The Truth About Startup Lawyers & Their Fees
Are you a startup founder wondering how to protect your business without spending an arm and a leg on startup lawyer’s fees? In this article, I share with you some food for thought on how to approach this topic, and what to expect and focus on as you’re starting your entrepreneurial journey.
As a founder, you probably have 100 things on your mind. Literally! You’re thinking about the marketing strategy, sales forecasts, product positioning, suppliers, technology and systems, branding, to name a few. The one thing you probably haven’t considered is having the right legal protection in place for your business. And you probably haven’t thought of engaging the right startup lawyer to help you out. Or maybe you have, and perhaps you’ve even met a few commercial lawyers, but something didn’t gel or they were overpriced, or quite simply, didn’t understand your business.
Well, if you’re a startup founder, you’re not alone. It’s pretty much the story I hear every day when I meet new startup founders.
Before I go through the fees you can expect to pay to a startup lawyer, I’ll quickly go over a few areas that should be reviewed by a startup lawyer.
1. Intellectual property protection
When it comes to patents, there are several factors to consider.
- Have you invented something new that’s considered ‘a world first’? Your invention needs to be new and should involve an inventive step that differs it in some way from existing technologies and products that have been invented already.
- Have you kept it secret? There is a high chance you might not be able to secure a patent if you’ve already disclosed it to other people or entities.
- Does it have the potential to be commercialised? At the end of the day, a patent is a commercial tool. If there is no potential for your invention to be a commercial product, there is little if any reason to get a patent on it.
If you are an FMCG (fast moving consumer good) brand for example, your trade mark like (McDonald’s or Coca Cola) means everything to your business, and will carry brand equity if or when you decide to sell your business. In all cases, your trademark is extremely important.
Copyright is a mix of rights through which visual artists, musicians, writers and video and film makers own in relation to their work. It’s considered one of the most powerful rights you can own as a creator and enables you to 1) control your work and 2) get money for your work.
2. Contracts & Agreements
You’re likely going to have partners and investors at some point. Clearly stating the ground rules on day 1 is critical for the success of your business. A shareholders’ agreement will dictate the company’s relationships, rights, responsibilities and obligations of its shareholders.
Capital raising Agreements
Raising capital often means selling equity in your business. And that’s a bid deal. Whether you’re selling equity to family, friends, angel investors or any entity, you have to have the right agreements in order. Generally, you are likely to require a 1) Term Sheet, 2) Share subscription agreement and 3) Shareholders agreement.
Whether you ’re looking to employ people full-time, part-time, hire contractors, or a mix of all of them, employment agreements are incredibly important. Employment is always an area that creates a level of exposure and risk for any business. Employees can sue your business for various reasons (including brining an application for Unfair Dismissal) whether it’s your fault or not. Independent contractors can also do so, but the risk extends to having lower levels of control, which can lead to failure of delivering on their commitments, missing deadlines, etc. Outlining roles, responsibilities, commitments, terms of payments, and the exact terms both parties are entering and agreeing to, will save the day on many occasions.
Idea Protection Agreements
Non-disclosure agreements are another area you should have covered. Whether you’re sharing ideas with potential business partners, a potential buyer or acquirer of your business, investors or any other reason, NDAs can become essential.
Finally, getting advice and opinions on how to approach your business strategy and plan is sometimes worth more than any service you’ll get. Great startup lawyers are entrepreneurial by nature. They’re on the battlefield every day. They see and work with businesses on a regular basis. They have extensive experience advising businesses across multiple sectors. In other words, they have a bird’s-eye view you probably won’t have. Getting their advice can save you hundreds of thousands or millions of dollars down the road.
Startup lawyers most commonly charge in a couple of ways. A fixed project fee based on your business requirements or a retainer that includes and covers a certain amount of work or hours per month. The better option will come down to how much your business requires now and your plans for the future.
Another option which some lawyers might consider but is certainly not as common, is taking an equity stake in your business and essentially becoming a shareholder in exchange for their full (or part of) their services.
In all cases, working with an experienced startup lawyer is one thing you can’t afford to forego. In saying that, shopping around and speaking to various lawyers will help you find the right person for the job. It’s not only about how much they charge, but it’s also about the culture fit, their vision for your business, how much they understand your industry and product and whether you can get along, especially during those testing startup moments.
Here are the areas we help our startup clients with at Lazarus Legal.
- Business idea viability, commercial advice on proposed business structure, and identifying legal risks.
- Protecting ideas (NDA/confidentiality agreements) and Protecting IP rights (copyright, trademarks, and patents in Australia and abroad)
- Agreements for founders of the start-up and company set up advice including equity division
- Legal documents for software developers, designers, writers and other contributors
- Advice on attracting investors and administering the entire investment process.