How I Reduced Legal Costs in My Startup

As a serial entrepreneur (with some exits ;=)) and founder of early-stage startups, I prefer to invest funds not in legal services, but in product development and testing hypotheses.

For a startup, this is the only way to find product-market fit. Legal expenses won’t significantly contribute to this (with all due respect to lawyers :=) ). 

However, legal documents are an essential part of any startup and require careful attention. There’s no room for overlooking a single nuance or detail when signing intellectual property, confidentiality, nondisclosure, or other kind of agreements. Such agreements are designed to protect counterparties’ interests and data privacy. Thus, mistakes, inaccuracies, or ambiguous clauses in documents are subject to critical risks for signees. 

The list of why legal support is vital for startups can go on.

While legal support helps early-stage businesses to address a whole heap of challenges, the support itself brings another problem to the table. Legal costs can quickly spiral out of control and dramatically affect startups’ activities.

Over the years of entrepreneurship, I’ve developed several key strategies to reduce these expenses and want to share them with you.

1. Use Existing Contracts

The first thing I do when drafting a new contract is research similar agreements from competitors or similar companies. The goal is to gather as many relevant contracts as possible. By reviewing these documents, I can identify best practices and key clauses that align with industry standards. This not only ensures the reliability of my contracts but also reduces the initial drafting workload.

2. Delay Lawyer Involvement

Involving lawyers in the early stages of contract drafting can lead to significant expenses, as they often insert many requirements that lead to prolonged negotiations, disputes, etc. Instead, I take responsibility for the initial review and drafting of the contract. Only when the document is almost ready do I bring in my legal team. This approach minimizes early legal costs and ensures that lawyers focus on significant issues, not on minor tweaks or trying to impose their understanding of how the parties should interact.

3. Manage Changes Through Counterparties

When negotiating contracts, I insist that the other party make changes through their lawyers. This strategy reduces the number of mutual edits between legal teams, which often leads to additional costs and delays. By handling the offered initial changes myself, I can quickly understand what I need from the agreement and accordingly direct my lawyers.

4. Use Document Comparison Tools

Tools like BestAgreement.ai have been a real find for me. In my previous company, we received numerous standard NDAs with minor modifications. Sending each one to my lawyer for review was costly and time-consuming. Now, I use document comparison tools to quickly check these agreements against my standard template. If there are significant changes, I send the analysis to my lawyers. This approach streamlines the review process and reduces dependence on legal services for routine checks.

5. Require Template Use

I require my lawyers to use standardized templates and AI-based tools, including those based on ChatGPT. This ensures consistency and efficiency, helping to control costs and speed up legal processes. Using templates not only saves time but also reduces the likelihood of errors.

To summarize, effective legal management is vital for the financial health of a startup, especially in the early stages.

To reduce legal expenses, you can:

• Use existing contracts
• Delay lawyer involvement
• Managing contract changes
• Leverage document comparison tools
• Require the use of templates based on AI tools.

Saved funds you can direct to product development and testing hypotheses.

Hope my practical advice will help you with your startup!

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Best regards,

12New.AI / BestAgreement.ai

CEO & Founder 

Vitaliy Goncharuk