If you are on your first deal, you should consider pitching lawyers first. It is always a good idea for a first-time entrepreneur to try to meet three to five big law firms and try to get them to make time for you to pitch your idea to them. This is a good way to practice your pitch and get used to pitching folks that see a ton of deals, ask for feedback, and eventually ask if they know anyone with relevant experience to your deal that might be a fit for advising you. Some smaller law firms may not be able to afford to defer legal fees and will want you to pay a few thousand bucks up front, and then they will do work for you. This may be cheaper in the end than going with a large national or international law firm, but many of these larger firms will defer legal fees until you complete your angel round or even wait until your VC round to start billing you for work done. Much of this work is boilerplate work that does not require more than changing a few things in a form, and it is work that a partner can pass to an associate that has the spare capacity. This is still an investment for the law firm, and if you just send an e-mail with some cryptic ideas about a vague startup you should not expect good results. I recommend early stage entrepreneurs get a polished version of their executive summary and slide deck before contacting a law firm. Exciting these guys about the opportunity is good since then you can list them as your legal counsel and, with luck, they can start introducing you to mentors, angels, and VCs.
Keep in mind that these legal animals count their minutes as if it were opportunity cost of cash. They may even be clocking you while you tell them about your skiing adventure as you try to develop a relationship. A first lunch or breakfast meeting is the way to go after sending them the exec sum and slide deck. Use that time to establish the relationship and try not to take up too much of their time. When you actively go into solicitation for funding, ask if they can make any intros and even feel free to ask for specifics like an intro to Ron Conway and others on your target list. Whatever you do, avoid using a provincial lawyer who really focuses on some other kind of law and does not do angel and VC corporate securities–type work. Any lawyer that has contributed to my book is obviously a good place to start if you are unfamiliar with active lawyers in your area. For my first startup I pitched at least five law firms before deciding with whom to go. I had them all competing to represent me and invest their time and representation in us.
I recently spent two weeks on the road raising capital for my VC fund in Stockholm and London and met with a lot of lawyers. They were telling me that they rarely defer fees. So while this strategy works well in the US, it may be tough to pull off in Europe. That said, I personally got all my legal fees at The Founders Club (apparently an outrageous number) not only deferred but written off by MoFo (Morrison & Foerster). I would suggest it is worth asking and go and see five law firms and see if one of them will take you on with deferred fees. I think it’s much better to pay later and get good legals from the start and go with a law firm that has tons of active deal experience and a Rolodex that’s better than an investment banker’s. Conserving cash for expenses that absolutely need to be paid in the early days of a startup is super important. Don’t pay upfront for things that can be pushed out or avoided.
Follow me on Twitter @RomansVentures and our firm @RubiconVC. Check out my book on Amazon: THE ENTREPRENEURIAL BIBLE TO VENTURE CAPITAL: Inside Secrets from the Leaders in the Startup Game