First, let me say, I have worked with dozens of startups in biotech, telecommunications, and Internet infrastructure in major startup cities throughout the U.S., and on every continent--sans Antarctica. I have been involved with projects that were wildly successful and others that failed miserably.
So rather than discuss why startups fail, let me explain why startup lawyers fail. I can sum it up with one word: “No.” The startup lawyers who fail say, “No, you can’t do it that way." And they say no all the time.” Those who succeed answer every problem with "this is what you can do" instead of "no way, impossible."
In fact, for startups that are looking to make use of a lawyer, I could end this post right here. You have enough. But, I can’t help myself--so, let me add some color.
Before you hire a lawyer who could fail, you might ask, “Why bother?” The reason is, more often than not, startups that fail have no lawyer--or no one else to help them think realistically about how to best organize a company.
You might be thinking about your lawyer in terms of connections or cache. Connections are important, name cache is good to get started, but like “good looks,” these bells and whistles aren’t very important over the long term.
A company must be practical in its needs. A startup needs basic guidance, like assistance in choosing a location. Should we buy, rent, or get free space in return for services? Loans, intellectual property rights, and essential paperwork that keeps the machines running smoothly are all areas that will necessitate legal expertise. Airtight agreements also serve as a strong prenuptial if things go south.
While a good lawyer will probably know how to handle these tasks, a good startup lawyer also knows how to relate to entrepreneurs. A lawyer who understands startups knows how to help run a business, and perhaps they’ve even founded a startup themselves. They know the difference between Bill Gates in a garage and Bill Gates running Microsoft at the multibillion dollar level--a transition very few CEOs are able to make.
Many startups lawyers fail because they join the company right before the crash, not the launch. The company leadership forgets the basic nuts and bolts because they have their eyes glued on growing the company.
Once you've established that you need a lawyer (and you do), the next step is differentiating between an okay lawyer brought in at the right time for the company to succeed, versus the great lawyer who can anticipate potential future legal hassles.
Most startups have an idea that is ahead of its time. The best startup CEOs envision what will happen next and create the technology or solutions before there is a need. Our legal institutions are facing enormous currents of change that are eroding longstanding foundations; consider for a moment the potential impact of biomedical advances on law.
Throughout the history of mankind, the nature of government and law has depended on our understanding of the nature of man.
Now, in contrast, for the first time in human history--because of biomedical breakthroughs--we can imagine the possibility of not having to accept the nature of man, but the frighteningly appalling possibility of being able to shape and determine the nature of man.
It means that a lawyer for a biomedics company must work to create guidelines for a company to operate in areas where there is no legal ruling or opinion. So the best lawyer will ask, “What will be the impact on society and what are the questions of justice and ethics that this 21st century of biomedical discovery will pose?”
Or, in the area of communications, if we are creating a new world of social marketing, how is that affecting privacy and copyright laws? If a tech company creates a platform that enables what was impossible a generation before--are they liable if the platform is used for illegal commerce?
In this brave new world, startups actually need lawyers, like our own founders, who believe in the rights of man and the corruptibility of power--lawyers that can navigate the brilliant self-correcting, counter-levered system of limited government and individual liberties under the rule of law with which we are all familiar.
Remember, start-up lawyers most often fail because they are brought in too late. But, brought in at the right time, the best ones will know the basics--and then know the right questions, understanding you cannot have all the answers… yet.
By the way, if you ask the best lawyers to come in and save your company when it is probably too late, it is the one time they should say “No.”
--Nick Allard was a lawyer and lobbyist for three decades, working for dozens of startup companies. He is currently a professor and Joseph Crea Dean of The Brooklyn Law School.
[Image: Flickr user Chris Potter]