Lawyers play a vital role in the early years of startup companies with big ambition, writes Lee Leslie, for Strategy+Business. But it’s important to find the right fit for your firm, especially when you’re scaling up quickly.
Leslie is a California attorney who has represented emerging growth companies through all phases of development. He sees a clear conflict between the necessity for legal counsel and the propensity for it to stifle risk taking. However, it’s a hurdle that can be conquered with the right approach.
THE ROLE OF A GREAT STARTUP LAWYER
Your startup needs an in-house lawyer who will:
1) Aim to reduce risk but not reject it altogether. Of course it is the lawyer’s job to minimise potential damage to the company’s legal foundation or reputation. But an over-cautious approach can mean heavier expense and higher potential for losses than a middle-ground solution. To make sure of the best decision in your particular circumstances, your lawyer needs to present the options after accurately assessing:
- advance costings for each approach, in terms of finance or resources;
- the potential for any legal challenge;
- how expensive a change of initial course could be.
2) Clearly explain risk to team members. It’s necessary for your teams to understand the legal implications of certain choices. Your lawyer needs to explain these in easy language, and without prejudice, to inform accurate assessments. A lawyer might be tempted towards prudence to safeguard their own accountability. The result is that they discourage more risky actions – even if these are the strategies that most fit the company’s aims.
“The startup attorney needs to develop and deliver actionable information that sparks meaningful dialogue and assists the company’s business managers in making the right call,” writes Leslie.
3) Resist relying on the advice of outside legal advisers. An in-house lawyer can’t simply be a messenger between external law experts and the company’s executives. As insiders they should have a much clearer overview of the organisation’s day-to-day issues and generally know which practical measures are right for the business. They need to be prepared to question over-cautious outsider advice and assumptions, challenging by putting forward “what if?” options.
In a startup situation there’s a fine balance to be found between rigidly protecting the company objectives and keeping operational disruption to a minimum, while remaining open to more risky actions.
4) Get to know the business inside out and be an integral part of it. A startup needs a legal representative who is willing to explore and contribute right across the company, rather than build their own specialist silo. It’s important for an in-house lawyer to:
- introduce themselves to key personnel across the business and learn all they can about operations;
- be physically present at discussions even when there is no clear legal input required;
- offer their contributions freely and be on hand to answer questions;
- fully embrace the company’s objectives.
Lawyers are often considered a necessary evil, but they play a critical role in protecting your startup business as it grows. Just make sure yours is on the same cultural page rather than blinkered by overprotective convention.