Swipe Sense, Buzz Referrals

Fee Structure: Charges for profit clients an initial consultation fee of $500 and bill on a per project basis.

Tip for Founders: The relationship between an entrepreneur and her lawyer is so important. Entrepreneurs should be sure to find a lawyer that has the right fit both in terms of personality and practice area expertise. Chat with former clients to learn about their experiences with any lawyer you are considering engaging.

Heather Harper

"One of my missions is to get clients to the right attorneys. I'm the first step. Come to me and I can help you get from here to there at a really affordable rate and be very accessible while also educating you."

Firm: Entrepreneurial Law Clinic, Law Offices of Chicago-Kent College Law

Focus: Transactional matters common to growth companies, including but not limited to choice of entity and entity formation, contract review and drafting, corporate governance issues, review of leases, researching legal issues as appropriate, and trademark searches and filing. *Chicago-Kent also has a Patent Clinic.

Education: JD, Boston College Law School '06

Notable Clients: Entrepreneurs Unpluggd and Rentalutions

Fee Structure: Project-based flat fees. Does not defer fees. Does not exchange equity for services.

Affiliations: IIT Entrepreneurship Academy | Knapp Entrepreneurship Center

Tip for Founders: If you feel the need to be bashful about sending something to your lawyer, then maybe you're not with the right lawyer.

Erika Pfleger

"The goal at our clinic is to help for-profit entities that could get caught up in regulatory red-tape and that could not get off the ground if they didn’t have legal counsel. We focus on low-income entrepreneurs with the goal of helping those who couldn’t otherwise afford legal services."

Firm Institute for Justice Clinic on Entrepreneurship, University of Chicago Law School

Focus: Represents lower-to middle-income entrepreneurs in the inner city. Business organization, licenses and permits, agreements and leases, regulatory and zoning compliance, copyright and trademark protection and employment.

Education: JD, Yale Law School '00

Affiliation: The Institute for Justice

Fee Structure: Free!

Tip for Founders: The most important thing is that [the entrepreneur] has identified who their market is and what makes their product different otherwise the legal work can be premature.

The Legal Lone Wolves

Second on the menu are the solo practitioners. These legal mavericks effectively act as outside in-house counsel. Not bound by the complicated bureaucracies and exorbitant overhead costs of bigger law firms, these attorneys are extremely flexible in terms of fees and work processes. Also, because these attorneys are business owners and entrepreneurs themselves, startup clients may find it easier to relate to them.

Ken Obel

"I have been a company founder in my own right, and I continue to be entrepreneurial in my legal practice: in risk-sharing billing arrangements, use of technology, and the desire to do things the better way instead of the same old way."

Firm: goodcounsel

Focus: Counseling growth-stage enterprises. Corporate development, business development, M&A, private investment transactions (including securities law counseling), contracts, general commercial counseling, IP matters.

Education: JD, Yale Law School '95

Notable Clients: Right at School, Zaplee, MightyNest

Fee Structure: Fixed fee basis in a lot of cases, determined after evaluation of the matter. Will consider deferred fees but generally disfavor them. Will consider equity for compensation.

Tip for Founders: "Deferred fees are a lot of times the product of lawyers proposing to do too much and to charge too much. First, determine what legal services are necessary right now and what can be phased in down the road if they get down the road."

Darren Green

Firm: Law Office of Darren Green

Focus: Business formation, angel and venture capital investment, IP, contracts and M&A.

Education: JD, UCLA Law School '94

Affiliations: Adjunct Professor at Northwestern University Law School

Fee Structure: Typically starts with a basic hourly rate but is not opposed to flat fees for certain defined projects. For capital raises and similar transactions, has also agreed to bill at a lower hourly rate until such time as the deal closes, at which time there is a "catch-up" or similar payment.

Tip for Founders: "Be very stingy with your equity early on. If you believe in your company and you think it's going to be successful that's the most expensive service you're ever going to buy."

 

The Legal Boutiques

Next rung up on the fee ladder is the boutique and mid-sized firms. Unlike the solo practitioners, these firms have multiple attorneys with specialized expertise. Unlike the mega firms, boutiques are still likely to be very flexible and creative with its fee arrangements.

David Morris

"Our firm is comprised of attorneys who were trained at the nation's best law schools and who previously practiced at major national law firms. We provide sophisticated legal services in a streamlined boutique setting, at hourly billing rates that are generally 25-30% below the rates charged by the firms at which we previously practiced."

Firm: Fox, Hefter, Swibel, Levin & Carroll, LLP

Focus: Corporate and securities law and corporate finance. M&A, private equity, securities, banking and finance, trading and commodities law, emerging growth companies and general corporate matters.

Education: JD, UCLA School of Law '91

Notable Clients: Appolicious, Blueye, Enjoy Life Natural Brands

Fee Structure: Alternative fee arrangements to start-ups on a case-by-case basis.

Daliah Saper

"The advantage of coming to a small firm like mine is that you know what you're getting. You're going to get super specialized knowledge for certain areas of law."

Firm: Saper Law Offices

Focus: IP, social media, litigation, contract negotiations, drafting licensing agreements and entity creation.

Education: JD, University of Illinois College of Law '04

Notable Clients: Red Frog Events, Tech Cocktail and Code Academy

Fee Structure: Trademarks LLC and basic contracts are subject to flat fees. Most other matters are subject to an hourly rate at $250. Exceptions apply for complex litigation or IP issues.

Tip for Founders: You have to be willing to have that uncomfortable conversation between the founders when you determine how much each has contributed to the company. The earlier you have this conversation, the more headaches you can avoid.

