Can I ask you a question?
Sure, but read the disclaimer. If you communicate with me in connection with a matter for which WSGR does not already represent you, you should not send me confidential or sensitive information via email because your communication will not be treated as privileged or confidential. If I answer a question on this blog site, it’s because I thought the question and answer would be helpful to other people and it doesn’t mean that I’m your lawyer. Neither WSGR or I are your lawyer unless you have signed an engagement letter with WSGR.
The likelihood that I will provide a thoughtful response to a question increases if the question is well thought out. Don’t contact me as a substitute for hiring your own lawyer. If you ask me a random question and actually expect me to reply, you should at least thank me in advance (and an offer to make a donation to an appropriate charity will increase the likelihood that I don’t treat the email like a 419 scam email). Sending over a box of Sprinkles or Kara’s cupcakes or Beard Papa cream puffs will get my attention. I think the most thoughtful gift I received was a copy of Madden 2009 the day after it was released. Read below to see what my hourly billing rate is. Also, please spell my name correctly.
Can I contact you to represent my company?
Yes. While I prefer to be introduced to people by someone that I know, I generally will at least chat over the phone with anyone who contacts me on a legitimate matter. My interest level will increase dramatically if I have some idea of your background (e.g. having a Ph.D in electrical engineering would automatically qualify you as someone that I would meet) and what the company does (e.g. an executive summary would be helpful). Like online dating (for which I have no personal experience by the way), I am worried about being contacted by potential axe-murderers and stalkers, so being able to quickly qualify a person is important to me. A LinkedIn bio where I can quickly review someone’s background is often helpful. I will invest the time to meet with someone or to grab lunch if I think it is worthwhile.
I generally prefer receiving emails as opposed to phone calls from people that I don’t know. This is partially because I don’t like the hassle of physically writing down sometimes garbled contact info (especially when I am listening to messages while driving). If you feel compelled to cold call me, then at least send me an email with contact info. If you’re going to contact me and you’re not being referred by someone I know, it would be helpful to understand your background and what you’re working on. An executive summary would be helpful.
Have you ever represented someone that has cold-contacted you?
Yes. A couple of companies have gone on to receive venture financing. Some of them would have likely gotten introduced to me anyway through one of several mutual connections.
What is your billing rate?
My current billing rate is $775/hour. I might provide startup companies with discounts off my billing rate, depending on factors such as whether I have worked with the entrepreneur before and whether WSGR has equity in the company. Every person at WSGR has an hourly billing rate ranging from $100/hour and upwards depending on their level of experience and expertise, among other things.
Will you defer legal fees?
Depending on the company, I will consider deferring legal fees (but not out of pocket costs) in connection with basic startup matters up to a specific dollar cap. In order to even consider deferring legal fees, the founders need to be working full-time on the project (i.e. why should I defer fees if it’s only a part-time hobby for you) and must have some likelihood of raising financing. Deferred legal fees are due upon a financing and will be reevaluated after a period of time (six months to one year) if the company has not raised financing. If a company continues in bootstrap mode and the founders are getting paid, then I think that the lawyers should be paid. If the company dissolves without raising financing, then I will write off the accrued legal fees, but with the expectation that the founders return to me for the next company.
In return for the risk in never getting paid, I expect my firm’s investment partnership to receive somewhere between 0% and 2% of the fully-diluted capitalization of the company at the same price as the founders. The exact percentage depends on the risk. For example, if you already have a term sheet from a legitimate venture fund, the risk is probably zero.
What does it cost to incorporate a company and what is the process?
Incorporating a company in Delaware, issuing restricted stock to founders, setting up an option plan and providing forms of NDAs, consulting agreements, etc. seems to cost around $5K or so. Actual mileage may vary. It could be higher or lower depending on the amount of back and forth and questions. For example, founders who are incorporating their third company with me probably already understand the nuances of vesting acceleration and know exactly what they want. Generally speaking, I have noticed that legal fees relating to incorporating a company with several founders will cost more because of increased explanation time, additional customization for standard forms and multiple revisions of documents due to the founders changing their mind on issues.
I send potential founders an incorporation questionnaire, which they fill in. Most founders have a handful of questions, which I answer over the phone or over coffee/lunch. Once the incorporation questionnaire is completely filled out, a paralegal and a junior associate typically create the documents, with me reviewing a couple of issues (e.g. vesting) for quality control purposes.
