Any advice on getting a start-up attorney that will work without a retainer?

QUESTION:

I’m looking to work with a start-up attorney w/o a retainer.  Thanks.

ANSWER:

Russell Greenman

Russell Greenman

by Russell Greenman at Raines Feldman LLP

An attorney’s willingness to work without a retainer depends on a number of different factors including, but not limited to, the attorney’s relationship with the potential client, the level of sophistication of the potential client, what stage in the star-up evolution the potential client is and, increasingly, the attorney’s confidence in the success of the venture. You have to remember that attorneys are “selling” hours and need some level of confidence that they would not be working for free (or spending additional hours tracking down payments). As you can imagine, it is impossible to evaluate the willingness of any attorney to take any client (established or otherwise).

That being said, the best way is to reach out to an attorney and if he/she is not able to help you the chances are he/she will have a referral to someone who possibly will.

ADDITIONAL ANSWER:

Naomi Kokubo

Naomi Kokubo

by Naomi Kobubo, Cofounder of Founders Space

If you’re going out to raise venture funding, you may try to find a law firm that will work on deferred payment.  Many of the larger law firms in Silicon Valley will take a gamble on startups they believe have a good chance of raising venture funding and defer their legal fees until after funding closes.

I personally have done this with two of my startups and both times we got funded, so the law firm made back its investment.

That said, in order to make this happen, you have to have a very compelling business plan.  Essentially what you’re doing is asking the law firm to become your angel investor and take a risk on your company without the upside of equity.  This means it’s a high bar to overcome and most startups don’t get the luxury of having deferred payments.

I hope this helps!

Comments & Advice:
  1. Soody Soody says:

    All true. A few additional things to remember:

    As stated, you are asking for the attorney put in his/her time and services as investment in your dream.

    When choosing a firm or attorney, aside from the obvious (e.g., expertise, who will actually be handling your case, your chemistry with the attorney, their billing practices, work style: task-based versus task in light of the bigger strategic picture) look to what that deferred amount will actually buy you … some firms have such high rates (and bill for every” minute”) that the deferred amount will be eaten up very fast.

    Look to the nature of the work for which fees are being deferred. Some work, although still of great value to the client and firms should get compensated for, are more in the form of “packages” (e.g., corporate formation packages) versus what, as a patent attorney I would call “original work.” So the nature of the work being provided is different. So, that may also play a role in what kind of arrangements may make sense.

    There are variations of course, some firms will actually defer without any equity, some will defer in exchange for some equity, and some will do a hybrid (deferred for equity and cash).

    Put yourself in the service provider’s role and see whether and how you would reach a compromise.

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