Rules for Startups #1: Get A Great Lawyer

We've seen a lot of big changes at Krillion since we founded the company 9 months ago.  And while I'm sure the experience is common across many early-stage startups, there are several key patterns that have emerged along the way, especially when it comes to what not to do.  As Paul Graham says, "way more startups hose themselves than get crushed by competitors," and he is right -- cut down on your number of self-inflicted wounds and you increase your chances of survival (even if only slightly).

So in this vein, here is the first of an occasional series on "Rules for Startups," in no particular order of priority.  Do I have all the answers?  Hell no.  But getting a startup off the ground is like playing a continual game of Russian roulette, so can I keep a few other entrepreneurs from pointing the gun in their own direction?  I certainly hope so ...

So Rule #1 is simple and others have touched on it (two examples are here and here), but nonetheless it is frequently overlooked in the rush to start building the company -- get yourself a great lawyer.  Not a good lawyer, not a lawyer who handled your friend's divorce, and likely not the cheapest lawyer since you truly get what you pay for in this area.  A great lawyer (ours is Steve Bochner of WSGR) will save your ass more times than you can count, and more often than not you won't even know it at the time.  How?  By gently & proactively pointing the gun in your hands (remember the Russian roulette theme) in a different direction from your natural instinct to point it at yourself. 

Having worked as an attorney for WSGR in the distant past, here are some code words the great lawyers employ to save their naive startup clients:

• "let's be more creative".  Translation: you are way off base but I am too polite to say no because you are the stubborn type (of course you are, you are an entrepreneur out to prove everyone wrong).  Example: "Perhaps there is a more creative way to write this term sheet provision (without giving away your firstborn to indentured servitude with the VCs)."
• "it's ultimately a business decision".  Translation: this is just a polite caveat; whatever I said right before this, that's what you should do.  Example: "I think there are other alternatives to signing a 5-year exclusive deal with this big customer that isn't going to pay you very much, but ultimately it's a business decision."
• "that's non-standard".  Translation: no way are you getting my legal signoff on that piece of crap.  Example: "A 10x liquidation preference in a VC term sheet?  That's non-standard in the Valley these days."   

Ultimately it boils down to one subtle, but very important, distinction between a good and great lawyer.  When you bring a new deal or business proposal to a good lawyer, they look for reasons to say "no."  A great lawyer looks for reasons to say "yes" -- they'll flag all the risks for you, but they try to enable the business as much as possible.  Do yourself a favor and find a great one!