Ted is the founder of Howell Legal, a Providence-based law firm that caters to the unique legal needs of entrepreneurs. We caught up with Ted to find out what he and his firm have been up to (and to steal some free legal advice for you, of course).
Q: Tell us a little about your practice
Ted: We practice corporate work, predominantly for early stage start-up companies, although about 1/3rd of our clients are not start-ups. For start-ups, we handle formation, ownership issues, financing (convertible equity and equity), mergers and acquisitions, licensing and negotiation of contracts, and general corporate maintenance. Our goal is to get our clients in the best position possible for later stages of financing, in a cost-effective manner. For other clients, in addition to the same types of matters that we handle for start-ups, we handle debt financing, buy-sell arrangements, and business succession planning. We also oftentimes play the role of outside counsel for transactional work.
Q: What should an early stage company look for when selecting a legal partner?
Ted: Early stage companies are in an interesting place because they need to save money (so they can maximize growth), but legal mistakes made in the early stages can make or break them in the later stages. This is further compounded by the fact that early stage companies are generally structured differently, and have different issues, than lifestyle and other companies. So, an early stage company needs someone who is experienced with start-ups (not just an experienced corporate lawyer), so they can leverage that experience to put the company on track for future financing, but at a lower price. The attorney may also have contacts which can help the client grow.
If you are an early stage company, first make sure that you select someone that has good experience working with start-ups, from there, you should be able figure out if the pricing is reasonable (but beware of deferred fees, etc., as those often end up far bigger than if they had paid along the way - this may be a calculated risk to save capital up front, but don't be surprised), and from there make sure you like whoever you are working with!
Q: What common legal "mistakes" do early stage companies most make? Advice for avoiding them?
Ted: There are so many mistakes that are made without good counsel which seem logical until they are played out. A good example of that is promising someone equity in terms of a percentage of the company when the company hits a certain milestone and can afford to bring on a lawyer to help out. Often-times when companies do that, they inadvertently cause large tax implications relating to the issuance of the equity that could have been avoided if it were granted early on, and sometimes they also end up creating a form of anti-dilution for the recipient.
Another common mistake is failing to subject founder equity to vesting restrictions - or making those restrictions too favorable to the founders. Too many founders do this thinking that they are going to put themselves in a better position vis-a-vis investors, and fail to understand that the more protective provisions also help them protect themselves against each other. A split up can get very ugly - and without proper vesting provisions, splits usually end up killing the company.
There are so many online tools for formations - Clerky, Cooleygo, etc. Those aren't foolproof, but if you need to save money and want to avoid some of these mistakes, see if your local start-up lawyer is willing to help guide you through the documents (leaving you to some of the heavy lifting, and reducing fees).
Q: Things in the startup and technology world have moved quick in the last few years. What's been the impact on how you work with your clients?
Ted: Everything moves more quickly. As we try to automate the things that can be automated and focus on the "high impact" areas for our clients, we find that we end up working with a larger group of clients. All of those clients expect "high touch" service with a quick turn-around, as they should. This can be challenging when a group of clients all want something at the same time. We are always on call for our clients - but on the flip side, we also don't have to keep "normal" hours. If we're not busy, we take the time to enjoy family, friends or other diversions. We also have quite a few clients (mostly in New York and California) whom we have never met face-to-face. That is a big change from when I started practicing in 1999.
Q: We hear you spend a lot of time in the ocean. Where's the craziest place you've been on your board?
Ted: That's a tough question to answer! Like any New England waterman, I enjoy the ocean year-round, so some might think that I'm crazy to be out on the water in the middle of a blizzard. Other than New England, I've made trips to Maui and the Caribbean, although never at giant breaks like Jaws or Teahupo'o. But I've been in my share of some big waves here in RI - big enough to be overcome by their shadow far before the wave gets to me. Too me, the ocean is a place to relax and lose track of time (and my phone and everything else) - it's second only to spending time with the family.
Q: Last question...just what is a Pa'u Hana?
Ted: It's Hawaiian. I was introduced to it by a former partner of mine who was from Hawaii. She told that it meant "no more work" and was a time to relax with friends over some drinks. Very low key. Wikipedia says it is "The time after work. It is considered a time for relaxation, informal socializing with friends and family, and enjoyment." That's exactly what we try to have at our office - or anywhere else if others want to host - on a regular basis. Just stop by, have a quick drink, and enjoy the company.
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