Ever have a legal question that might take a lawyer 5 minutes, but would take you hours of research and uncertainty on your own? The online community is a great source of knowledge for a lot of FAQs, but sometimes you don’t want to gamble with the sites you trust and your attempts at interpreting the legal jargon secret code… Wouldn’t it be nice if you could just get an opinion face-to-face by someone who’s been there done that?
I’ve heard endless complaints that law firms in Scotland are too traditional, expensive, and lacking the startup-friendliness we hear about in the grass-is-greener Silicon Valley. And cheap Scottish stereotypes aside, most of us really just can’t afford hundreds of pounds every time we need some steering in the right direction, or reassurance that we’re on the right track.
Well I’m very excited to share that Dug Campbell of MBM Commercial is setting up a group to help tackle this problem. Aimed at helping tech entrepreneurs, the group will offer free advice and a chance for Q&A on a monthly basis. Not to mention a free meal (hey, he’s no stranger to startup culture). Dug has been active in the Entrepreneurship Club and is also working on his part-time MBA, so he’s a familiar and friendly face in the startup scene. A bit more info from Dug about the group:
Starting up a business, there are a hundred and one things competing for your attention – from big picture strategies down to the more mundane day-to-day issues. Being able to chat with people who have experience of the same issues helps you to isolate and focus on various key decisions that truly deserve your time. And, as we all know, a common problem facing any bootstrapped startup is how to cut legal costs by only focusing on essential areas whilst minimising the risks to yourself and presenting a professional front as you start to trade. Since so many new businesses experience slightly different versions of the same problems, we are setting up a monthly meetup to tackle some of these issues.
Either myself or a member of the MBM team will give an informal chat, followed by Q&A session and the obligatory beer and pizza. The sessions will be held monthly, starting in September, and based around a theme, with the agenda being set by feedback from the group as it develops. Whilst the group is aimed at so-called growth technology companies, the issues should be relevant for all budding entrepreneurs and is intended to be complementary to all of the other great resources out there (E- Club, Tech Meetup etc).
Sound cool? Dug is now looking for suggestions from those interested on a *name* for the seminar, and a bottle of bubbly will be awarded to the person whose name idea is selected (write your suggestion in the comments below, or you can email me at jess@startupcafe.co.uk if all this talk of legal issues has put your in a super secretive mood). He’s also keen to hear what issues people would like to have covered, so throw out your requests of tricky/annoying legal topics and we’ll see what’s most frustrating!
StartupCafe 
Great news I was just thinking we needed something like this.
Haven’t got any ideas as yet, but a similar project run by the very friendly Barry Vitou down in London is called Bootlaw, if that helps get anyone’s creative juices flowing.
Magna Starta
Techlaw (pronounced da CLAW!)
18th Century Law Revival: Final Tour
L-Club
Alibi Network
White Collar Parole
Startup Solicitation
SuPLaW
Phil – thanks for the heads up on Bootlaw, it looks very similar to what I’m looking to set up north of the Border
Hilary – great start, cheers!
StartupLaw?
The Silicon Valley legal relationship model for start-ups is simple and easy to replicate. Embraced by leading firms such as the powerhouse WSGR, it makes sense for the start-up cycle, and correlates the legal firm’s success with the start-ups.
It basically looks like this:
Law firm helps company enticize legally in the early stages and provides advice along the way, including representing company in investor and partnership negotiations. Law firm gets 1% (up to 2.5%) of founder’s equity in the beginning, vested over a time period (two years, three years, depeding). Law firm also agrees to provide extended terms for legal advice. Advice is billed, and Law firm only gets paid when the start-up raises its first big angel round, or venture capital round. Then the accumulated legal bill is paid.
Thus the law firm takes risks with the start-ups. Silicon Valley entrepreneurs must pitch law firms just like they do investors. The law firm takes on a portfolio of start-ups, some of which fail, some of which do not. In the long run the law firm might make out better from the accumulated portfolio of equity.
