Five reasons to be your startup’s own lawyer

You need to read and understand your own contracts. For the vast majority of contracts that newly-formed startups will enter into (with the notable exception of formation, investment, and loan docs), the business terms matter far more than the “legalese.” As long as the financial terms are right and there aren’t any long-term commitments, exclusivities or other terms that could complicate a future strategic deal, there’s likely little to worry about legally. Sure, a lot of lawyers will tell you that something could still come up and bite you. And it could. It absolutely could. But that’s why you’re the entrepreneur; you’re taking that risk in exchange for not having to spend the time, legal fees and negotiating uncertainty in getting lawyers involved.

Here’s a shock: many lawyers aren’t well-trained to differentiate between those issues that matter and those that don’t. For every lawyer who will scale his or her work to the size and complexity of the deal, some will happily spend hours arguing over and re-crafting minor provisions in small contracts. I can’t emphasize enough that for most agreements your startup enters into, you don’t want “perfect” documents. You want things that generally work for you, don’t unduly tie your hands, and let you get back to your business. That’s all.

Here’s a radical thought – don’t look for maximum contractual advantage in your business deals. While many attorneys are trained to get “the best possible deal” in the form of contract terms most advantageous to their client, this is often NOT the best possible deal for your startup. It’s highly unlikely that the legal terms in your agreement will ever matter. But what’s 100% likely to matter is getting deals in place, having fair business terms, and establishing relationships that can help your business grow. In the early days of your startup, that’s best accomplished using simple, fair contracts. You’ll build trust and minimize friction – all at a minimal cost in added legal risk.

If you’re engaged with the issues facing your business, you’ll know when you need a little legal guidance. You’ll be far better-positioned to get that coaching – and have it laser-focused on the exact issue you’re addressing – if you’ve been the one dealing with the issues. It’s a more cost-effective approach than tossing everything that’s vaguely “legal” over to your lawyers for review.

As your business grows, it will at some point make sense to hire a lawyer to help guide the business. If you’ve been actively involved in the legal work for your startup, you’ll be able to tell if the lawyer you are hiring a) has the ability to differentiate between important and non-important and issues; and b) shares your attitude toward risk.