#1261 Constantine Karides on How To Use Your Lawyer To Win In Startups

Constantine Karides is a partner in Reed Smith’s Financial Industry Group, Office Managing Partner of the firm’s Miami office, and the co-lead for On Chain: Reed Smith’s Crypto & Digital Assets Group. This discussion was recorded at the BUILD Summit in New York. In this conversation, we discuss what a startup founder can do to evaluate law firms, test their competency, and how to work with them in the early days of your company to ensure the greatest success possible. ======================= Auradine, a leader in web infrastructure solutions including blockchain, AI, and privacy, has unveiled the world's first 4nm Bitcoin mining systems, featuring breakthrough EnergyTune™ technology, setting new standards in performance and energy efficiency. The Teraflux™ product line from Auradine offers best-in-class performance, efficiency, and total cost of ownership (TCO), positioning it as the optimal choice for Bitcoin mining needs. With EnergyTune™, a patent-pending technology, Auradine's Teraflux™ systems enable rapid demand response and optimal energy usage, fostering a symbiotic relationship with electrical grids, and contributing to sustainable energy practices. Designed and manufactured in the US, Auradine's Teraflux™ product line not only ensures cutting-edge technology but also mitigates supply chain risks and provides increased supply chain resiliency. Visit ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠www.auradine.com⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ for more information the Teraflux bitcoin mining systems. ======================= Get Better Crypto Data: Do you want faster, easier crypto data? Sign up for Velo Data, a new product that we have been working on to solve this problem: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠velowaitlist.com⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ ======================= Pomp writes a daily letter to over 250,000+ investors about business, technology, and finance. He breaks down complex topics into easy-to-understand language while sharing opinions on various aspects of each industry. You can subscribe at https://pomp.substack.com/

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:02Anthony Pompliano?

  What's up everyone? This is Anthony Pompliano. Many of you know me as Pomp. You're listening to the Pomp Podcast, which is my effort to find the most interesting people in the world and sit with them for hours while I ask questions in an effort to learn. So it would mean the world to me if you would subscribe to the show on your favorite audio platform, watch episodes on YouTube, and tell your friends and family about the podcast. My goal is to help millions learn from the world's most interesting people. So let's get into today's episode. The following episode is with Konstantin Karides. Konstantin is a partner in Reed Smith's Financial Industry Group. He's the Office Managing Partner of the firm's Miami office and the co-lead for On Chain, Reed Smith's Crypto and Digital Assets Group. In this conversation,

• 0:45Anthony Pompliano?

  Konstantin and I discuss what exactly a startup founder can do in terms of their law firm, both in evaluating who to work with, how you can test their competency, and then also how you can work with them in the early days of your company to ensure the greatest success possible. Konstantin is a lawyer that works directly with all of my companies and someone that I've really enjoyed getting to know and someone that I trust when it comes to giving out advice in terms of how to work with a legal team. And so this conversation did the best we could during the Build Summit, where 700 founders came together in New York City to try to unpack how you, as a founder of a company, can work with your legal team to ensure the best outcome. Here is my conversation with Konstantin Karitas.

• 1:28Speaker 01

  Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only.

• 1:52Anthony Pompliano?

  This episode is brought to you by Auradine. They are a brand new startup led by a number of Silicon Valley legends who just raised $81 million to build the future of internet infrastructure. You're probably wondering what that means. Let me explain. There are numerous new disruptive technologies that are being adopted simultaneously, from blockchain to artificial intelligence to zero knowledge technologies. In order to ensure that these technologies thrive in this new world, we need new infrastructure and that is where Auradine comes in. They just launched their first product line called Terraflux, which is a Bitcoin miner powered by the world's first 4-nanometer silicon chip technology. These air-cooled, single-phase and dual-phase immersion cooling miners have unrivaled speed and efficiency.

• 2:35Anthony Pompliano?

  They have superior uptime and they leverage a brand new innovation called Energy Tune that allows miners to dynamically adjust the energy consumption and Bitcoin hash rate based on demand response needs of the electrical grids. Auradine is an ambitious company working on hard problems. I'm really impressed with them. And if you want to check out more, you can go to Auradine.com. That's A-U-R-A-D-I-N-E.com. Go check them out at Auradine.com today. Before we get into this episode, I also want to tell you about a brand new product called Velo. Velo is faster, easier crypto data. Everyone in the industry is always looking for, what's the price? What's going on on the exchanges? Where are assets flowing or not flowing?