The law firm is thus incented to truly help the entreprenuerial firm, including through providing introductions to investors, customers, and partners.
The start-up thus preserves the rarest commmodity it has in the beginning – cash. Instead of cash flow out for legal advice, valuable cash can be used to fund development.
This is service — understanding the customer and accomodating that customer and helping his or her business grow.
Why couldn’t that model be replicated locally?
I know some product design companies in Edinburgh and Glasgow are already starting to move in this direction.
Is anyone else thinking about it? I’d love to hear thoughts from anyone who’s trying to provide professional services to startups (lawyers, accountants, graphic designers, product designers, etc.) whether they think the model Michael’s described could be replicated locally, and what tweaks would be required to fit their service offering specifically.
I think Mike’s raised some very valid points here. Back in the dot-com boom days as some will be aware, it was common for certain law firms up here to take equity in part/full-payment of fees. Speaking personally, I have affinity with the model and agree that it helps to align the interests of both law firm and startup. However, the practice was knocked firmly on the head at the time of the dot-com crash when many lawyers found themselves in difficult conversations fighting for their own jobs within their law firms when many startups either went under or failed to hit the heady heights promised.
Is this risk one that should be shared? Yes, I agree that it is – with one qualification. It won’t happen effectively across the board until law firms experience a seismic change in their business structure. Arguably this is starting to happen, certainly at the entrepreneurial end of the market. However, until it does, it remains a fact that many established firms cannot (or, in many cases, are unwilling in the face of frankly far-more lucrative work) to operate the lean business model required in order enable them to “take a risk” on carrying out work which may or may not result in being paid.
The change in structure is happening – more law firms are seeking to downsize premises, working virtually, outsourcing secretarial support etc – but it is taking time. Cash is king and the overheads that *most* law firms have do not permit a start-up orientated portfolio approach to dealing with entrepreneurial businesses – hence the relatively small number of firms in Scotland and beyond that do focus on this sector (and survive). I can’t claim to have an in-depth knowledge of WSGR’s business model, but I suspect that there are two significant advantages in the Valley – the quantity/quality of the startups (in terms of their ability to attract investment capital alone) and the range of other legal services that WSGR provide to bring in a buffer of monthly income (to the extent that this may be required).
If lawyers are only going to get paid on successful funding rounds, for example, with the size of the startup scene in Scotland there is a real risk that certain months will mean no fees = no salaries or lease payments etc = out of business. Doubtless, lawyers in cardboard boxes under motorway flyovers is never going to elicit much sympathy and how is that different from the startup scene anyway? Not significantly but you are dealing with a profession that has entrenched views on the value that it is adding – views, that in many cases, are becoming significantly outdated as the value shifts.
In terms of incentivisation for investment, I think it’s fair to say that my experience is that the existing model does work mostly on that basis in the sense that we don’t get paid for making introductions but we do get paid to close deals for companies/investors once those connections are made. On a basic level, the more investments there are, the better it is for all of us – particularly so if the startup goes on to be successful and provide employment for the region.
One final thought on equity – it’s certainly the case that I would have preferred equity in many of the startups that I’ve worked with as opposed to receiving a fee. And in a very small minority of deals over the past couple of years, I am aware of variations on this theme. You do need to be slightly careful (in terms of conflict issues) however with having a lawyer advising you who is also a minority shareholder – although there are ways around this in reality.
These are just a few initial thoughts. I have strong views on this (again, I stress these are my own personal views) and I agree with most of what Mike is putting forward. However, it will take a lot of work to achieve this if we are to enable the service provided by various law firms in this country to remain viable on a commercial basis.
What I would say though is that this kind of discussion is exactly what I’m looking to promote in the series of events – let’s keep the discussion open to help people tell us what they truly want from their lawyers. At the end of the day, if startups demand this from the market, law firms will either evolve to survive or collapse in their current form – and we’re all clearly heading in one or other of those directions already.
[…] This meetup has been in the planning mode for a while now and the last time we talked about it, we got some great responses… […]
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