Tag Archives: Startup Lawyer

The $10,000 Sentence

You’re in a startup and everything is scarce including capital. Thus, when you encounter a legal issue (like incorporation) you conduct a cost-benefit analysis of hiring a startup lawyer.

I understand the need to ensure you are getting value for the small amount of capital you start with — I did the same thing when I hired a large firm earlier this decade for my startup. And as a startup lawyer, I’ve fielded multiple requests for a “per page” breakdown of my legal fees.

While the per-page-basis is one way to evaluate the benefit of hiring a startup lawyer, it completely ignores the only reason to ever hire legal counsel: the advice.

I’ve drafted and/or reviewed several financing docs in 2010, but the most valuable work product I’ve dispensed to startups this year are actually sentences such as:

That option grant is fine, provided we vest his shares.

Burn the term sheet unless they delete that provision.

That’s f***ing crazy.

These sentences are worth much more than the theoretical 0.1 hours billed on the legal invoice. On a straight value basis, these 3-second sentences should be billed at $10,000 (or more) with everything else at $50. (Before I get the hate emails — I’m not trying to get paid $10,000 for these sentences, I’m just trying to demonstrate what is the true benefit of hiring a startup lawyer.)

Sometimes these “$10,000 sentences” are the difference between a client failing in month 3 and getting a Series A done a year later.

The $10,000 sentence is why no matter how many “free” legal documents are out there thanks to Google or any other “kit” you’ll see on the internet, human legal counsel will never be replaced.

Long live the $10,000 sentence.

Help Me Out of the Sandbox, Please!

Since I moved from thestartuplawyer.com to startuplawyer.com, my organic visits have been down 80%. I usually get about 400 visits per day from search and now I’m floating around 100.

I’ve done a 301 re-direct and a change of address via google’s webmaster tools. I know it might take some time for Google to get me back in the game. But I also read that if my incoming links are updated the process is quicker.

Thus, if you have previously linked to my site, could you please update the link from thestartuplawyer.com –> startuplawyer.com ?

Thank you all for reading! I really appreciate it.

Startup Weekend L.A. Presentation

Here’s the presentation slides from Startup Weekend Los Angeles:

Dallas Startup Weekend #2 Presentation Slides

Thought I would share the deck I used at Dallas Startup Weekend #2. I successfully used my new iPad to give the presentation. The presentation was successful because I didn’t hold up lunch.

Moving to Austin

UPDATE: This was an April Fool’s Day prank.

I’m Gowalla-ing!!! I have decided to move from Southlake to Austin at the end of April.

After a comprehensive polling of my clients, the overall consensus was that Austin was the place to be so that I could properly scale my business.

I hope that I can assimilate in Austin successfully, even though I am a square. But I’m from Cali — and what is square in Cali is “weird” in Austin. So I should be OK.

Anybody have a reference for intrastate movers?

Acquisition of StartupLawyer.com

Last Friday, I was talking with @rylanbarnes, @jakemarsh, and @amuse about how I have wanted to obtain craved the startuplawyer.com domain since 2006. I attempted to acquire the domain before launching this blog, but ended up going with thestartuplawyer.com

Well, I acquired startuplawyer.com late last night. It points to this site for now, but this site will likely be moving over to that domain after some minor re-branding. Good thing I had a previously scheduled lunch today with my web designer guru.

Model Seed Funding Doc Myths

A variety of model startup seed funding docs have been released in the past year or so: TechStars Series AA Preferred, YCombinator Series AA Preferred, and TheFunded Founder Institute’s Plain Preferred. And as I mentioned last week, Fenwick & West and Andreessen Horowitz released the Series Seed model documents.

The standardized seed funding document movement is great and I fully support it.

So now you have more docs to choose from, and maybe more to be confused by. I have and will continue to use these document sets when a client requests. But there are a few myths about standardized seed funding docs, both in terms of their use and their effect on the legal landscape:

Myth #1: Startup Lawyers Hate Standardized Seed Funding Documents Because it Reduces their own Payday.