• 3:18Anthony Pompliano?

  How is things like open interest and derivatives actually playing out in the market? Well, that's where Velo comes in. It's faster and easier crypto data. You can go to velowaitlist.com today. Myself and a couple of friends, we invested in the business. We're advising the founder and we think it's pretty cool. This one is something that keeps me informed on a daily basis. So you should check them out at velowaitlist.com. That's V-E-L-O waitlist.com.

• 3:46Anthony Pompliano?

  Our last speaker of the day is actually my lawyer, which before you get up, I want to tell you guys a quick story about Constantine. So Constantine works at Reed Smith. Reed Smith is one of the top law firms in the country. And for many of you, you probably don't know this, but your lawyer, as you start to build companies, is probably one of the most important people on your team that you don't treat the same way that you treat your employees. Like you go through a huge interview process and then you're just like, who's the cheapest lawyer? Like probably a stupid idea or way to do it. So I thought a great place for us to start is

• 4:31Anthony Pompliano?

  just when you are hiring your lawyer, you're starting a company, you need a lawyer, you need to get incorporated, you need to put all the documents together, you want to be able to set kind of groundwork in the business. How should we grill you to make sure you're the right guy or the right firm?

• 4:49Speaker 02

  Yeah, thanks. It's great to be with you all today and good luck with all your ventures. I've heard some really interesting ideas and opportunities. So I'm in the right place, I think. In terms of your question, Pom, look, I think you shouldn't just go to the first person that you're introduced to. I think that would be unwise unless of course Pom makes that recommendation. But putting that aside, you want to know, you want to make sure that your law firm and your lawyers know your business. They want to know, they have to know your technology, they have to know your business objectives, they have to know how you like to work, and they should be able to

• 5:28Speaker 02

  be a sounding board to you as you consider your next moves. So I would say right up front, you want to talk to your lawyers and make sure they have the technological range to understand the scope of your business processes and technology. Because if they don't,

• 5:46Speaker 02

  You're gonna miss a bunch of things.

• 5:49Anthony Pompliano?

  Now, how can you test them? I think this is one of the most, as you and I have talked over the years, like, testing your lawyer to literally be like, like, are you the savage that I need? To, because, you know, a lot of people are looking at it like, oh, put together my documents. Like, how bad could you screw it up? Newsflash, pretty bad. But also, as the business gets larger, you're gonna deal with employee issues. You're gonna deal with competition issues. You may deal with regulatory issues. Like, it gets pretty hairy pretty quickly. And so, how do you, how have you seen maybe the best companies that you've walked away from the hire, like, when they're hiring you guys? And you're like, man, that company really kinda did their diligence and made sure we were the right firm?

• 6:25Speaker 02

  Well, I, I think the founders in companies that are the best to work through are people who are really confident in executing the strategy around what they know and being curious and inquisitive about the things they don't know. A lot of that tends to be in areas like law. And so, being comfortable to ask questions that you're like, maybe this is a stupid question, it's not. And having a really thoughtful and engaging response from your counsel, I think, is critically important.

• 7:01Speaker 02

  So, the best companies that we work with have leaders who, again, are really able and thoughtful about their primary business operations and processes, but also can see the, the larger playing field and know that there are a whole host of legal issues and legal traps and things they need to put in place in order to be able to execute their strategies. And I think the biggest thing I would say is, at the startup level, it's so critically important to build the foundation correctly because everything else layers on top of

• 7:41Speaker 02

  it as you go into raising money, to your next series, into hiring people, into giving out profit interest, into considering the shape of your cap table, et cetera. And so, I would be really... It's really important to get that right.

• 7:56Anthony Pompliano?

  When you're starting, let's say that I'll start in a business tomorrow. What are like the two to three big decisions that I have to get right from a legal perspective in order to lay that foundation to be able to build a company and not have almost like legal debt later that I gotta deal with?

• 8:10Speaker 02

  Yeah, so I think first and foremost, you have to have the right corporate form that fits your business objectives. That corporate form needs to be right for a few reasons. One is importantly maximizing your return on your time and investment in the business. So things like QSBS and other notions around wealth creation and preservation are important. Even if you're like, well, I'm not really making any money right now. You very well may be, and if you haven't set it up right, you're probably gonna be in a position where you're, I would say, losing money but not really getting as much of the juice out of the business as you could.

