News Focus
Take a chance
on me
Despite their economic
difficulties, Spain and Portugal
are seen as fertile ground for
tech start-ups as office space
is cheap and the salaries for IT
engineers are relatively low – but
does the sector represent a big
opportunity for law firms?
Given that there are not always
significant legal fees to be earned by
advising a start-up, some lawyers
at major firms view such work as a
waste of time. “An entrepreneur may
have a great idea, but it may not be a
valuable use of our time,” admits one
partner at a leading law firm in Spain.
However, plenty of firms in Iberia are
willing to bet on the potential future
success of a start-up in the hope of
winning more lucrative instructions
from the company if it is successful, or
even clawing-back fees at a later date
for work done on a complimentary
basis. The start-up sectors in Spain
and Portugal are thriving and with
both countries having among the most
successful “business angel markets” in
Europe, start-ups are able to tap into
an ever-growing source of funding.
Cuatrecasas, Gonçalves Pereira
partner Pedro Fernández says the
start-up sector in Spain is presenting
major opportunities for law firms who
are advising entrepreneurs, investors,
venture capitalists and business angels
[affluent individuals that provide
capital for start-ups] that are active
in the Spanish security, biotech and
mobility (for example, smart cars)
sectors. In addition, Fernández adds
that private equity funds are also
taking a greater interest in the start-up
sector and are investing in businesses
at an earlier stage in their development
than they would have done in the past.
Even though start-ups, by
definition, have relatively small
budgets, Fernández says they are
increasingly prepared to spend big
on legal advice. “If you’re entering an
investment round, it’s to raise money
– start-ups are willing to use a big law
firm because it’s a very important time
for the company,” he says. Fernández
says that some law firms may advise
a start-up in the hope that, while the
fee-earning potential is minimal at
the start-up, if the business becomes
more successful it will generate more
18 • IBERIAN LAWYER • September / October 2016
lucrative work in future. But he
acknowledges there is a risk that as
a start-up gets bigger, it may switch
to a different law firm. However, he
adds: “If you help an entrepreneur
from scratch and you are a ‘tier
one’ law firm, you are in a good
position.”
Uría Menéndez partner José
Soria says that, while advising a
start-up on the “seed phase” of its
development may not be an “easy fit
with a large law firm”, there are still
ways for such firms to work with
the entrepreneurs. He describes Uría
Menéndez’s approach as offering
advice to start-ups on matters
such as “investment agreements,
shareholder agreements, stock
option plans and tax advice”.
Fees not main consideration
Billing is not always the main factor
under consideration when deciding
whether or not to represent a startup, says Soria. “Start-ups are very
innovative – the clients are often
young people with a lot of energy
and ideas and this is something
to take into consideration,” he
adds. Soria says Uría Menéndez
has created a start-up team that
supports, among others, start-up
accelerators by providing legal
seminars, for example. In addition,
advising business angels is another
opportunity for lawyers, according
to Soria, who describes it as a
“growing area” and says there are a
lot of networks for business angels in
Spain (see box).
It used to be the case that start-ups
did not set aside much money for
legal services, but that is no longer
the case, according to Luis Casals,
partner at Baker & McKenzie. “Startups can’t take risks,” he says. “If a
start-up has a good law firm backing
them, it helps with investment.”
Casals acknowledges that sometimes,
when advising a start-up, a law
firm can lose money, but he adds
that there are many things to be
learned and that when deciding to
represent a client, “there is always
the expectation that the project will
explode”. He cites the example of
property website Idealista, which
Baker & McKenzie has represented:
“That was a start-up once,” he says.
Casals adds that Baker & McKenzie
often has a “gentleman’s agreement
- nothing in writing that we’ll charge
the client less, but if things go well,
we’ll work at market rates”. But he
adds: “It’s not pro-bono, even small
companies have a budget for legal
services.”
Work for start-ups has convinced
some law firms of the value of
creating “spin-off” initiatives to
provide structured support for
such businesses. One example
is Cuatrecasas ACELERA,
a programme that supports
entrepreneurs in the legaltech
sector by providing them with
mentoring and training. However,
www.iberianlawyer.com