Bart Loethen

"Synergy Law Group has been in this space for 18 years, as long as anybody now working. I feel we are at least one of the top firms, if not the top firm for start-ups in Chicago, as is demonstrated by our track record."

Firm Synergy Law Group, LLC

Focus: Corporate Law, Securities & Finance Law, M&A, Technology & Licensing, Real Estate and Litigation.

Education: JD, University of Illinois College of Law '94

Notable Clients: Juhl Wind, Inc.

Fee Structure: Generally, does not offer deferred fees. We offer fixed fee arrangements for certain items, such as corporate and limited liability company formation and option plans. We try to be flexible on other matters. Companies may pay with a percentage of equity based on how much funding it being raised and who they are raising it from.

Tip for Founders: To the best of your ability, know where you want to go. Also, have the founder's roles pretty well-defined and what it takes to earn that equity.

Tricia Meyer

"We have built strong relationships with many fabulous mentors and funding resources so that when our clients are in need we can provide appropriate introductions. We want our clients to succeed as much as they want to succeed so we do what we can to help make that happen."

Firm Meyer Law, Ltd.

Focus: Entity creation, commercial transactions and employment-related matters. Advising buyers and sellers in the technology, telecommunication and financial services industries.

Education: JD, John Marshall Law '01

Notable Clients: Model Metrics, HaveMyShift, Fig1

Fee Structure: Offers flat fees and hourly rates, with time estimates, depending on the transaction.

Tip for Founders: Attorneys have a tendency to be very risk averse. But they should not be there to kill the deal, they should be telling you what the real risks are and the likelihood of those risks.

 

The Giants

They are called "full service" for a reason. These firms can take entrepreneurs from the ideation stage all the way through to IPO. Big firms are undoubtedly going to be the most expensive option within the spectrum; however, the work gets completed by a team of people, each with a specific expertise. The theory is that big firms can quickly answer questions efficiently because of the amount of specialized associates. *For purposes of this article, we are qualifying "big firms" as any firm with 50 or more attorneys.

Ted Wern

"At Perkins there is limited bureaucracy for emerging company lawyers. The firm structure at Perkins allows an enormous amount of flexibility within the firm to choose what clients to work with and what work to do for them. An additional advantage of Perkins is that they can often outsource work to highly skilled attorneys within Perkins in lower cost markets where the cost structure and rates are lower. Those savings are ultimately passed on to the client."

Firm Partner, Perkins Coie LLP

Focus: M&A, private equity, venture capital, early and late stage equity financings, joint ventures, strategic alliances and general corporate counseling.

Education: JD, The Ohio State University College of Law '00

Notable Clients: Box.net, Cloudera, Animoto

Fee Structure: The startup discount consists of deferring fees for an agreed period (typically between 3-9 months) or when the company closes a financing or otherwise generates sufficient revenue. Will exchange equity for services on a lawyer-by-lawyer and case-by-case basis.

Tip for Founders: Founders need to be really straight forward in the early stages of negotiations regarding formation and equity matters. Being passive aggressive is really bad and it will only build.

Innovative Tool: StartupPerColator: Perkins Coie's free legal document generator for startups. In-house investment capabilities.

Greg Grove

"There’s an entrepreneurial culture here. Culture comes from the top down. We understand what it’s like to be a business person. Given our size, I believe we are at the absolute lowest billing rate you can get to and still have all of the expertise that any high growth company could reasonably need to call on."

Firm: Principal, Much Shelist

Focus: Private equity, venture capital and corporate transactions and counseling.

Education: JD, Harvard Law School '95, SB (Electrical Eng.), M.I.T., '92

Notable Clients Voxsup, Noblivity, Blossom Coffee

Fee Structure: Generally bills on an hourly basis, with free initial consultations and discounted hourly rates for startups and early- and seed-stage venture capital and angel investors. Fixed-fee quotes are available for commonly needed but sophisticated tasks like compliant privacy policies and customized website terms of use, with those up-front fixed quotes varying by level of complexity and customization required. The firm is open to creating alternative billing structures to meet specific client needs.

Tip for Founders: Successful entrepreneurs are open to constructive criticism, they're coachable, they’re able to learn from others and are willing to change their own ideas if they find something better.
Affiliation: The Founders Institute. Much Shelist makes free deferral available to Founder Institute companies.

Galen Mason & Christopher Cain

Firm: Foley & Lardner LLP

Focus Software issues and digital rights, information technology agreements, M&A, private equity, venture capital, cloud computing (Chris). Employee benefits and executive compensation practice (Galen).

Affiliation: Catapult Chicago is located in Foley & Lardner. It provides some free legal services, facility support and hold weekly office hours.

Notable Clients: StyleSeek, Eved, VLinks, Media

Fee Structure: "Fee realignments" so that when clients succeed, the firm will be rewarded. Will defer fee up to $50,000, tied to client ultimately raising a certain amount of money. Generally pegged in the several hundreds of thousands of dollars. Client can elect to give 1 percent founders shares in exchange for about $5,000 of the deferred fee package.

Tip for Founders: "You should be paying your lawyer to think, not to type," says Galen.

Innovative Tools: Matchmaker software that facilitates connecting investors to clients. Online budget management tools that enables clients to set budgets and track their legal fees as they rack up via Foley's website. In-house venture fund.

Richard Komaiko is the co-founder of AttorneyFee.com, an angel funded startup seeking to promote transparency around the cost of legal services. He holds a degree in economics from the University of Illinois, and has studied Chinese language and culture at the University of Chicago. and the Beijing Institute of Education. He is proficient in English, Mandarin, Spanish, and Hebrew.

Kory Buzin contributed research to this article.

Leave Comments