Based in Sydney, Australia, Foundry is a blog by Rebecca Thao. Her posts explore modern architecture through photos and quotes by influential architects, engineers, and artists.

What Are the Expected Legal Costs for a Startup at the Angel and Series A Stages?

First, let’s unpack the meaning of “legal costs.” Legal costs include not only attorneys’ fees for a lawyer’s work, but also registration fees. Registration fees are non-negotiable. They’re fees set by a state or federal governmental entity and don’t include a lawyer’s billable time.

Registration fees include everything from registering the incorporation of your company with the state (these are usually nominal - below $100), to trademark, patent and copyright registration fees, which are more expensive (typically in the $1000s). If you’re required to submit an SEC filing, you’ll need to add those registration costs to the transaction. 

As for attorneys’ fees, much depends on your geographical location. Traditional law firms located in larger cities will generally cost you more than those in smaller cities and towns. 

An average range of legal costs for a startup at the angel stage can sit anywhere between $5000 to $20,000. The more complexities involved (e.g., intellectual property transfers and number of investors), the higher the expense.

When you get to the Series A stage, you’ll be looking at legal fees easily above $30,000. Due diligence and document review are time intensive, and you’ll want to ensure that this is done thoroughly. It’s also customary to pick up an investor’s legal fees in the ballpark of $10,000. VC preferred stock investment documents tend to run beyond 100 pages, and negotiating with investors’ counsel inevitably adds costs. Larger cities routinely see attorneys’ fees in the range of $50,000 to $100,000 once you enter the Series A phase.

Many attorneys offer fixed fees as an alternative to the billable hourly rate. This allows clients to anticipate costs and have clarity regarding expectations. For example, some attorneys might charge $5000 for a basic startup, which includes the incorporation, operating and/or shareholder agreements, stock issuance, Confidentiality Agreements and IP transfers. Higher fixed rate packages might include patent and trademark registration, drafting and negotiating notes, and compensation plans. Other lawyers offer a blend of fixed and hourly rate structures.

It’s important to remember that you’re not just purchasing documents, but the lawyer’s expertise. Like fingerprints, no two deals are ever alike. There will always be special circumstances that will require a set of legal eyes that can identify and make the modifications that will represent your best interests - saving you a lot more expense down the road.

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