The Clerky founders have done what founders at their best will do when launching a venture: they have toiled at length in their field, identified key pain points bedeviling the user, and developed a service that deals with them not only effectively but, one might even say, brilliantly.
The short-term aim of Clerky appears to be to tame the process by which founders take the legal steps to traverse the path from launch to first funding by giving founders and their lawyers the tools to do it all more efficiently and cost-effectively. I would think that is a worthy goal and a worthy market to target. How many founders over the years have given up as much as a percent or two of their equity just to get fee deferrals from law firms that would enable them to get to first funding? And paid sizable fees to boot? Credible founders do not begrudge a lawyer his hire they also do not want the legal part to take more than its fair share of the budget or the equity.
Clerky offers as a first step a standardized Delaware C-corp approach to startup launch, and a skillfully done one at that. Its site suggests that it will targeting as well the remaining steps on the standardized path, right down to ones that will facilitate efficient and low-cost handling of all the important steps leading to first funding. This is not a modest goal - it is huge.
In law, there are strict limits to how far anything "standardized" can go - law is simply too big and complex to be reduced to simple recurring steps in any important area. For this reason, the role of the lawyer (even as to the standardized aspects) will not soon be displaced. Indeed, traps and issues abound for founders in setting up their companies, in funding them, and in dealing with a whole host of legal issues that will crop up. It always has been, and remains, foolhardy for founders to wing it in this area once they get beyond the very early positioning parts of their ventures. The beauty of what Clerky seeks to do, however, lies in providing ways to make it all easier both for founders and for lawyers and thereby setting up ways of doing collaborative relationships by which all concerned will benefit. I am a lawyer. I have done this stuff for years. But I have no stake in wanting to do any of this the clunky way if there is a simple and elegant way at hand. I welcome what Clerky is trying to do and look forward to its benefits as they roll out their services. The fact that founders can save on fees is not a threat but instead an opportunity for me to focus on the parts I do best rather than the repetitive parts.
The beauty of Clerky, as I see it, is that the founders, having worked extensively as superb startup lawyers in their own right, have a keen sense of how all this works and are aiming to develop a service that truly deals with the issues that have burdened clients and lawyers alike. It is a tall challenge but, if anyone can do it, this is the right team, especially working within the innovative framework provided by YC and the startup community. It will be fascinating to see how it all unfolds.
"law is simply too big and complex to be reduced to simple recurring steps in any important area. "
Agree. I'm not a lawyer and I have no relatives that are lawyers, and nothing to gain by raining on the clerky parade at all.
That said I've been in business for a long long long time and I've dealt with lawyers, paid legal fees, seen the good and the bad and have seen mistakes lawyers have made - even good ones.
Seat of the pants, I think it's a mistake for anyone to take an important step and pay a fee to incorporate this way.
The principles running clerky have nice credentials but as anyone will tell you "speak to 10 lawyers/doctors get 10 different opinions".
It's foolish to not even want to have a conversation discussing specifics which is not the same as having to give up significant equity to get legal advice. It is "always Delaware" or "almost always Delaware"?
I wouldn't advise anyone fresh off the boat to go the clerky route although ironically since I know what I am doing I very well might be a customer! That doesn't mean either that clerky wouldn't be good for some startups in some situations but they don't know that.
As an aside the entire concept of someone giving equity to a lawyer in exchange for legal work is to me an example on the face of how little some people know about business. I've seen countless examples (non high tech traditional world) where business people have a lawyer as a partner which to me makes no sense at all. "He/She will do the legal work". Bullshit. This is like someone thinking that they can buy legal insurance and that their lawyer partner will spend 20 hours a week on their business problems at no charge. 20 hours (arbitrary) that they then have to give up in billing their clients. Not going to happen. [1] For the amount of legal work you need just pay for it and factor it into your costs. This is not partnering with a painter on a home rehab or something like that.
[1] The other fallacy that I've seen is someone feeling that if they are dealing with a lawyer that it is easy to get sued because "it doesn't cost the lawyer anything". It does it costs the lawyer his time and a lawyers time is how they make money. And they know that and if they sense a case or action will sap their time they will run for cover.
Many founders feel comfortable doing things themselves on Clerky, but many also loop in their lawyers (for the reasons you describe). It just makes for efficient use of legal fees, since you are paying your attorney for what they do best (advice and review) instead of rote tasks like word processing, printing, scanning, faxing, etc.
I look at Clerky as kind of a stim pack for lawyers (except it doesn't reduce the health of the attorney).
"I look at Clerky as kind of a stim pack for the company-lawyer relationship"
If clerky is good and allows lawyers to focus on charging for the things they are good at while avoiding things that they make little money at then you should attempt to market the service to lawyers so they can refer that business to you that you are good at. Similar to what the "Company Corporation" and others do.
