How to Create the Next Facebook: Seeing Your Startup Through, From Idea to IPO Read Online Free Page A

suffered. As you’re reading, soak up the legal lessons of this chapter and learn from Zuckerberg and Facebook’s mistakes, because nothing can bring a young company to its knees faster than a lawsuit (or 12). Just look at Napster.
Obtain Legal Services
    When starting a new venture, it’s tempting to scrimp on legal fees. Why should anyone get hundreds of dollars per hour for their services? Aren’t the majority of legal issues that startups face fairly straightforward?
    Not really. The law is critically important in any business endeavor, and the legal details of even the most everyday business transactions can get extremely complicated. Despite this well-known reality, many entrepreneurs still try to go solo when it comes to their legal issues, and they rely on a free Google search rather than a paid legal professional. They also try to find sample contracts online and then attempt to tailor them to their business’s needs. Obviously, this inadvisable practice can cause a world of trouble for young startups, because these legal documents may have already been negotiated or may be aligned with the laws of a jurisdiction other than that in which they operate.
    Some founders, acquiescing to the necessity of obtaining some form of legal advice for their company, use third-party legal services like LegalZoom. Although companies like LegalZoom provide tremendous services at cost-efficient prices, they are often incapable of meeting adequately the needs of a technical startup with specialized issues that include the need to protect intellectual property. In addition, the fact that online legal services are named as such is a bit misleading, because they do not provide actual legal services. More accurately, they are document preparation services—and very good ones, at that—but you should not rely on them to serve as your company’s legal counsel.
    No doubt, your best solution is to hire a qualified attorney who specializes in technical startups to advise your company in the many legal challenges it will undoubtedly face. Startup attorneys not only understand the nuances and landmines that are part and parcel of building a new venture, but they also realize that startups have little capital to spare. As a result, technical startup attorneys are usually willing to take equity as payment for their legal fees during a startup’s early days. Facebook, for example, issued 1.29% in equity to its first law firm.
    Aside from sparing you the need to fork over huge amounts of cash in your company’s infancy, paying your attorney in equity effectively aligns their interests with those of your company. In other words, your attorney wants to see her equity in your company expand, effectively leading her to provide you with better legal counsel, which is a win–win for all involved. Also, most likely, you won’t be your technical startup attorney’s first client, which means that she probably has lots of contacts in the technology startup industry and might even be willing to make key introductions to potential investors.
    Prior to hiring an attorney, make sure you perform some due diligence on your candidate pool. First, get a list of each candidate’s clients—either from fellow entrepreneurs or services like Avvo—and call them. Doing so is a good way to get a better sense of the caliber of the attorneys. Here are some other suggestions:
Make sure you negotiate the attorney’s fees, and never take the first offer that she makes. This type of negotiation is actually expected and even customary.
Insist that a partner work on your account, not a junior associate. Although you’ll pay a higher rate for the counsel of a partner, the quality of the work will be much better.
Put a cap on admissible attorney’s fees. Why give a lawyer an excuse to keep billing and billing?
Remember that attorneys are naturally conservative and have a tendency to focus on all the ways in which you and your company could get into legal trouble. So,