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Lawyers and startups don’t always mix

Stanford professor discusses challenges between lawyers and startups

lawyers and startupsWhen an article titled, “Why lawyers don’t run startups,” popped up on LinkedIn recently, it naturally caught our eye. In the article, Stanford Professor Steve Blank highlights some of the challenges lawyers and startups face when they begin to work together.

We work exclusively with entrepreneurial lawyers here at LawBank, so we know that they have first-hand knowledge about running a business as well as practicing the law. However, Blank’s article brings up some good food for thought for lawyers who want to work with startups in all industries:

Contract panic

Blank details one of his first contract negotiations with a technology startup in which his lawyers raised several concerns:

“‘You guys can’t sign this. It has you putting your software in escrow, giving them all of your source code if you go out of business, indemnifying them from all possible lawsuits, not selling to competitors, first rights on a number of irrelevant issues and has a clause about promising them your first-born children.’ I stopped listening for a while as it dawned on me that the deal I thought we had was probably now gone. I was feeling pretty deflated.”

Strategy vs. legal

Blank soon realized that he and his partners needed to solidify their business strategy, including negotiating big concerns with potential partners, before turning the contracts over to their lawyers:

“The issues our lawyer had raised about the contract, while correct, were strategy questions the founders needed to answer, not legal questions. Negotiating deal points before we thought through our strategy at best would have cost us a ton of money with little progress.”

Finding a good lawyer

Blank concludes by sharing some of his tips for startups on finding a good lawyer. Those include looking for a lawyer who discusses solutions vs. problems and one who maintains a strong, informative blog.

Read the complete article here

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