• 8:50Anthony Pompliano?

  And so on this specifically, QSBS is the ability for people to get the first $10 million or so tax-free on a sale or liquidation event, but also things like getting equity from the business into RIA or IRA, 401K, anything like that, and a law firm's able to help set some of that stuff up.

• 9:10Speaker 02

  So there are a lot of folks who we partner with who are smart to identify this space as ripe for people who will be great clients in wealth management or M&A or IPOs down the road. We do stuff with Fidelity, for instance, who runs this great cap table model.

• 9:33Anthony Pompliano?

  That's the guy who runs the Fidelity cap table, clapping in the back.

• 9:39Speaker 02

  And so you can loop in somebody who is really smart around wealth management, trust and estate, tax planning, right up front for probably a really reasonable price because they want to grow with you, they want to be sticky with you. So that even though day one, you know, they're charging you a fixed fee that's, you know, appropriate, if your company is a success, well, boy, they're gonna get to enjoying some of that success and properly so, I would say. So kind of combining those professionals right up front. Is really important and I think is available and you may not know how to do that

• 10:22Speaker 02

  or how to go about doing it, but a good law firm or good lawyer will have those relationships and will bring those folks and their voices into play right up front so that you can really build the right foundation for your business.

• 10:35Anthony Pompliano?

  Talk about litigation is something as companies grow, usually in my experience, startups don't go around looking to sue people. It's usually the opposite. People go around looking to sue startups. Sometimes it's incumbents because they feel like they can bully a smaller company with less resources. Sometimes it is people who have left the company, former partners or vendors. There's all kinds of different groups of folks who see specifically around times when they raise money and they're in the headlines and like, oh, you just raised $15 million. That sounds like I should get some of it. How do you think of, you guys

• 11:16Anthony Pompliano?

  are laughing, that's, I've seen it literally tens of times. How should founders think about some of these as in preparation? Make sure I'm prepared for when this stuff comes. And then also you get a letter. It's a demand letter. It's a cease and desist, et cetera. What does that look like from a communication standpoint to your law firm?

• 11:37Speaker 02

  Sure. The biggest source of disputes at the founder and early stages of a company is between the folks who were quote unquote technically part of the initial group who received some sort of equity allocation or some sort of profits interest that the founder either quickly figures out six months into it, well, this person actually can't function as a CTO. Now what do I do? I've given him or her 5% of the company and that's a horrible situation to be in. So we see a lot of issues around that. Or you have folks who've resigned

• 12:19Speaker 02

  and somehow think that their equity is worth something even though the company's in the building stage and start making demands or hire aggressive lawyers to deal with it. So it's important to have people who've been through that process and know how to actually engage. I would say number one, be extraordinarily thoughtful about who you allocate equity to at the initial stages of your company. Apart from not wanting to dilute yourself, you also don't want to create.

• 12:47Speaker 02

  Stress or drama because that wasn't the right person to allocate it to. And so obviously there's ways to have people earn into equity. But because we sometimes take over clients after this initial setup, we're having to kind of go back and try to redo things that could have been done properly at the right time. On the litigation standpoint, you just have to have somebody who's got a spine and say, "Sorry, nothing's going to happen. You're not getting a penny. Goodbye," and deal with it that way.

• 13:23Anthony Pompliano?

  So there are some law firms. I've got tons of companies who work with like my brother's best friend runs a law firm and it's like three lawyers. They're cheap. There's other law firms like you all where former federal prosecutors and just, you know, a who's who of people who have been in and around law and very experienced, et cetera. Is there a right time and a wrong time to engage a large law firm versus a small law firm? Or like different type of work that you should work with one law firm over another? Or should you have just one law firm or should you have multiple?

• 14:01Speaker 02

  That's a great question. I think first I'll start with your prior speaker. Talking about some big M and A, that's where you want to bring in real experts. And the outcome of that M and A is such that you're not really worried about what the legal fee is. You're worried about making sure the deal is done right and you're getting everything you're supposed to and not have any tail liability. So you start there as the, you know, maybe highest point in the process. But when you set up a company, there are firms, ours included and others, who look at the startup and founder world as a tremendous opportunity to onboard great potential long-term clients.

