Hacker News Reader

Comment by r00fus | Hacker News Reader

I read it like one of the commenters in the article - "get lawyers that work for you".

As a founder you should question the relationship between the VCs and any counsel you hire.

That was the big lesson I took away too. For many of us who are relatively young, it's valuable to be reminded that often we're surrounded by other players whose relationships go back much further than ours do. I've found that loyalties are often a lot stronger and less obvious than you may think.

The lawyers in this situation had a clearly defined client whom they had an ethical obligation to represent zealously. I don't know any of the particulars, but let's assume their official client was the corporation, and the board, stacked with the VCs, duly voted on this course of action. The lawyers were then just doing their job properly, under this assumption, and serving their actual client, not making a calculated betrayal. The only ones responsible for the VCs' decision are the VCs.

Of course founders could and probably should have their own lawyers advise them in deals with outside investors.

A well known Palo Alto law firm I talked to last year made this point abundantly clear in early discussions re engaging them. They wouldn't represent the founders, they would represent the company. Even in those early talks they mentioned there would sometimes be conflicts of interest where it would be best the founders seek their own legal advice.

That's exactly right, and they're also doing their job right to recommend the founders get their own separate counsel. I have seen some really surprising conflicts of interest arise between founders and investors and even between founders before the corporation exists to become the official client. Everyone wants to be awesome buddies and not think about the chance of not always getting along.

Reply on news.ycombinator.com