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Do high-end silicon valley law firms matter for fundraising?

I am considering a move to a top tier law firm. I have a smart, but not well-known lawyer who charges about $400 / hr. The top tier firm has approached me and has offered to defer payment .  The nature of my business will probably require 50-100K of legal work over the next 12 months to grow.  

My advisor claims that high end firms are a signal that investors use to validate your company. They also have many different types of lawyers in-house, whereas I would have to coordinate amongst a lot of other lawyers with my current firm.

The business is break-even after 2 years, and we are averaging about 25% revenue growth each quarter, close to a 1M run rate. I have raised a very small seed round and kept the company very closely held. I will probably try and raise 1-2M over the next 6 months to fund growth.

Based on all this, is switching lawyers a good idea? Do they “pay for themselves” or is it just a racket?
 

 

  • Firms seldom defer more than 10-20k of work. Since they work with VCs on their financing paperwork they are more connected so if you’re dead set on institutional capital they would be helpful.

    On other matters though you’ll probably be working with jr associates who won’t be able to help you strategically.

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  • As a lawyer, I would say go with a smaller group that charges less but specializes in technology (they will have access to potential investors also). Large law firms are not necessarily better; however, they are very good at billing if you catch my drift.

    That being said, if you are really willing to pay the heftier price tag for access to VCs/other investors, it would be your call. I would interview several law firms and pick the one with the best connections to investors. Your decision really depends on whether you have enough cash right now.

    Another more frugal approach is to retain two law firms, a cheaper technology boutique outfit for your regular legal requirements and an expensive law firm for other legal concerns. This way, your dollars can go further as long as they work on separate issues with little or no overlap.

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  • “Yeah, despite growing like a rocket in a big/expanding market, we ended up passing on startup XYZ because it wasn’t using a high end law firm, so the signal was weak” …Said NO investor, ever.

    THE main signal investors use to validate a company is current and future growth. Plus, with angel list, social media, blogs, etc. today, you can reach any investor without middlemen. Ignore your advisor, unless he/she’d wants to pay the top tier fees. Your current lawyer is already expensive at $400/hr – if you change, look for small firm/lawyer that specializes in tech/startups.

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  • No, this is a waste of money.

    You should be questioning your products, your sales tactics, your revenue/profit numbers, but not something like that. Who cares who the lawyer is, the lawyer is just there to get a job done.

    No one ever ever ever put into an investor deck the names of the lawyers, as if it would change anything.

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