How Startups Should Choose Outside Counsel: Comparison Points for Incorporation, Fundraising and IPO Preparation

Hello, I'm Noriaki Asato, Representative Attorney at LegalAgent.

The moment a startup starts looking for outside counsel differs from company to company: around incorporation, at the first major contract, on receiving a term sheet from an investor, or when considering an in-house hire. A search turns up lists of "law firms recommended for startups," but name recognition and the size of the retainer fee alone cannot tell you whether a firm fits your company's stage of growth.

A company that wants to put a founders' agreement in place, a company about to close a J-KISS round, and a company whose terms of use and day-to-day contract reviews are piling up each need different experience from an attorney and different deliverables. When comparing candidates, it is important not only to look at the list of practice areas, but to confirm concretely who will review which materials, when, and in what format they will respond.

Outside counsel is more than someone you ask to fix the contract in front of you. Will the documents prepared at incorporation carry over into the next fundraising round? Will day-to-day contract decisions remain on record in a form you can explain in legal due diligence? Choosing with that continuity in mind reduces rework after the company has grown. LegalAgent's retainer fees and scope of support are listed on our startup legal and outside counsel service page.

When to Start Looking for Outside Counsel and How to Use Them

You do not have to sign a monthly retainer the moment the company is incorporated. At a stage where there is a single founder, no outside shareholders and no commercial contracts yet, you can also engage counsel on a spot basis only for the matters you need. That keeps fixed costs down while letting you settle first the items that are hard to fix later, such as the founders' agreement and the first contract templates.

An ongoing point of contact suits the period when several legal topics start moving at the same time. When contract negotiations with business partners arise every month, labor consultations increase with hiring, and fundraising negotiations with investors are under way, the burden of re-explaining the business background from scratch for each matter becomes heavy. An attorney who knows the history of past contracts and the capital policy can connect new questions naturally to earlier decisions.

If you first look for an attorney only after an investor has sent a contract, you end up checking, in parallel with the contract terms, everything at once: past share issuances, minutes, the shareholder register and even the ownership of intellectual property. On the timing of consultations for fundraising, see also When Startups Should Consult an Attorney About Fundraising.

If all you need is a founders' agreement at incorporation or a one-off J-KISS issuance, a spot engagement may be enough. In periods when the scope of work and deliverables are clear and day-to-day questions are few, you can obtain the review you need without bearing a monthly fee. On the other hand, for a company where contract reviews, questions from business divisions, labor and IP, Companies Act procedures and fundraising preparation continue on an ongoing basis, the advantages of a retainer under which past decisions and internal documents can be shared become significant.

For a company planning to hire in-house legal staff in the future, outside counsel is also more than a stopgap until that hire. If you set up with outside counsel in advance how requests are received, the standards for contract review and the rules for storing key documents, you can hand them over smoothly to the person who joins. Please also see Startup Legal Advisors: What to Put in Place Before Hiring In-House Counsel.

Scope of Support in the Founding Stage and for Day-to-Day Legal Work

The items to check at the founding stage include the articles of incorporation, the corporate governance structure and the shareholder composition, as well as the founders' agreement and the ownership of intellectual property. Even if the incorporation registration has been completed, you need to confirm individually how shares will be treated if a co-founder leaves, and whether the rights to software and logos developed before incorporation have been transferred to the company.

Ask candidates not only whether they handle the incorporation procedure itself, but how far they can support the founders' agreement, the capitalization table, minutes of shareholders' meetings and board of directors meetings, and coordination with the person handling registration. Where registration is split off to a judicial scrivener, tax to a tax accountant and labor to a certified social insurance and labor consultant, also check who manages the overall schedule and passes the necessary documents between them.

When the business starts, you will need non-disclosure agreements (NDAs) and service agreements, as well as employment contracts and terms of use. Looking at whether a firm can not only create templates once but also update them to match your business model, sales methods and data handling tells you whether you can entrust day-to-day legal work after founding to them as well.

Checking Fundraising Experience and the Link to Legal Due Diligence

An explanation such as "we have a track record of supporting startups" does not tell you whether the firm has the experience needed for this particular fundraising round. The support varies greatly depending on whether they acted for the issuer or for investors, whether they handled J-KISS or preferred shares, and whether they managed not only the contract review but also the closing, through resolutions, collection of signed documents and registration.