The premise here is simple: complicated/long docs = $$$ for lawyers.

But lawyers don’t make documents complicated to pad the bill. Legal documents can get “complicated” because of the potential issues that may arise pre- and post-transaction. If these issues didn’t actually happen, the documents wouldn’t be longer or more complicated.

For example, a founder stock purchase agreement is 12+ pages long because founders can, have, and will fail and/or bail on startups (hence the vesting schedule & startup repurchase option). When an issue like this occurs at your startup, you’ll be glad your documents are “complicated.”

Each time a new set of docs get released, I don’t cringe because it means I then have to remove the hockey stick from my revenue projections. I welcome these and future standardized seed funding docs because they provide entrepreneurs with the chance to take a look at financing terms. And since the model seed funding documents aren’t as cumbersome as those used in a typical Series A Round, I find that entrepreneurs tend to actually review them. Clients come better prepared now.

An educated entrepreneur is a better entrepreneur. And better entrepreneurs build more successful startups. Startup lawyers (myself definitely included) take the long-term view and want to see our clients succeed.

(Note: If you believe your lawyer is making documents complicated and long for the sake of his or her payday, ask your lawyer about the documents and the need for their complexity/length. If your lawyer’s answer isn’t good enough for you, then find a new lawyer. Of course, you can also ask for fixed-fee billing.)

Myth #2: Standardized Docs Reduce the Need for a Startup Lawyer

This myth is usually offered by someone who thinks lawyers are just gatekeepers of the legal document vault. There is no “walled garden” when it comes to legal documents. You can easily get legal documents via Lexis, Westlaw, Edgar, or any relevant legal treatise.

If you believe lawyers are simply document gatekeepers, you are missing the entire reason for hiring a lawyer — counsel. If you aren’t asking for counsel, you aren’t using your lawyer right. If your lawyer isn’t providing counsel, you have the wrong lawyer.

No set of seed funding documents will replace counsel, either pre-financing or post-financing. But in the event one of you genius hackers does this, please consider me for a job at your startup.

Myth #3: Standardized Docs = Open Source Law.

“Open Source Law” is a buzz phrase thrown around frequently, but what the legal profession is experiencing is more of an automation of various parts of the law practice….not the entire practice of law. There will always be demand for good counsel.

While the practice of startup law isn’t rocket science, it is nevertheless complex. In addition to understanding the provisions of your particular agreement, you have to know (i) what is missing from the agreement, and (ii) how the various provisions, situations, people, and investment amounts interact and may affect other off-document rules and issues. It’s difficult to do this unless you do this frequently.

Law firms are no more immune to open sourcing than any developer, engineer, or pixel pusher. But it doesn’t mean we’ll all go away, we’ll just adapt by providing more value. Those that manage this feat will survive.

Myth #4: Standardized Seed Docs are Appropriate for My Startup’s Raise.

First, most if not all the model seed docs assume your startup is a Delaware corporation. Thus, you are going to have to either edit the docs or reincorporate your startup in Delaware to use them properly. (Next up: the model reincorporation merger kit)

Second, the model seed docs tend to impress upon the entrepreneur that preferred equity is the best angel investment structure. That may be so, but convertible debt can also be appropriate for your startup’s angel round.

However, most (all?) sophisticated investors will not invest via a convertible note. And since the people & groups behind these model seed funding docs are some of the most sophisticated angel investors in the world, preferred equity investment model docs are being released.

Since entrepreneurs trust groups like TechStars and YCombinator, there is the tendency for startups to blindly use these docs, without considering alternatives like convertible debt. To their credit, these groups have earned entrepreneurs’ trust and have altruistic reasons for their release. Nor do they push these docs as “must use” docs.

Nevertheless, entrepreneurs should still consider whether a model seed funding document set (preferred equity) is prudent relative to their startup’s situation.


