Startups and the Law
Acquiring good legal counsel
I’ve had the good fortune to get some exposure through the MIT ecosystem to great legal advice. I’ve been working with professional law firms for small business cases for years now, but never with someone who has devoted a majority of their career to working with early-stage businesses. There are a good number of options available to students at major universities and institutions. Here are some that were available to me as I was a student at MIT and the types of engagement.
Quick Start Programs // Wilmer-Hale
This was the best part of working with MIT advisors. Through the Sandbox program, there is a regular once-a-week or twice-a-month office hour session with Gary Schall. Gary works as a partner at Wilmer Hale and made time to meet with me and a few classmates very early on as we got started at MIT. It seems that every major start-up law firm has a “get you started” program with some deferred payment model. However, Gary spends a lot of time engaging students and trying to help answer the same generic questions that are outlined below in Boston University’s Law Clinic and Martin Trust Center programs.
Gary explained to us that they have a Quick Launch program that will help us form a Delaware C-Corp with an eye towards proper corporate governance to later allow VC investors. This program operates on an application process where you put forth your team as a pitch. He then takes this to a committee and they decide if you and your team are a meaningful investment. They of course are going to put time and deferred compensation into your operation. If you don’t meet certain milestones of fundraising, profitability, or months of operation you won’t have to pay the fee. The only hard costs you will incur by choosing this process are Delaware filing fees and franchise fees.
Gary took us on and the committee approved us. This is something that may be relatively easy for any startup at a major top-tier program to obtain, but the service Gary provided was exceptional compared to others. I won’t mention the other attorneys’ names, but we were accepted into a few similar programs. Gary took over our file from another attorney and helped us quickly resolve problems in the setup which should have been a very short process before working with Wilmer-Hale. Upon cleaning things up he was incredibly responsive via email within 24 hours or better in most cases. We also always worked directly with him, even if others worked on our case behind the scenes. He delivered everything to us and closely monitored quality, which is not the case at other firms from my experience.
Gary made time to help with all of the following
Incorporation and company organization
Employee and Advisor agreements (equity driven)
Consulting agreements (compensation via equity)
Cap table organization
Accepting investment from our first investor
Discussions around SPV vs Friends and Family as Individuals
General legal planning
One of the things a great attorney can advise you on is things you don’t realize you should ask about. I can’t cite specifics in this case, but there were ah-ha moments in conversation where I realized he knew to suggest something I didn’t know to ask.
I would happily work with Gary again, and albeit we folded our business, he and I discussed an amenable term to allow me to retain his help for the dissolution procedure.
Free Option // Boston University Startup Clinic
This group operates out of the Martin Trust Center and hosts regular office hours in Innovation Headquarters as well. I was able to obtain one generic meeting with them where they explained to me how they operate. My understanding is that they are final-year law students paired with a practicing lawyer. They tend to focus on obtaining projects from early-stage startups coming through Martin Trust and Innovation Headquarters at MIT to provide practical application work for these soon-to-be attorneys.
This is a great resource, but it comes with some caveats. It costs you nothing to engage, however you won’t be treated with any amount of priority in terms of setting timelines. You also need to come to them with a clear goal in mind, something you want to be done. They can help you organize and incorporate a business in Delaware for example, or engage you to help you set up some employee agreements. I found the slowness to be a challenge for how I’m used to working. If I’ve decided to engage a law firm I’m usually ready to talk about several issues, and it seemed challenging for me to find a way to work well with the BU Law Clinic.
Free Advisory // Office Hours through Martin Trust
Several prior MIT alumni are willing to meet with students and talk about off-the-cuff regulatory or compliance topics. They are also happy to talk about generic startup advice for those who have never formed an entity or operated a business before with legal concerns. This is likely a best-used resource for folks with minimal experience. It’s great that it exists, but the moment the topic shifts towards anything non-standard the advisor will encourage you to engage a proper attorney.
As a startup founder, you have to be scrappy and figure out how to mature your business into a growth operation. One step on the path is to have good legal guidance and there may be some great options available to you. Especially if you are operating in a University or Accelerator ecosystem. If you are not operating in one, maybe this is a good thing to investigate if you are considering it.