Putting It into Practice

Because Alexei and Piper thought that an attorney would be useful in the initial structuring of the company and issuance of equity, they decided to find an attorney before officially launching their business. Another entrepreneur had told them that even if you may think you do not need an attorney until you are raising money, an attorney can handle many matters in the beginning, from making sure that stock is issued properly to reviewing a lease for office space. Although Alexei$$s lawyer friend Scott had been helpful in sorting out Alexei$$s obligations to Empire State Fabrication Inc. $($ESF$),$ Scott agreed that Alexei and Piper needed someone experienced in representing high$-$tech startups as counsel for the new venture.

To find a suitable attorney, Alexei and Piper asked friends and business associates for recommendations, then they pruned their list of prospective attorneys to two: a solo practitioner and a partner in a large national firm. Alexei and Piper made an appointment to talk with both attorneys, who each agreed to meet with them free of charge.

At their meeting with Anjani Sudhir, the solo practitioner, Alexei and Piper learned that he had a general legal practice. Anjani said that he would do all the legal work himself at a rate of $$400$ per hour. He warned them that his practice was quite busy, so his turnaround time on documents would vary depending on other clients$$ demands. Anjani explained that he had done a number of projects for startup companies and that, in most cases, he would be able to modify existing documents to meet their needs. He would need to draft certain documents from scratch, however. Anjani had contracted with a local patent firm that would handle any necessary patent applications. He promised that regardless of how busy he was, he $54$ would always return phone calls and email the same day. As for a payment plan, Anjani said he could be flexible for a couple of months but ultimately would have to be paid in full.

Alexei$$s second meeting was with Sarah Crawford, a highly regarded corporate partner in a large national firm. Sarah explained that although she would ultimately be responsible for the startup$$s legal work, a third year associate, Aaron Biegert, would actually draft the documents, which Sarah would then review. Sarah said that her billing rate was $$845$ per hour and that Aaron billed at $$530$ per hour. Sarah told Alexei and Piper that the firm$$s resources would allow it to turn around documents as quickly as they needed them. Her firm had several patent counsel who could handle the startup$$s patent work.

Sarah also explained that the firm had invested heavily in technology and had a computer program that generated customized documents based on input of certain information about a company and its needs. The firm also used state$-$of$-$the$-$art encryption and other security measures to safeguard both the firm$$s intranet and sensitive email communications. Sarah said that because her schedule entailed significant travel, she might take a day or two to return phone calls. Aaron, however, would be able to respond to calls immediately and would have access to Sarah for advice. In addition, Sarah offered her and Aaron$$s cell phone numbers to Alexei and Piper and indicated that if time$-$sensitive issues arose, they should not hesitate to call them on their cells or send an email or text.

Sarah said that her firm would agree to postpone billing until the new company received venture capital or other financing. If the company did not receive financing, the company would still technically be responsible for the legal fees, but Sarah indicated that her firm would not expect the company or the founders to pay the full amount of the fees. Sarah then introduced Alexei and Piper to Aaron, a Stanford School of Engineering and Law School grad who impressed them with his intelligence and enthusiasm.

After the two meetings and calling several of the references provided by Anjani and Sarah, Alexei and Piper decided to hire Sarah. They were particularly impressed by the firm$$s broad expertise and network of relationships and felt that the improved efficiency would offset the higher billing rates. They also thought they would save money because most work would be done by the associate. Although Sarah might not be accessible at all times, they felt comfortable knowing that they would be able to reach Aaron whenever they had a legal question or concern. Finally, they thought that the law firm would have the attorney resources and sophistication to accommodate the company$$s growing legal needs both in the United States and globally.

Content with their choice, Alexei called Sarah, told her of their decision, and set up an appointment to discuss which form of legal entity would be best for the new business.

What are the pros and cons of the two lawyers interviewed by Alexi and Piper?

Which lawyer would you have chosen based on the information provided?