How to Choose a Lawyer for Your Fund
Choosing a potential lawyer for your fund is an important decision, helping you formalize your legal structure while guiding you through the obligations of becoming a fund manager. Here are some criteria to use in interviewing and picking your fund’s lawyer.
Ask who will be your daily point-person and overall coverage model with your legal team.
- Will you have separate lawyers for fund formation, investment deals, service provider contracts, SPVs (special purpose vehicles), and human resources law, etc.? e.g., two lawyers; one handling fund formation and another handling investment deals, for cost savings or specialization.
- What services will each lawyer provide? Are there redundancies between law firms?
- Will your lawyer’s senior partner or junior associate work on your account? e.g., senior members may cost a higher rate of ~$400-$1,500+/hr, while junior members may cost ~$100-$400/hr and save you money over the long term.
- Who is your backup if someone is unavailable? Will they be knowledgeable about your account?
2. Expertise & References
Verify your lawyer has experience working with funds, investors, and investments like yours.
- Is your lawyer familiar with the types of investment deals you will do? e.g., leading rounds, mergers & acquisitions, follow-on investments, recapitalizations, board seats, governance side letters, etc.?
- Are your lawyer’s documents considered “standard” in the industry? This may save time and money by removing the need to negotiate with counterparties, even if the upfront cost is higher.
- Who else has your lawyer worked with? How was the relationship? If the lawyer cannot share references publicly, try back-channeling to contacts.
- Can your lawyer cover the regions where you plan to make investments? e.g., small cities, international, or major cities?
3. Structure Familiarity
Confirm your lawyer will balance the interests of your team, investors, and portfolio companies — optimizing each member’s needs across setup, ownership arrangements, and capital movements.
- Will your lawyer create a “Summary of Principal Terms” or equivalent document to outline your fund structure, terms, contributions, distributions, and fees? e.g., to be used later in fundraising conversations with investors.
- Will your lawyer create key documents? e.g., Private Placement Memorandum (PPM), Operating Agreement (OA), Limited Partnership Agreement (LPA), Subscription Agreement, and Investor Questionnaire, etc.?
- Is your lawyer aware of your team’s involved parties such as General Partners (GP), Limited Partners (LP), and Limited Liability Company (LLC), etc.?
- What are your lawyer’s suggestions for standard terms, non-standard terms, negotiable terms, and common restrictions?
- Will your lawyer support multiple closes for your fundraise? e.g., most fund managers may perform multiple closings to reach a fund’s goal size.
- Is your lawyer comfortable with the minimum amount of capital you need to raise for your fund model to work? What issues arise if the minimum is not met?
- Will your lawyer work with your investments to execute deal documents? Will they assess your ongoing rights? e.g., board seat intent, information rights, ownership rights & pro-rata rights?
- Can your lawyer support the number of investments and ownership percentages of each investment you intend to have?
Stay in regular contact with your lawyer to guide you through fundraising, timing, exceptions, and investor questions.
- Will your lawyer communicate directly with investors? Will they manage negotiations?
- Will your lawyer collect executed documents? Will they chase signatures or e-signatures after a capital commitment is confirmed?
- How will your lawyer handle pending lawsuits that arise with investments, or broader lawsuits that may impact the fund reputationally?
Ensure you are comfortable with all legal costs, as counsel fees are often your largest expense as a new fund manager.
- What is included in your lawyer’s pricing? Is pricing hourly, a flat rate, based on the number of general partners, or calculated as a percentage of fund size?
- Can your lawyer defer fees until you’ve fundraised? e.g., until after your first close or after 90 days
Coordinate with your lawyer around regulatory filings including state and federal registrations.
- Will your lawyer coordinate state and federal regulatory requirements? Will they alert you when payments are due? e.g., filings with the SEC, annual filings, disclosure documents, registrations (for example in Delaware or in your home state)? If not, ensure your fund administrator has agreed to take this over.
Picking a lawyer can be challenging and time consuming. Be sure to ask the right questions to confirm your needs are met, so you can position yourself for a successful launch and investing cycle.
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