I support any effort to bring transparency to the law firm establishment and otherwise educate entrepreneurs (including model seed funding documents). That’s one of the reasons why I started this blog in 2006. You can’t be a startup lawyer and not want startups to have a better chance at succeeding. Model seed funding docs help entrepreneurs, but not to the detriment of startup lawyers.

94,685 Thank Yous

The Startup Lawyer had 94,685 visits in 2009 and visitors spent a total of 3,603 hours on the site.

Most visitors were from California (16,662), Texas (8,203), and New York (8,097). Canada (3,454), the UK (2,452), and India (1,557) lead the pack of international visits. 86 people in China broke the law and visited my site.

I remember being excited the day total visits hit 100 for a month back in 2007. And now I’m pretty confident the blog will bust through the 100,000 visits mark by October this year. So thank you for helping the blog grow exponentially.

The Startup Lawyer Re-Design Project

If you haven’t already seen, The Startup Lawyer blog has been re-designed. My vision for this blog is one that I can’t implement on my own. I had pushed the limit of my coding skills, so I opted to move the ball forward with a formal redesign project in September.

Here’s the breakdown of how it all went down:

The Designer

I first met Dave Onkels, one of the co-founders of Magntize, via a meetup with a mutual startup-world friend/client/colleague at the Southlake Town Square Starbucks. I felt left out because I was the only one at the table without his macbook pro. I felt ridiculous because I was the only one in a suit. (I wear suits 1-2 days a month but am working on further reductions in 2010.)

The Project

Thankfully Dave didn’t hold the suit against me and agreed to meet up and discuss my blog redesign project in mid-September. My only guidance was that the blog needed to be “clean and contemporary” and that I wanted to pay close attention to typography. Dave took that concept and ran with it, serving up several wireframe concepts until we settled in on a workable layout. From there he proceeded to develop and refine the WordPress template until everything began to fit into place. We probably went through 3 major iterations of the site design all said and done but the finishing point left us both quite satisfied.

One of the more notable features of this site is the top navigation bar which helps unify and contain all of my personal and business content across the web. This is one of Dave’s ‘trademark’ features as he’s implemented something quite similar for his own website.


In addition to the re-design, Dave helped me migrate the blog to a different server and optimized my WordPress installation to help speed up the site. Apparently, The Startup Lawyer was sharing a server with 1,000,000 other websites on GoDaddy and this was bringing page load speeds to 2400-baud modem status.

The Delay

About half-way through the re-design we set a target re-launch date of November 18th, 2 days before the start of Startup Weekend Dallas. Dave was on schedule, but Magntize got a sweet Mashable write-up the morning of November 16th. I pretty much figured that would push back the finish date on my blog, so I called Dave up and said not to worry about missing the deadline because he had a pretty good excuse. (Magntize has received over 30k visitors since the Mashable write-up.)


The Logo

After making the finishing touches on the overall layout and design, the last piece for the re-design project was the logo. I think it was interesting we went design first–logo last. I know I have spent too many times holding up various design projects trying to find that “perfect” logo.

Dave and I met up in early December to figure out the logo and I happened to be wearing a new Nike track jacket that day (proof that I don’t wear suits 24/7) and Dave suggested we roll with a modified version of it. We went through several combinations and ended up with a logo I feel works well with the overall design. I also like that the logo connotes movement.

The Feedback

The immediate results have been pretty good. I did a re-design about a year ago that received very unflattering reviews. So this has gone much better. I’ve received a lot of compliments about the design via email, twitter, phone, blog comments, and in person high-fives. As for analytics, my pageviews/user is up over 25% since the re-design. If you have any suggestions and features you might like out of this blog, feel free to contact me.

The Future

I’d like to think this blog is still in public beta. I have only begun the startup law glossary (I have about 250 definitions to go). And I have another blog project tentatively named “Operation Cru Jones” that is going to require coders.

The Conclusion

I know that working with designers can be painful for clients. And I also know that working with clients can be painful for designers. If you are looking for a designer, I can without-a-doubt recommend Dave Onkels. You can contact him here.

I hope this new site design suits you well. Thanks for reading this blog.