Corporate & Securities Law

The $10,000 Sentence

By Ryan Roberts

You’re in a startup and everything is scarce including capital. Thus, when you encounter a legal issue (like incorporation) you conduct a cost-benefit analysis of hiring a startup lawyer.

I understand the need to ensure you are getting value for the small amount of capital you start with — I did the same thing when I hired a large firm earlier this decade for my startup. And as a startup lawyer, I’ve fielded multiple requests for a “per page” breakdown of my legal fees.

While the per-page-basis is one way to evaluate the benefit of hiring a startup lawyer, it completely ignores the only reason to ever hire legal counsel: the advice.

I’ve drafted and/or reviewed several financing docs in 2010, but the most valuable work product I’ve dispensed to startups this year are actually sentences such as:

That option grant is fine, provided we vest his shares.

Burn the term sheet unless they delete that provision.

That’s f***ing crazy.

These sentences are worth much more than the theoretical 0.1 hours billed on the legal invoice. On a straight value basis, these 3-second sentences should be billed at $10,000 (or more) with everything else at $50. (Before I get the hate emails — I’m not trying to get paid $10,000 for these sentences, I’m just trying to demonstrate what is the true benefit of hiring a startup lawyer.)

Sometimes these “$10,000 sentences” are the difference between a client failing in month 3 and getting a Series A done a year later.

The $10,000 sentence is why no matter how many “free” legal documents are out there thanks to Google or any other “kit” you’ll see on the internet, human legal counsel will never be replaced.

Long live the $10,000 sentence.

Full post as published by The Startup Lawyer on December 13, 2010 (boomark / email).