How to work with your startup lawyer: Why entrepreneurs should not wait

When I was guest lecturing at an Designing Entrepreneurial Organizations class at MIT Sloan School of Management recently, I was asked by a student who was working on developing a startup, 'when should I consult with a lawyer?'  The answer: yesterday. I often hear from entrepreneurs that they don't consult with a lawyer early on because they don't have much cash at startup and the lawyer will be too expensive - I need to put my cash into other things, they say.  Sometimes, this is true: some law firms deal with startups the way they deal with larger clients.  By involving too many people at high billing rates with inefficient processes.  This often comes from law firm structures themselves, which are not designed for representing startups.

Another misconception is that people often assume that any lawyer can advise a startup company, which is why entrepreneurs will often select a relative or friend who practices in a different area of law altogether.  That lawyer will probably spend more time researching than advising and the advice may not even be relevant to the company's particular situation.

So here are some things to consider when you are starting up:

1.  Choose a lawyer yesterday.  Your lawyer can be one of your most important advisors, and a true startup lawyer can be invaluable.  Lawyers have the perspective of working with many different companies and seeing first-hand the avoidable mistakes that early companies make.  I start with entrepreneurs before they organize, because some of those foundational issues become critical to the long-term success of the company.  Setting up the organization, protecting intellectual property, determining the proper equity splits (worthy of its own subsequent post), and vesting schedules are just a few of the important decisions that need to be made up front.  Too often entrepreneurs jump into the work without properly considering the ramifications.

2. Don't just go for a brand name.  The problem with big name firms (having worked for them) is that the person you sign up with is not always the person you end up working with.  Many large firm partners have great reputations of working with successful companies, but that often means they will not have time to work with you, particularly because you won't have the money to spend.  Don't get me wrong, I don't mean to say that associates are not capable and energetic attorneys, but the system they work under values time instead of results, and as a result of the billing rates that large firms are charging, you will have trouble getting any of that.  There are many terrific lawyers who work with small firms or who have left larger firms to start new ones.  You can do some research and find out who they are.  There is a tremendous amount of information out there - particularly due to social media - and never underestimate the value of advice from other entrepreneurs and companies that have already been established.

3.  Be honest with your attorney and be ready to hear some honesty in return.  Working with an advisor requires give and take in order to make the right decisions moving forward.  There is no one right way to set up a company, and the decisions you will be making are dependent on the people involved.  You should hire a lawyer to advise, not just to be a cheerleader.  And remember that you should never start a company unless you have thought about how to end it.  Be prepared for some uncomfortable discussions, and know where you want to go before you start.  Your lawyer will help apply his or her experience to your company, but needs to understand all of the details to do it right.

Remember above all that your lawyer and other advisors will be a valuable part of your team.  Work closely with them early and often and don't be afraid to move on if it doesn't work out.

Privacy Trumps Freedom in Italy as Google Execs Prosecuted

With all the talk about the new Massachusetts privacy regulations about to set a new aggressive standard in the United States, it looks like the real privacy hawks are in Italy.  An Italian court convicted three Google executives today in a case that is certain to create confusion throughout the Tubes.  Italy, meet YouTube, and welcome to the 21st century. As reported by Wired Magazine (among many other today), the case against the three Google execs - none of whom is apparently in Italy - centered around what sounds like a disturbing video of Italian schoolkids bullying and beating up a mentally disabled classmate.  The problem was not that Google did not take down the video - it did! - it was simply that they didn't take it down fast enough.

With today's "share everything" mentality on the Internet, this case sets a dangerous precedent when you consider the "sue everyone" mentality that has also become pervasive in our society.  If adopted here, it seems as though this case could set off a new wave of litigiousness that would not weaken the freedom we have come to know on the Internet, but also our legal system.  This is exactly the type of problem that Philip K. Howard talked about recently at the TED conference.

But that could never happen here in America, right?

Will new gTLDs make the Internet too confusing?

Do you remember when the Internet took off in the 1990s and you could find a company simply by adding ".com" to the name and  - voila! - there was the Web site.  That worked well until all of the common names or phrases were taken because every business, organization, charity, or individual was lumped together in the same place.  Then came ".org" and ".biz" and other extensions, each of which is called a "generic top level domain" (or gTLD), to try to bring some order to the Internet universe.  You had to separately register you name on each of those with ".info" and ".net" and then link them together with a redirect.  Ah, how simple the world was back then. Indeed, while most people do not think much past the basics "open" gTLDs that we have used for the past 10 years, ICANN has rolled out the likes of ".mobi" for mobile devices, ".aero" for the aerospace industry, ".travel" for the travel industry, ".jobs" for companies to post openings, and several others.

Now, the Internet Corporation for Assigned Names and Numbers (ICANN), the group that is in charge of controlling how Internet addresses are handled, is pushing through with a new plan to allow literally hundreds of new top level domains starting early next year.  This would allow for some more specific "community" gTLDs like ".boston" or ".sports" or even individualized company-specific names like ".redsox" or ".dunkindonuts".  Since the naming convention will any string of between 3 and 63 characters, which will now include characters from other languages, there could be millions of possibilities.

What does this mean for trademark owners who have been diligently protecting their name through the various iterations of gTLDs that have come out over the past decade?  It is hard to tell at this point.  There will be some protections for trademark owners, but this may mark the end of the now commonplace occurrence of business owners buying their name in each domain - that just might not be possible anymore.  That is why many companies were critical of the new plan when it was announced last year.

There certainly will be more to come on this in the next several months.  Trademark owners in particular will want to investigate whether a company-specific gTLD makes sense for their business, and I am sure that multinational corporations like IBM and Coca Cola will shell out the $185,000 fee currently proposed for new applications.  There is clearly a need to clean up the conventions of finding information on the Web.  But I would expect that ".com" addresses will continue to be required minimums, particularly for small businesses, while there will be more experimentation with the new names for some time to come.