How to hire a lawyer for your Singapore startup?

how to hire singapore corporate lawyer

Startups don’t like lawyers. This usually doesn’t have anything to do with the fact that the legal industry and innovation go together like oil and water, and has everything to do with the fact that lawyers cost an arm and a leg, and they’ll take your watch too if you let them.

I’ve heard a number of complaints from startups that have hired lawyers from large firms as well as solo practitioners, and the complaints all seem to be a variation of the following:

1). Did I really need to pay so much money for a trademark or patent registration? I saw the cost of registering myself on IPOS. I could have just done it myself instead of hiring a lawyer.

2). The patent “specialist” I hired knew jacks**t about the technology of my product. Technical lawyer, my ***.

3). The solo practitioner I hired to help me do a Shareholder’s Agreement didn’t know anything at all about startup law and tried to convince me to draft a will as well.

4). I was referred to a technology lawyer from a large firm who charged me S$XXXX for drafting my Terms of Service and Privacy Policy, and this guy would take days to respond to my emails.

I get it. As a fledging business, many startups want to grow their business as quickly as possible. Corporate lawyers are usually the last thing on a startup’s metaphorical mind. It’s a chicken and egg situation though. If you truly intend on growing a proper and successful business, it’s necessary to get your foundations right from the start, and part of getting your foundations right is having a good lawyer set up the proper legal infrastructure from the very beginning.

There are a number of exceptions where I think you can get away without hiring a lawyer.

1). You’re at the bootstrap stage, not seeing any traction or making any revenue.

2). You want to build a simple lifestyle business with relatively little complexity, and you’ll use templated documents.

Outside of these few exceptions, it’s probably a good idea to lawyer up, preferably from the start, or latest when your business starts to grow and inevitably starts facing more complex issues.

So you’re probably going to hire a lawyer sooner rather than later. How on earth do you find the right one?

The “Specialist” vs the “Generalist”

As a founder, one thing you should know is that you can’t just hire a one-size-fits-all lawyer. There are family lawyers, corporate lawyers, shipping lawyers, conveyancing lawyers, litigation lawyers, arbitration lawyers and so forth. These are different specialties that lawyers generally choose to enter depending on their interests and where their careers lead them. A lawyer that claims to do everything probably isn’t going to be that good at anything. Most lawyers don’t have a photographic memory like Mike Ross, and I guarantee you that a Mike Ross definitely won’t come cheap.

As a startup, you’ll be looking for a corporate lawyer. However, there are sub-specialties within the specialty as well. Some lawyers have a mini-practice in startup/VC law. Some lawyers pay particular focus to technology. Some lawyers focus on mergers and acquisitions. Usually, corporate lawyers will have sub-specialties in one or two different areas depending on their clientele.

The ideal scenario for a technology startup in Singapore would be to work with a corporate lawyer that specializes in startup and technology law.

Why you shouldn’t hire a large law firm for your startup.

You can’t afford it. For any fledging startup, it simply makes no economical sense to hire a large law firm in Singapore to do your legal work for you. It just makes no economical sense.

In order to understand this, it’s probably necessary to understand how the legal industry operates. Large, traditional law firms have ridiculous overheads. Inevitably, these overheads have to be passed onto the consumer. This is the frequently used argument against hiring a large firm and it’s an excellent one.

However, it goes deeper than that, and you truly have to understand how lawyers in the larger firms are incentivized. They are motivated by:

1). Pricey hourly billing rates.

There has always been a disconnect between the hours billed for legal work and the client’s expectations. While the cost of legal services can be difficult to estimate in many situations, there’s always that tension between the client and the law firm when the final bill is presented. Clients have been questioning the hours on their legal bill since time immemorial, and it’s difficult to get away from the fact that the legal bill can be padded. After all, the lawyer assigned to you only gets to keep a fraction of the billing rate, and probably has a bunch of other junior associates to feed as well.

2). Origination credit and cross-selling.

Basically, the law firm partner who brings in a new client gets compensated for referring the client to the firm. Financially, it’s in the partner’s best interest to refer you to other specialist lawyers within the firm. This is the reason why your startup might end up working with a few different specialist lawyers when you hire a large firm to represent you.

Large law firms do have their place in the startup world though. Smaller boutique firms usually don’t have the capacity or resources to handle larger scale deals. In the event that your startup faces an IPO or a large scale exit which require rapid access to a large number of lawyers who can start work on the deal immediately, you should probably look for a larger law firm that specializes in these sorts of transactions.

Specialist boutique law firms and why you should look at getting a fixed rate.

There are excellent lawyers in boutique law firms working at a fraction of the price of the larger firms. You could possibly get a far better lawyer with the right kind of experience for your specific situation for cheaper.

These firms charge less because they can afford to, and for the most part, depending on how lean they maintain their businesses, they get to keep the bulk of the legal fees charged.

The slowing economy in Singapore has seen a slow but sure move to the “fixed-rate” model for law firms across all specialties. These firms are still in the minority but this way of charging appears to be a growing trend.

While situations vary on a case by case basis, this move to fixed rates is generally a good one for startups. You avoid getting rough estimates which can end up fluctuating wildly. Most startups also tend not to have particularly complex issues at the start and a fixed-fee package helps put you in control of exactly how much you’re willing to spend in legal fees.

Some firms will also work with your startup on a milestone basis, where you pay fixed fees once certain project milestones are met. This works well for startups that have slightly longer term legal needs.