My start-up is in a position now to begin accepting outside investors. What should we look for in a lawyer to help us draft up term paperwork? How do we begin to find a lawyer who specializes in this but won’t charge us an exorbitant amount?
Suzanne Garber – answer:
In my experience, the best way to get started is to ask for recommendations from business owners and others with connections to attorneys. Ideally, you will want an attorney who has experience with a) your industry; b) firms of your size; and c) fundraising.
An attorney with all of these qualities is likely to provide you with more value in terms of insight on your business, raising questions that you may not think of and general efficiency and quality of work. At a minimum, you are going to want to look for someone with a high degree of experience — if you are going to raise funds, the legal work has to be right.
In addition, I would pay careful attention to the business owners’ recommendations for aspects like responsiveness and how easy it is to work with them. Based on those conversations, create a shortlist of potential partners, conduct interviews with the attorneys and get a feel for who you think is the best fit. Remember that this is someone with whom you will be working very closely, so you will want to like your attorney.
As for conserving money, education is paramount. The more you can educate yourself on the issues in advance of your attorney meetings, the better off you will be. You will be able to ask better questions and your attorney will likely need to spend less time explaining things to you (at five dollars a minute, these explanations get expensive!).
I would also encourage you to do some research of your own. You can find plenty of sample deals on the Internet, as well as blogs and websites that focus on deal structure. It may also be beneficial to ask those you know who have experience fundraising — they may be able to point you in the right direction.
About the author
Jay Ebben is an associate professor of entrepreneurship at the University of St. Thomas Opus College of Business.