Just how law firms make money by giving away services and documents is an issue that lawyers have been examining for some time.
TechCrunch have an article a bout the law firm s ranging from Silicon Valley to Boston who give away documents to statups neededing to execute basic deals.
As TechCrunch report:
New sites, Cooley GO and WHLaunch, join first-movers Founders’ Workbench and Start-Up Forms Library, to enable entrepreneurs to incorporate their company, secure early-stage financing, hire employees and compensate them with stock options. SeriesSeed.com has emerged as an industry standard for documenting seed investments, and StartupCompanyLawer.com offers answers to over 100 frequently asked questions, along with a term-sheet generator.
How do law firms make money by giving documents away?
“I wanted to get something legit in writing, but I didn’t want to spend any money on it,” said one founder I spoke with. Despite the sentiment, a lawyer is typically the first outside adviser that a startup company pays (eventually).
Because the infamous “billable hour” system – where clients pay hundreds of dollars per hour regardless of outcome – remains ill-suited to cash-strapped startups, big law firms offer alternative payment structures including capped, deferred and discounted fees. Some even take small equity stakes in their clients.
These firms are hoping that the startup will get big, stay loyal and use the firm down the road for high-cost legal transactions like a merger or acquisition, an IPO or an intellectual property litigation. But many of these clients go out of business before they can pay off. As a result, startup law mirrors venture capital where occasional home runs pay for common strikeouts.
Putting legal documents online allows law firms to maximize potential deal flow at minimal cost. “It’s a scalable marketing move,” explains one attorney responsible for one of the popular sites. “If you have a question [about the documents] you’re probably going to contact us.”
Another emphasizes the branding value of the site, saying “It’s not like we’re trying to push our version of a non-disclosure agreement. The site is intended to position ourselves as an A to Z resource for startup companies.”
The sites also convey a message about the scale and quality of the sponsoring law firm: It has the scale to afford giving away the once-“secret sauce” and the quality to bet doing so won’t cannibalize business. That message is founded upon the idea that law is a service, not a product. As one lawyer explained, “what I’m telling you is that my documents are not what makes me special – it’s the advice behind the documents.”
Some attorneys emphasize their sites’ contributions to the larger startup ecosystem, highlighting informative blog posts and data on industry trends. “We don’t brand our documents. We are really sensitive about being supportive of the entrepreneurial community, and not having people feel this was a marketing thing.”
Others are skeptical. “In the past [firms have] offered free consultation: ‘come tell us about your issues and we’ll give you some thoughts and you can decide to hire us or not.’ This is kind of a small move ahead from that.”
Can Startups Do It Better?
Whether commitments to scale and quality prove fruitful may depend on whether startups in the legal space can provide “good enough” for far cheaper.
One company, Shake, provides a mobile platform to access and sign simple legal agreements like freelance consulting contracts, with users downloading native Shake templates or uploading their own. Clerky provides form documents for incorporations, convertible notes and employee agreements along with document-generator and progress-tracking tools.
Read more at TechCruch