• 14:44Speaker 02

  So there are models of pricing that those firms have that I think are digestible by startups. But with both parties, especially if there's a good fit culturally and personally, see this as a, you know, five, 10-year relationship ending with hopefully very exciting monetization event or longer.

• 15:07Speaker 02

  I think because the very first things you do in forming your company are really important. It's not necessarily has to be a large law firm, but it's got to be a really competent firm that's done it a lot. And so a boutique firm that has the experience is just as fine as big law in that context. I wouldn't respectfully hire your brother's three-person law firm. For that, anyway, I'd bring him in, maybe something else. So I think I would be, if I'm allocating resources at a startup level, I think I'm tipping a little bit more in the legal pile than in other piles

• 15:50Speaker 02

  because of the long-term impact of getting it right.

• 15:54Anthony Pompliano?

  Small companies, 10, 20 employees or less, when they have a board meeting, I try to my best not to have to go. But if I gotta go, it's usually the founder and the other board members, and that's it. Any startup that is Series A, maybe B or beyond, there's a lawyer in the room.

• 16:14Speaker 02

  Yeah.

• 16:15Anthony Pompliano?

  Why is the lawyer there? And at what point should the lawyer be showing up to the board meetings?

• 16:21Speaker 02

  The lawyer in that, in that, in that setting is acting as a secretary. They're taking notes and they're transcribing those notes and circulating them. Should be as a courtesy to a larger relationship, by the way, if you're getting charged for that, you shouldn't be, just FYI. But that's why they're there, and they're probably not there at an earlier stage because of the cost or, you know, disinterest in having them involved that early. You'll probably have less outside investors at that point. Once you start assigning board seats to your strategic investors, you gotta, you know, have it all look and feel like they're comfortable having it.

• 17:04Anthony Pompliano?

  So along these lines, one of the things that I appreciate about you guys and, you know, I've learned over the years from great founders is a lot of times there becomes a decision to make. And the founder almost always kind of knows what decision they're gonna make. And sometimes they just make the decision, which is fine. If it ends up being a bad decision, it becomes a lot of questions. And the best founders I find, they know a decision they want to make, but they go talk to their board. They talk to a couple of investors. They may even talk to their lawyers and get feedback. And then they probably still make the same decision that they were going to make anyways.

• 17:43Anthony Pompliano?

  But what is the importance of kind of communication, but also a little bit of like cover your ass and make sure everyone's on the same page? And kind of how a law firm can play into that?

• 17:53Speaker 02

  I think, you know, the best relationships I have with my clients are where I'm acting sort of as a conciliary to the CEO or founder. That's simply the role I'll play in terms of our team. And in that context, you can have really open conversations, all privileged, of course, about those types of decisions and how to execute them. And there's always a variation of ways you can achieve that. You can have the lawyer push it or bring it up. I mean, it's not controversial, it doesn't matter, obviously, but we're talking about things that might have a little hair on it or may not be as popular as you would like it to be.

• 18:31Anthony Pompliano?

  And just to clarify what I'm talking about, I've seen, how did you spend the money? Who did you hire? Why did you hire a specific vendor? Why did you want to buy that company? Why did you want to run a certain campaign? I mean, these are decisions that usually almost always involve money.

• 18:50Speaker 02

  Yeah, for sure. Yeah, I think, look, I've been on some board meetings recently, actually, where the CEO was asked to reduce budget expenses, not a more common thing past year or so, as you know. And then they really have a plan or a clue. And the board members were really, really pissed. And they basically told him that if he didn't have it done in a week, he was fired, right? And so that's pretty heavy. So my advice would be number one, know exactly what you want to do and justify it completely, especially in that context when it deals with money. You're the one who knows your business best. And the people on the board don't, they know they don't.

• 19:33Speaker 02

  But they also don't want to hear somebody who lacks confidence about their vision or their execution. So if you hired somebody for something and it didn't work out, own it. I thought this would be great for these reasons, it didn't turn out that way. Now I know and we're gonna pivot to X, Y, and Z. Trying to hide stuff or kind of pushing the blame on somebody else comes off really badly, I think. And unless there's like a legal mess up in it, you're fine, you know. That's, you know, if the business doesn't work, it doesn't work. But I think you need to have that kind of sense of vision and confidence when you're talking about difficult decisions you've made.