Generally when I quote prices to someone I am eager to offload anything that I can't make money on and have someone pay directly so it reduces the total amount of my bill and my pricing looks more reasonable.
Definitely - we're headed in that direction. It just turns out that attorneys need more features, since they manage a whole bunch of different clients. So we launched with just support for company-side accounts for now :)
I don't mean to be overly critical, but the obvious question seems to be: Do most YC startups use Clerky? If they do, it seems like a huge endorsement, maybe the only one you'll ever need. If they don't, that sounds problematic...
Yup, most do! Check out the customers section on our homepage :) For incorporations, we work together with YC to get everyone set up, so pretty much everyone uses us unless they're already incorporated (then Kirsty and YC's lawyers do whatever cleanup they have to). Most companies end up choosing to use us for their seed round documents too (currently in private beta) - we are by far the most popular option for that.
Perfectly reasonable question - that's what I'd ask myself!
Oh, sounds great! In that case, maybe you should consider saying so explicitly in your homepage. I read about YC so recognized some names, but my takeaway conclusion wasn't as strong as "most YC companies use this, good enough".
Well said grellas. One of the things I have seen happen to most professions - and especially in markets that are not fully familiar with the startup space - is that when industry players, that have been making bank from the 'trivial' tasks, see a startup challenging them, they see it as a full frontal assault.
Rather than seeing it as a way to move themselves up the value-chain, they keep trying to defend the low-hanging fruit. That makes no sense.
The real value and real big bucks are further up the chain. I would think that all lawyers would welcome a service like this, which allows them to focus on M&As and much more complex deals and structures that can't be outsourced.
It just makes for a much better world overall.
I think it comes from an insecurity in them thinking they can't adequately compete for the higher-value-add (which may be true), but we are all better off if those professionals stop practicing anyway.
Well..product cannibalization is different than a professional moving up the value-chain.
A professional is trading hours for dollars, the only way to increase their income is to either arbitrage cheap tasks (i.e. hire low-paid professionals and bill them out at a higher rate), increase the amount of hours they bill, increase their hourly rate.
The best paid in an industry tend to have the highest hourly rate - not necessarily the most amount of hours worked.
So, it would seem to me, that all professionals should be looking to move up the value-chain.
Clerky forces lawyers to make a choice. They can either fight for the 'automatable stuff' or they can move up the value-chain.
If you're not already familiar with him, there's a great professor at Harvard Law School, Ashish Nanda, who writes about exactly that - the choices service providers have to make as to where on the value chain they sit:
The short-term aim of Clerky appears to be to tame the process by which founders take the legal steps to traverse the path from launch to first funding by giving founders and their lawyers the tools to do it all more efficiently and cost-effectively. I would think that is a worthy goal and a worthy market to target. How many founders over the years have given up as much as a percent or two of their equity just to get fee deferrals from law firms that would enable them to get to first funding? And paid sizable fees to boot? Credible founders do not begrudge a lawyer his hire they also do not want the legal part to take more than its fair share of the budget or the equity.
Clerky offers as a first step a standardized Delaware C-corp approach to startup launch, and a skillfully done one at that. Its site suggests that it will targeting as well the remaining steps on the standardized path, right down to ones that will facilitate efficient and low-cost handling of all the important steps leading to first funding. This is not a modest goal - it is huge.
In law, there are strict limits to how far anything "standardized" can go - law is simply too big and complex to be reduced to simple recurring steps in any important area. For this reason, the role of the lawyer (even as to the standardized aspects) will not soon be displaced. Indeed, traps and issues abound for founders in setting up their companies, in funding them, and in dealing with a whole host of legal issues that will crop up. It always has been, and remains, foolhardy for founders to wing it in this area once they get beyond the very early positioning parts of their ventures. The beauty of what Clerky seeks to do, however, lies in providing ways to make it all easier both for founders and for lawyers and thereby setting up ways of doing collaborative relationships by which all concerned will benefit. I am a lawyer. I have done this stuff for years. But I have no stake in wanting to do any of this the clunky way if there is a simple and elegant way at hand. I welcome what Clerky is trying to do and look forward to its benefits as they roll out their services. The fact that founders can save on fees is not a threat but instead an opportunity for me to focus on the parts I do best rather than the repetitive parts.
The beauty of Clerky, as I see it, is that the founders, having worked extensively as superb startup lawyers in their own right, have a keen sense of how all this works and are aiming to develop a service that truly deals with the issues that have burdened clients and lawyers alike. It is a tall challenge but, if anyone can do it, this is the right team, especially working within the innovative framework provided by YC and the startup community. It will be fascinating to see how it all unfolds.