Why startups have to pitch attorneys like investors (video)
Startups are not just a risk for investors. They are also a risk for the attorneys and other service providers that choose to work with them. That’s because there’s no guarantee an early-stage company will be around to pay a law firm for all the work it’s done – let alone become a long-term customer.
“A characteristic of a startup company is that they are almost universally resource scarce,” said Jeff Jones, a longtime “startup” attorney who has worked with life science and digital health companies among many others.
“For me to want to work with a startup company I have to do an assessment of whether this business is worth the risk,” Jones said. “Obviously, you do that assessment any time you work with a new company. But with startups it’s a little more extreme.”
Jones has worked with my company, MedCity Media, so I asked him to speak candidly and provide some rules of the road for healthcare companies seeking high-quality attorneys to invest their time and resources with them. Among his advice:
It’s all about the future. Much like investors, startup attorneys need to believe that the founder has a vision and the company has a strong plan for long-term growth. Even for an attorney, working with a young company is about a future, long-term payoff. Be prepared to show the attorney the executive summary and deliver the same pitch you would an investor. “You need to essentially convince the attorney you want to work with that you’re an opportunity rather than a risk,” Jones said.
Show the science (and the patents). For pharmaceutical and medical device companies, be ready to show the intellectual property you own or have rights to, or discuss the plan you have to negotiate a license for the intellectual property for the university.
What’s the regulation? Because of the intense regulations and reimbursement issues with various drugs and devices, be ready to explain specifically how you’ll navigate those hurdles and monetize the technology. If you don’t showcase knowledge of regulation and reimbursement – and a distinct approach – some attorneys may pass.
Make sure they are specialists. Attorneys are specialists. So startups should – before they even begin the conversation with an attorney – make sure the firm or attorney has a background in the startup’s specific needs: whether it’s a specific clinical area, a certain type of documentation, etc.
Deliver bad news fast. Attorneys will lose faith in a startup not when the company misses a payment (or two or more), but when the startup isn’t up front about communicating problems that will affect their relationship with a lawyer.
[Photo courtesy of Flickr user StuSeeger].