What Do Venture Lawyers Do?

By Thomas Michael

If you’re starting a business and you plan to grow using venture capital, then one of the most important early decisions you will make is to engage a venture lawyer.  As a startup, hiring a lawyer may seem completely unnecessary considering that you can find all of the documents and information that you need to run a business online and, if you’re bootstrapping, you may have no choice but to do-it-yourself initially.  However, a good venture lawyer will do far more than prepare form documents for you, they will be a long term partner who will help you build your business.

So what does a venture lawyer do?  A good venture lawyer should: (1) provide sound legal advice; (2) provide current market insight; and (3) open doors for you in the startup world.

Sound Legal Advice

The first, and most important, quality of any venture lawyer is that they are a good lawyer.  Venture lawyers are corporate lawyers by training, meaning that they provide corporate and transactional related legal advice, however, a good venture lawyer should also have a much broader skillset.  As a startup, you will need advice regarding corporate and contract related laws, but also regarding securities laws, employment laws, intellectual property laws, and tax laws, among others.  All of these are complex areas of law and law firms make a lot of money by having high priced experts specialize in these fields, however, most startups face similar issues that do not require a high level of legal specialization.  Instead, startups need quick, practical and actionable advice in an efficient manner.  A good venture lawyer will be well versed in each of these areas of law and will be able to guide and advise you on these topics up to a point where sector expertise is required.  For example, all venture lawyers should be able to counsel regarding the tax impacts of issuing shares of restricted stock or stock options to early employees, however, a tax lawyer would be required to advise regarding whether an employee benefit plan is compliant with tax regulations or how to structure a deal in a tax efficient manner.  A good venture lawyer makes legal work more efficient by being able to provide a wide range of practical advice.

Current Market Insight

The second essential quality of a good venture lawyer is that they understand the venture market.  Even if a general corporate lawyer can provide all of the same high quality legal advice mentioned above, they will not understand the market terms and trends for venture capital led rounds of financing unless they are actively working with startups and venture capital funds in the market.  A venture lawyer’s area of expertise is the venture industry, which means your venture lawyer should be able to readily answer your questions about standard financing terms and strategy.  Working with dozens of startups and investors at any given time not only gives a good venture lawyer the pulse of the industry, but also gives them an extremely valuable perspective on the common pitfalls entrepreneurs face and how you can avoid them.  You should always ask your prospective venture lawyer what startups and investors they (or their firm) actively work with, as this will give you an idea of how valuable their perspective is.  A good venture lawyer is a startup and venture capital market expert.

Open Doors to the Startup Ecosystem

Lastly, a good venture capital lawyer should be an advocate and a connector for you in the startup ecosystem.  This does not mean that a venture lawyer will raise your round of financing or build your pitch deck for you, but it does mean that they should know the large investors in your market and, when appropriate, they should be happy to pass along your pitch deck to their contacts.  Similarly, a good venture lawyer should know the accountants, bankers, developers, creative agencies, insurers, benefits consultants and other service providers who are actively working with startups in your market and they should be your access point for high quality referrals.  A good venture lawyer should be the answer to your google search, “best ______ for startups.”

These are just a few of things that a good venture lawyer does, as opposed to a mediocre venture lawyer or a lawyer that says they’ve done a bit of venture work or a chat bot on some free online legal service.  So before you decide to ask your buddy in law school or your second uncle who’s a real estate lawyer for legal help setting up your company, consider asking them, what do venture lawyers do?

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