Searching for a Unicorn: The Guide to Finding a Great Attorney For Your Web3 Startup
I’m the founder of a cross-chain staking protocol called Brydge. I’ve interviewed a few dozen attorneys for my previous web2 projects and directly worked with about a dozen. Figured it’d be similar in web3. Couldn’t have been more wrong and nearly paid the price for it a few times. Put together the below guide for you budding buidlers to avoid some company-altering mistakes!
Disclaimer. I am not an attorney. I did not go to law school. In fact, I know very little about the law. This is not legal advice. Consult an attorney (or multiple) before making decisions.
How are web3 attorneys different from web2?
Precedent and personality. Becoming a lawyer is a battle-tested path to safe wealth creation. So, the profession usually attracts folks who have a low risk tolerance. This is good, your appetite for risk should be greater than your attorney’s.
Crypto, however, attracts the polar opposite personality type. We are risk-loving at heart. We’re willing to dump significant portions of our net worth / career into an asset class that’s been around for less than a decade. The EXACT opposite of what attracts a lawyer.
A lawyer working in web3 is a unicorn. Treat the search to find him/her accordingly.
Why is this important?
Web2 companies have a battle tested legal launchpad. Incorporate via Atlas/Gust, download the YC SAFE, open a company bank account, then kick the major decisions down the road. Before your seed / Series A you Google “best tech lawyers” or ask any investor/friend/guy on Twitter and you’re set.
Web3 companies have no precedent. If you’re a doxxed founding team planning on EVER releasing a token, you have a lot to consider at inception. Where do I incorporate? Was doxxing the right move? Is a SAFE ok? Or do I use a SAFT? Do I have to figure out tokenomics now? Wtf are tokenomics? Are there weird tax implications of paying an employee in crypto?
I’ll answer some of these below. Best path-find a web3 lawyer who knows his/her stuff.
Why does a token make a difference?
This goes deeper into US securities law. Check out the Howey Test. Quick TLDR-Uncle Sam doesn’t allow public securities offerings (i.e. most token sales) to non-accredited US investors. Securities may only be sold to accredited (wealthy) investors. Merits of this regulation aside, it’s a BIG deal that you need to be intimately familiar with.
How do I find this unicorn lawyer?
First, ask your network. If you don’t have a network yet, read on.
Jot down everything your team + protocol is. For us, that’d be American, doxxed, bridging, B2C + B2B, and incorporated in the USA. For you, it’s probably different.
Then, find your closest comparables (not competitors). Luckily build in public (aka this) is huge in web3, so this shouldn’t be too hard. For us, the best comparables would be other doxxed American pre-seed/seed stage DeFi protocols. Again, probably different for you.
Hit them up via Twitter/email/Discord. Founders LOVE helping other founders. It makes us feel good because we know EXACTLY what you’re going through. Ask for email intros to their lawyers. Important for this intro to be direct. Warm intro -> lawyer will 100% take your call. Cold intro -> 50/50. Remember, good web3 lawyers are unicorns.
How do I interview these lawyers?
Just like an employee interview. Ask repeated questions. Your goal is to see where their knowledge stops. If a single response sounds uninformed, thank them for their time and end the call. You may not be an expert in blockchain law, but your intuition can tell when someone isn’t knowledgeable in a subject matter. Trust your gut-this is a HUGE decision.
Firm name and tenure are meaningless. Crypto is a decade old. None of this was taught in law school.
Does this get expensive?
Out of the dozens of attorneys I’ve interviewed, only 1 has ever charged for an initial consult. Generally, they’re free. Maximize the time and ask detailed questions for the entire 30 hour block.
Do I raise my round on a SAFE, SAFT, or something in between?
This is a nuanced legal question that I’m not qualified to answer. Honestly, every attorney I’ve spoken to runs it differently. Ask a million “why” questions to each attorney and form your own opinion.
Where do I incorporate?
Depends on attorney recommendation. Some prefer for you to incorporate as a Delaware C corp like a normal tech startup, then license that out to a British Virgin Islands / Cayman Islands shell corporation. Some prefer straight BVI/Cayman. Some prefer just one. Sound sketchy/scary? Because it is. This is what your unicorn is for. Ask, ask, ask. Then analyze responses.
How do I structure my community allocation?
Assuming your attorney is onboard, it’s likely best to defer this until you have tokenomics set in stone. Common structure is to structure your round with investor % coming from the company’s allocation instead of the entire market cap. If your attorney doesn’t know what this is, you have the wrong attorney.
How much should I pay for my web3 attorney?
You’re playing in a loosely-regulated sandbox that can change in an instant. A legal hiccup with your fundraise / tokenomics can destroy you and your protocol in a few years. See Ripple’s SEC action for a worst-case scenario.
Pay WHATEVER it takes to get your unicorn. For context, we happily fork over $975/hr for ours. We’d pay double if that’s what it took, even though we’re VERY tight on cash. It’s just that important. You may be a 16 year old founder with $2k in her bank account. Figure out a way to defer payment until after you raise to hire a pro web3 attorney. Don’t go with the $500/hr tech lawyer who’s “drafted a few SAFTs”.
Additional 2 cents:
Attorneys are not exempt to exaggerating qualifications. There’s a HUGE difference between a lawyer who knows crypto and a crypto lawyer. Ask ask ask questions. Make sure they know the sandbox you’re playing in as well or better than you do. Your personal + company’s ass is on the line if they don’t. Why SAFE v SAFT? Why token warrant? What community token allocation is common? Why? Why BVI/Caymans? Why why why why why…
You’ll quickly learn the dirty legal secret of web3. No attorney actually knows what to do. There’s nearly zero legal framework to operate within. The Howey Test was instituted in 1946 to regulate the investment in an orange grove (yes, the fruit) as a securities offering. Everyone’s just covering bases how they think is best. Your job is to find the guy/gal who can cover your bases best.
Hope this was helpful + enables you to avoid some of our mistakes. Happy to answer questions below. Happy buidling!