Questions

As for attorneys’ fees, much depends on your geographical location. Traditional law firms located in larger cities will generally cost you more than those in smaller cities and towns. An average range of legal costs for a startup at the angel stage can sit anywhere between $5000 to $20,000. The more complexities involved (e.g., intellectual property transfers and number of investors), the higher the expense.

When you get to the Series A stage, you’ll be looking at legal fees easily above $30,000. To understand more about series funding read this:https://www.startups.com/library/expert-advice/series-funding-a-b-c-d-e
Due diligence and document review are time intensive, and you’ll want to ensure that this is done thoroughly. It’s also customary to pick up an investor’s legal fees in the ballpark of $10,000. VC preferred stock investment documents tend to run beyond 100 pages, and negotiating with investors’ counsel inevitably adds costs. Larger cities routinely see attorneys’ fees in the range of $50,000 to $100,000 once you enter the Series A phase.

Another option is utilizing convertible notes. A convertible note is essentially short-term debt that converts into equity. For example, your family and friends give you money and that automatically converts into shares of preferred stock when you close your Series A round. This is appealing for early stage investments because you don't have to deal with the valuation negotiations and it's much faster to close. Not to mention, it's only a few pages of legal documents which can cost between $1,500-$2,000 in legal fees.

Many attorneys offer fixed fees as an alternative to the billable hourly rate. This allows clients to anticipate costs and have clarity regarding expectations. For example, some attorneys might charge $5000 for a basic startup, which includes the incorporation, operating and/or shareholder agreements, stock issuance, confidentiality agreements and IP transfers. Higher fixed rate packages might include patent and trademark registration, drafting and negotiating notes, and compensation plans. Other lawyers offer a blend of fixed and hourly rate structures.

Feel free to check out www.lawtrades.com, which was designed to offer the high quality legal work from experienced startup attorneys at fraction of the price of law firms. Also don't hesitate to message me directly if I can answer any additional questions.


Answered 8 years ago

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