How much does a financing cost?
A simple seed stage convertible bridge note financing where the investors are not represented by counsel and don’t negotiate any terms typically seems to cost around $5K to $15K. A Series A preferred stock financing where the investors are not represented by counsel and don’t negotiate any terms typically seems to cost around $15K to $25K. Company counsel legal fees for a Series A financing with a venture fund typically seem to be greater than $50K or $60K, and can be much higher if there is neglected corporate housekeeping or mechanical hassles like bridge note conversions. In addition, the company needs to pay for investor counsel legal fees, which is often $25K to $35K. If investor counsel legal fees are $35K, it wouldn’t be unusual for company counsel fees to be around $70K. Actual mileage may vary.
What’s with the name Yokum?
My legal name is Yoichiro. In Japan, people are called last name-san. For young boys, it may be first name-kun. Yoichiro gets shortened to Yo-kun. Sometime when I was little, my parents probably told people to call me Yokum because Yoichiro was too hard to say. (Please note that this was before Ichiro Suzuki of the Seattle Mariners was a household name.)
Why are you blogging?
Two of my clients, Ballhype (which incidentally aggregates sports blogs) and EduFire started blogging about their experiences in starting up their companies. After reading their blogs, I realized that there was a lack of easily digestible legal information for entrepreneurs starting companies. I seem to answer the same questions over and over again, so I thought I would start blogging to disseminate what I know. (Oh, and I represented a company called Spotplex, which TechCrunch ponders as a potentially better Digg, so I figured I should join the blogging bandwagon.) Due to this blogging interest, I also started to represent Hatena, a Japanese blogging company.
What are you going to cover in this blog?
I’ll try to cover common startup company questions from my practice, including incorporation, founders stock, stock options, seed financings, convertible note bridge financings, Series A financings, M&A issues, IPO planning and other things that seem to come up over and over again.
How often are you going to post?
I’m not sure. Probably when I don’t have a client waiting for an immediate deliverable. I’ll aim for about once a week. Writing some of these answers takes a significant amount of thought and time.
Why are all of your posts in the form of responses to questions?
It seems like what I do most of the time is respond to questions.
Did you write all of these posts yourself?
Yes. However, I have recycled some WSGR client alerts and other memos at times. I have also had a couple of guest posts.
Is this an official WSGR publication?
No. Otherwise, there would be more WSGR logos and the color scheme would be different.
Can I use what you say here against you in a future negotiation?
Sure, but I could easily change one of the posts while I’m on the phone with you to whatever supports the position I’m advocating.
What if I think one of your answers is wrong or misleading?
Let me know. I’ll revise the answer accordingly.
Did you change the contents of one of your posts?
Probably. I write quickly and misspell things. If you read some of my emails, especially from my wireless email device, you’d realize this. I will change things as I notice errors or think of a better answer or if someone makes a comment. You may want to think about this site as a pseudo-wiki where I am the sole editor (until I get someone to volunteer to write more content).
Did you edit a comment?
Maybe. I reserve the right to do whatever I want, like fix typos and edit for clarity.
Why does your feed look funny?
See the previous two answers. I probably posted, then decided to change something.
Did you set up this blog by yourself?
Yes. I think I’m relatively technically proficient for an attorney. One of my clients called the WordPress interface slicker than any fantasy sports application he’d seen, which convinced me that I could do it myself. (Of course, it isn’t hard to have a better application than ESPN Fantasy Sports, which seems to have issues all the time.)
What does this blog run on?
Why can’t you make this site look better?
I just did a complete overhaul in January 2008, so I’m not sure what more I can do. As Doctor McCoy might say, I’m a lawyer, not a web designer. It’s a work in progress. I will take suggestions and constructive criticism. If someone wants to offer to re-design the site, I’m sure we could work something out.
What’s with the advertising on this site?
My Google Adsense experiment has generated $53.58 in February, $39.18 in March, $42.44 in April, $27.43 in May (along with $19.99 in affiliate sales fees), $27.14 in June (along with $19.99 in affiliate sales fees), $46.68 in July, $54.80 in August, $43.54 in September, $33.75 in October, $25.61 in November and $27.36 in December. I donated everything I made from the site to various charities.