When I started my first company Openvote, I asked my lawyer's advice on every legal matter. I thought it was essential that he be involved in everything that could one day come back to haunt us. He prepared us with NDA templates. He explained every detail of the articles of incorporation and the bylaws. He did an incredible amount of work for us. He was not the most expensive lawyer by the hour, but we used him a lot.
I had budgeted $12,000 of credit card debt to get us to a prototype. The bill from the lawyer before we'd barely written a line of code?
$9000! Holy Shit!
Of course, I negotiated it way down, but still, I had screwed up. It was my responsibility to manage his time. A lawyer is a service provider. The entrepreneur has to manage the costs associated with his work. When we started FlightCaster, I worked incredibly hard to learn as much as I could on my own time. I figured that with enough blog reading, friend-bugging, and advisor counseling, I could get away with only the bare minimum in paid counsel.
Funny thing happened though. All this extra work on my side meant that I could now afford to hire the very best!
You should insist on working with incredible people in all aspects of your business. If you only hire world-class engineers, apply that same demand for quality to your accountant and your lawyer. There will be times when they prove their value. Our legal and financial counsel contributed an incredible amount to FlightCaster's success and I'm certain that, without them, our result would've been substantially worse. And because I only used them for the most important questions and tasks, their overall impact on our cash flow was actually reasonable. Most importantly, I put the effort in to self-educate, which helped me make better decisions overall.
Asking your lawyer questions about general startup stuff instead of doing your own homework is just pure laziness. And worse, your lawyer will give you advice that is the absolute most conservative strategy you could possibly pursue. It's like asking the referee how to play football. You need to learn the game from other players and coaches. Use your lawyer for the really hard-to-figure-out stuff.
In order to use your financial and legal counsel less, you're going to have to self-educate. The following links and several weekends of your time should get you started.
Startup Legal and Financial Resources:
This site flat out rocks. Read every word on it. Twice. It'll teach you all the basic of dozens of legal issues that will come up with your startup. Everything from 83b to vesting to IP.
I just love these guys. They are doing so much to help the entrepreneurial community, and in ways that are good for everyone. In addition to running Angel List, they've written and collected some of the best resources on the web. Everything from equity to board seats to due diligence.
This is the blog and startup resource center run by Brad Feld, of TechStars and Foundry Group. While there are now hundreds of VCs with blogs, Brad's is one of the most comprehensive set of concrete resources out there. He also uses Lijit to power search of both his blog and other top blogs. It' s a powerful way to find high quality, curated advice on any startup topic. Everything from 409a to financial statements to negotiations.
Y Combinator worked with Wilson Sonsini to create a solid set of equity financing documents that startups and angels can use as templates. They're neutral, vetted, and free. Even if you're not using them, reading through them is a great way to educate yourself about all the topics you'll face during a financing round.
At some point you'll need top quality advice to supplement all of your hard-earned learnings. If you're doing a startup that is poised for big things, I can't recommend anyone better than the professionals we used for FlightCaster:
Legal: John Bautista at Orrick
Part-time CFO: Betty Kayton
Neither are cheap on a per-hour basis, but both are the absolute best value overall. Please only contact them if you're serious about working with (and paying for!) top quality professionals.