In-House Counsel

Startups Need Lawyers, Whether They Realize It Or Not

Many startups think they can get by without an in-house lawyer, but they're missing out on a key strategic advisor.

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law-technology-legal-technology-legal-tech-300x240The risk-averse attorney may be leery of the often unstructured, right-brained world of tech startups. Indeed, tech entrepreneurs are probably just as off-put by the idea of a lawyer hanging around their office cramping their style. Despite the seemingly oil-and-water nature of these two career paths, hiring a lawyer should be early on every startup’s to-do list and it’s time lawyers do more to help techies understand this.

The Harvard Business Review is spreading this gospel in a new article targeting the tech startups:

Lawyers can add value in the obvious ways, helping to avoid early mistakes like issuing stock too late in the game, when the company has grown in value and the employees can no longer take advantage of favorable tax treatment. But more importantly, a lawyer on the early team can contribute to a thriving company culture by asking the right questions at the right times, providing perspective on crucial transactions, and getting smart fast on issues where the rest of the team lacks expertise.

Obviously many of these functions can be handled by hiring outside counsel at the opportune moment. But, what a full-time in-house lawyer adds strategically — the up-and-coming role for in-house counsel — is what makes this a key hire for startups:

Counterintuitively, lawyers can add the strategic absence of knowledge. President Harry Truman famously longed for a “one-handed economist” when presented with the equivocating analysis of his advisers, but executives in politics and business need to understand opposing viewpoints in order to make informed decisions. Legal education and training includes a strong emphasis on questioning assumptions and probing for further information.

Rather than crippling the company through risk aversion and overanalysis, however, having a lawyer on the early team contributes to a data-driven, analytic culture of thoughtful decision making. Further, lawyers are trained as advisers and service providers. They can ask questions, explore options, and execute on answers, but they don’t expect to make the final call. This comfort with playing a supporting role helps avoid the egocentrism that can cripple any organization, particularly a nascent one.

The startup life isn’t for everyone, and it’s definitely not for every lawyer, but if you think you might want to roll the dice on the volatile world of tech startups, then you need to do your part to spread the word to baby entrepreneurs that they’re much better off with a stuffy, left-brained lawyer by their side.

Why Lawyers Make Good Early-Stage Startup Hires [Harvard Business Review]

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Earlier: In-House Counsel Take On More And More Responsibility, But Is That A Good Thing?

Joe Patrice is an editor at Above the Law and co-host of Thinking Like A Lawyer. Feel free to email any tips, questions, or comments. Follow him on Twitter if you’re interested in law, politics, and a healthy dose of college sports news.

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