December 15, 2011
Picking Professional Services Firms
One of the most important things you can do as an entrepreneur is to surround yourself with a great lawyer (as I mentioned in my posting on negotiating term sheets) and a great accountant. Brad’s advice here is excellent:
Choose professionals carefully: It may be tempting to use your wife’s brother’s friend’s neighbor as your lawyer, because he will give you a great rate and you see him at the neighborhood barbecue, but you get what you pay for. The same is true for accountants and other services that your business will use. Find professionals who know what they are doing and have experience with young companies.
I echo that and would add to it a cautionary note about big, brand name firms. Our experience at Return Path hasn’t been great with them. It’s not that they’re necessarily bad, they’re just not compatible with startups. They have lots of overhead and have to charge for it. They put junior people on your account who don’t have the depth of experience you need to properly advise you. Or you can work with a partner and pay $900/hour for him or her to come up to speed on your business since you’re not his or her million dollar account.
Some larger firms have “emerging company” programs with discount rates for young companies – I’d avoid those as well. The rates always creep up over time, and you’ll still be a second-class citizen to them in the interim because their margin is lower when they talk to you.
Find a good boutique law firm that specializes in venture financings, M&A, and general counsel, where you can get a partner working on your account and good advice without paying a fortune. (There are, of course, exceptions to this — one or two in Silicon Valley come to mind that are larger firms but with specialization in this kind of law.) Find a second-tier accounting firm (not one of the big four, but the next rung down), where you aren’t in competition with Fortune 1000 firms for time and attention. You’ll be much happier in the end.