Working With Startups and the Value of Saying 'No'

A young, ambitious entrepreneur came into the office with the next big thing.

Having made millions in other enterprises, the client was confident this was the business that would set him up for life. He wanted to record videos of young women at parties, like Mardi Gras, and sell them online.

"I don't think it's a good idea," I told him, saying that another company was already risking privacy violations in a similar venture. To his credit, the client listened and came back another day with a different idea.

The founder of that other company, by the way, later fled the country after a judge issued a warrant for his arrest in a bankruptcy case. Girls Gone Wild made about $20 million in its first two years, but civil and criminal lawsuits soon followed and forced the founder into bankruptcy.

Just Say "No"

It's hard to tell clients "no," especially when they are successful and excited about a startup idea. But there is real value in truly independent counsel -- not as an attorney invested in clients' ideas or the financial return of doing their legal work. It's about being objective.

For example, one time a client came to me during the get-rich-quick days of evolving internet search engines. Her web development company had the opportunity to develop a voice-enabled search engine -- a predecessor to Google and Siri.

It was exciting and the opportunity looked golden, except that the gold was too expensive. The inventor of the technology wanted a licensing fee that was more than the client's annual profits.

I could have taken stock in exchange for legal work, but I told the client that she simply couldn't afford it. She couldn't resist either, and that dot.com, dot bombed.

Beyond Legal Expertise: Common Sense

Clients naturally come to lawyers for legal advice, but we are not robots. Sometimes, we have to use the distinctly human algorithm -- common sense and gut instinct.

One time, I strongly advised a client not to go into the medical marijuana business. There are too many risks, I said. Little did I know how risky it would become.

California had legalized medical marijuana, I said, but it was still a crime under federal laws. It was a laissez-faire administration, the client responded, and the U.S. Attorney General was not prosecuting.

"And what happens when a new sheriff comes to town?" I asked. The client wasn't worried and proceeded with the business plan. He was making a lot of money -- until he got shot.

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Related Resources:

• Top 10 Reasons Why Entrepreneurs Hate Lawyers (Venture Hacks)
• Lawyers, Here's How You Can Save Startups From Themselves (FindLaw's Strategist)
• How to Convince Start-Ups That They Need In-House Counsel (FindLaw's In House)