For a seed-stage J-KISS, you check the valuation cap, the discount, the events that trigger conversion, the treatment on maturity and dilution in the next round against the capitalization table. Version 2.0, published in Coral Capital's J-KISS guide, and the earlier version differ in design points such as the cap (post-money cap or pre-money cap), so you also check which version of the contract is used and what individual modifications have been made. Maturity does not mean that the instrument always converts automatically, or that the principal is repaid. For Series A, you read across the investment agreement, the shareholders' agreement, the distribution agreement and the terms of the class shares, and work out consistency with the term sheet and the closing conditions. If a different person is responsible for each document and nobody oversees the whole, discrepancies easily arise in the definitions of the same terms and in the content of rights.

In meetings with candidates, confirm not only the number of past matters but at what stage they get involved, what deliverables they return, and how far they negotiate with the investors' counsel. An attorney who handles both issuer-side and investor-side matters may be able to prepare the company with the points investors focus on in mind. However, because matters involving a conflict of interest cannot be accepted, share the specific investor names and other parties early in the consultation. We never represent opposing parties on both sides of the same fundraising.

Fundraising practice is also closely tied to day-to-day legal work. In an investor's legal due diligence, the review covers not only share-related documents but also key customer contracts, IP assignments from contractors, labor documents, terms of use and the handling of personal information. If day-to-day contract reviews record who accepted which risk on what terms, you can answer due diligence questions calmly. If contracts are scattered across individual staff members' mailboxes and the reasons for revisions are not recorded, you will have to build a contract register and redo the risk review from scratch just before the fundraising.

When choosing outside counsel, check separately the capacity to handle fundraising events and whether day-to-day contract, labor and IP questions can be handled through the same point of contact. It need not be one attorney handling everything; a structure in which the team shares the history of past consultations and company documents can do the job.

Comparison Points, Fees and the Initial Consultation

Practical details that cannot be seen from a candidate's website are confirmed in the initial consultation and the quotation. Preparing a comparison table with the same items keeps you from being swayed by the level of the retainer fee alone.

Comparison item	What to check
Scope of support	The split between legal consultations and contract reviews covered by the monthly fee, and fundraising and registration-related work quoted separately
Staffing	The point of contact, the attorney who actually reviews, and handover when that person is unavailable
Deliverables	Tracked changes in Word, comments for the counterparty, internal risk explanations, and issues requiring approval
Response time	The starting point of the clock, the distinction between first and final responses, and how to communicate urgent matters
Fundraising	Rounds handled, contract types, issuer-side and investor-side experience, and the scope of closing management
Company documents	Support with managing the articles of incorporation, minutes, shareholder register, capitalization table and contract register
Fee terms	Number of matters or hours within the monthly fee, unused allowance, re-reviews, meetings, English-language contracts, and treatment of overages
Information management	Cloud and AI tools used, handling of input information, access rights, and how consultation history is stored

Even if a firm says "within one business day as a rule," the practical meaning differs depending on whether that refers to acknowledging receipt or to returning a revised draft reviewed by an attorney. For fixed fees as well, you cannot compare properly without checking whether re-reviews of revised versions returned by the counterparty and online meetings are included. Look at the responsible attorney's background separately from the firm's track record. If the person handling fundraising and the person handling day-to-day contracts are different, confirm in the meeting who understands the company's overall direction and reconciles any inconsistencies in judgment.

Even if the retainer fee is low, annual payments can end up larger than expected if contract reviews, shareholders' meeting minutes and fundraising are all quoted separately. Conversely, even if the scope covered by the monthly fee is broad, a company with few consultations will keep leaving the allowance unused. It becomes easier to compare if you take your own work over the last three months and apply each candidate's fee terms to it. The work to use for this check includes the number of NDAs and service agreements, revisions to terms of use, preparation for board and shareholders' meetings, planned fundraising, and whether there are English-language contracts. For a company where the same contract comes back two or three times in negotiations, how far a re-review is counted as a single matter also affects the cost.

The working time that remains in-house cannot be ignored either. If outside counsel sends only the legal issues and your staff member then has to reflect the revisions in Word and rewrite the explanation for the business division, that working time remains even after outsourcing. Along with the quoted amount, check whether the deliverables come in a form you can use in-house as is. Fundraising may also be handled as a fixed-fee matter separate from the retainer. Check whether it covers only the review of the investment agreement, or also the shareholders' agreement and distribution agreement. Also align whether support extends from designing the class shares through resolutions and registration, and compare on the same terms.

