
Should I give my lawyers equity? - terpua
http://www.venturehacks.com/articles/lawyer-equity
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DaniFong
The analysis here seems pretty shallow. As in every other deal, one needs to
consider what they're offering, and your own position.

In our case, we are equity rich and cash poor. We don't care nearly so much
about our share, so long as a great product gets off the ground. We also don't
particularly think it's a wise course of action to bargain with a law firm.
Especially when one has better things to do.

We're talking about 1% here. Shouldn't you be spending time worrying about
your product? Or more cynically, getting a better VC deal?

Lastly, there's the equity equation. If these particular lawyers would improve
your prospects for 1.01% over the alternative (other lawyers, or more
specifically, over the bargaining process for other lawyers when you should
probably just be coding), it should be worth it: more if you're risk averse.

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nivi
Thanks for the comment Dani.

When it comes to applying the equity equation, consider the opportunity cost:

<http://venturehacks.com/articles/equity-equation#opportunity>

For example, 1% spent on lawyers is 1% you can't spend on developers.

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DaniFong
True, but another consideration is that sometimes those optimal deals take
long enough to make, they should be factored into said opportunity cost.

Whatever time you're spending hunting and bargaining with lawyers could be,
alternately, spent hunting for developers, or hunting for users, or one of any
other things. Indeed, the value of the better firms may be far more than worth
any 1% investment.

Perhaps a better idiom is that the lawyers are investing in the _company_.
They're large enough to qualify for riskier investments open only to
institutional investors, so they miss much higher levels of interest than the
public. This means that a deferred payment is a significant hit to their
bottom line, and should be counter balanced.

Additionally, certain law firms waive their fees unless an initial financing
to completes. These firms, in addition to helping you out legally, also can
help appreciably in raising the next round, and getting the best deal (for
themselves _and_ the founders).

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ALee
A venture lawyer we know usually puts a warrant on for his firm (DLA Piper),
which allows them to invest at the round valuation for up to .1 to 1% of the
company.

I generally think that law firms nowadays are really not taking as much a hit
by deferring fees, especially the ones in silicon valley who are competing for
your business.

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nivi
I wonder what the warrants are priced at? If they're priced low, it is like
giving them free equity.

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optimal
Give them bones--they especially like to crush bones to get at the tasty
marrow inside.

Oh wait, that's hyenas.

How much value do the lawyers bring to your business, and are the services
they're offering specialized, or of the commoditized, cookie-cutter,
boilerplate variety?

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Kaizyn
It's a lot like a protection racket. You need lawyers to help protect you from
the laws others lawyers have made. You need lawyers to protect you from your
competitors' lawyers. You also need lawyers to protect you from random people
who know how to take advantage of the litigation system setup by the same
lawyers who made the legal system to create more work for lawyers.