In the initial consultation, after explaining your business overview, shareholder composition, current number of contracts and the timing of the next fundraising, confirm the following:

• Experience supporting companies at a similar stage of growth and with similar fundraising methods
• The split between work covered by the monthly fee, work quoted separately and work outside the scope
• The format of Word redlines, comments for the counterparty and internal explanations
• How response deadlines are defined for ordinary and urgent matters
• The responsible attorney and how matters are handed over in their absence or on their departure
• The scope of coordination with judicial scriveners, tax accountants and certified social insurance and labor consultants
• What information is entered into AI and cloud tools, and whether it is stored or used for training

You do not need to prepare all the documents at once. With the latest articles of incorporation and registration, the shareholder register and the capitalization table, plus the main investment agreements and frequently used contract templates, candidates can more easily grasp the scope of support required. If fundraising is imminent, also share the status of agreement with investors and the desired closing date. Not only the answers given in the consultation but also the way the candidate asks questions is a basis for judgment. If a candidate only asks whether there is a contract, without asking about the business model, the flow of transactions or the fundraising schedule, it is reassuring to ask further how far they will come to understand your business background in ongoing support.

LegalAgent's Strengths as Outside Counsel for Startups

When comparing candidates, the starting point is to translate the practice areas a law firm advertises into the specific work your company needs, and check them. LegalAgent's strength is that it connects corporate legal work at founding, day-to-day contracts, fundraising and IPO preparation along the company's stages of growth, rather than treating them as separate matters.

More Than 200 Startup Legal Matters Supported

LegalAgent has supported more than 200 startup legal matters, including capital policy, shareholders' meetings and registration work. Representative Attorney Asato himself founded Legal Agent Inc. and has experienced raising JPY 50 million from ANRI and BoostCapital. A distinctive feature is that we can treat the moment when founders decide on investment terms and the subsequent work of assembling contracts, resolutions and registration documents as one continuous process.

Our support is not limited to founders' agreements and J-KISS. We continuously handle the legal work that arises with growth, including preferred shares, investment agreements and shareholders' agreements, stock option issuances, terms of use, IP and labor questions, and IPO preparation. Shareholder documents and contracts prepared at the seed stage can be handed over in a state that can be reviewed in Series A and IPO preparation.

Experience on Both the Issuer Side and the Investor Side

LegalAgent handles matters for issuers raising funds as well as investments by VCs and CVCs. On the issuer side, we check how the investment terms affect the founders' shareholding ratio, the next round and incentives for officers and employees. On the investor side, we check the items needed for the investment decision, such as representations and warranties, veto rights, information rights and closing conditions.

Experience on both sides lets us prepare the company while anticipating the documents and contract terms investors are likely to ask about. When actually accepting an engagement, we check for conflicts of interest, confirm the scope we can accept, and act accordingly. We never represent opposing parties on both sides of the same fundraising.

Consistent Support from Contract Negotiation to Closing

In fundraising, the procedure is not complete once the review of the investment agreement is finished. Necessary corporate approvals and amendments to the articles of incorporation are made before payment and the like, and, depending on what is issued, we check through to updating the shareholder register or the stock acquisition rights register, registration and collection of closing documents. The necessary procedures and their order differ depending on the governance structure and the type of rights issued.

At LegalAgent, in addition to reviewing investment agreements and shareholders' agreements, we provide consistent support through shareholders' meeting minutes, board of directors meeting minutes, review of the documents needed for registration applications, and closing. Assumptions are less likely to diverge between the people handling the contract and the people handling the procedures, and what was agreed in the contract can be reflected in resolutions under the Companies Act and in registration documents.

Responses Within One Business Day as a Rule, and Fixed Fees

In fundraising, the deadline for responding to revisions sent by investors is linked to the schedule for the board meeting, payment and registration. LegalAgent responds within one business day as a rule, and for highly urgent matters such as those right before closing, we also respond on the same day where necessary.

Our fees are based on fixed fees for both monthly retainers and spot matters. Where we adopt hourly billing, we set a cap so that the range of costs can be confirmed before engagement. You can combine options to fit your volume of questions and your fundraising schedule, for example a retainer for day-to-day contract questions and per-matter engagements for fundraising through J-KISS or preferred shares.

Deliverables Produced by AI and Attorneys

At LegalAgent, we use our in-house AI Agent for comparing contracts, extracting issues and organizing documents, while attorneys make the final legal judgments and handle quality control. We do not let AI complete answers on its own; we prepare revised drafts based on the business, the investment terms and the company's past internal decisions.

For contract reviews, our standard deliverables are a Word file with tracked changes and comments for the counterparty. This reduces the work of founders and business staff transcribing legal answers into Word, and we return the result in a form that can be used in negotiations with investors and business partners based on the agreed approach.

The outside counsel that suits a startup changes with where the company is now and its next fundraising. You can review LegalAgent's specific services at Outside Counsel Services for Startups. For an overview of startup legal work, see Startup Legal Work from Seed to Series A; for a concrete seed-round example, see A Checklist Before a J-KISS Round; and if you are moving toward listing, see also The Legal Schedule for IPO Preparation.