• 20:15Anthony Pompliano?

  At what point do you hire a general counsel and bring someone internal? And then what is their relationship or role in terms of working with external counsel?

• 20:26Speaker 02

  So, and I hate to start an answer like this, but it kind of depends on the nature of your business. There are certain companies that really can get away without an internal general counsel, really for a long time, right up until perhaps they're starting to contemplate an exit of some kind. And that's because their business is commoditized, maybe that's a bad word, but it's a repetitive business. It doesn't really change that much. The documents and the agreements are fairly similar and the same. The revenue is the same, you know, they're building, building by adding customers.

• 21:05Speaker 02

  And, you know, if you want to bring in a GC at some point and take in the legal work because you might be saving money, maybe you start thinking about that at some point. So that's one type of business. But if you have a biotech business that's highly dependent on patents, making sure they're in place, looking at the landscape around how those patents are prosecuted or trademarks or dealing with intellectual property issues all over the world. Or you're constantly engaging with counterparties, whether they be potential new investors or contract partners, where you're processing a high volume of documents. I might hire somebody internally at that point.

• 21:50Speaker 02

  I do think that once you reach a certain scale, you want to have a chief legal officer in place because it's not the highest and best use of your time to be dealing with that stuff. There are ways to kind of do it with outside law firms. They have programs called secundments, where they lend you a lawyer. You pay them a fee and that lawyer works for you exclusively, even though they're an employee of the firm. That's one way to do it. And the interaction between a general counsel and a lawyer is that person is the funnel of all legal matters that come up. They kind of decide what requires outside counsel to do it and what they can do it themselves. And they should be building a relationship

• 22:35Speaker 02

  with the relationship partner at the firm you're working with. On that point, I think this is important for the audience to know is it's really important to have a really strong relationship partner at a law firm that you're working with because the way law firms work is depending on the cloud you have within the firm, you can achieve certain outcomes for your clients that maybe other folks within the firm can't. Chiefly around better pricing, making sure the teams are, you know, have the best lawyers on them, delaying payment or in some instances, or, you know, bringing in third-party relationships that they have because of their position within the firm.

• 23:17Speaker 02

  So that's an important part of your process too, as you consider outside counsel, is the person who's leading the relationship, somebody who is well-regarded and in a good spot within their law firm.

• 23:31Anthony Pompliano?

  So this conference is free for everyone to show up, but I'm going to save them all money?

• 23:34Speaker 02

  Yeah.

• 23:35Anthony Pompliano?

  How do they save money with their law firm?

• 23:37Speaker 02

  Well, I mean, it's a great question. I think there are certain functions and tasks that lawyers do that don't require... Five or six lawyers on them, which you may see sometimes if you're dealing with law firms, you're wondering, well, who's that person up in the corner? Why is that person over there? And am I paying for all these folks?

• 23:56Anthony Pompliano?

  Before we actually get to this, some people may not realize when you get on a call with a lawyer, you're getting billed for every person that's on the call. So if you have little experience with lawyers, if you get on a Zoom call and there's five people, you're not getting billed on an hourly rate of one of those people. You're getting billed all five of the people. And so you're saying, maybe you only need one or two instead of five?

• 24:21Speaker 02

  Well, I'm saying this, there aren't that many situations that require more than one or two lawyers on a law firm, especially if they know what they're doing, especially given the nature of your businesses. On these big deals that we were talking about, yeah, there's going to be a lot of people on the deal, but you want that. So don't be afraid to ask, why is this person on the account? Why is that person? What is he doing? What is she doing? You'll quickly save money by asking those questions. You know, when you see a first year lawyer on a deal, you know, first year lawyers don't really know much. They're learning, they're training. Then, you know, if they're on a new deal, you're paying to trade them. So that's not necessarily a great use of your, of your resources. So these are things that I would look to ask. I think you can have a very direct conversation

• 25:06Speaker 02

  with your relationship partner and say, here's the budget that I'm planning for this transaction, this matter, this litigation. And just have an open conversation. More often than not, you'll probably reach a place where it works for both sides. But if you're wildly off, you should know that right upfront and whether or not this is the right firm for you.

• 25:27Anthony Pompliano?

  So I think this is a really important point because most young founders specifically, they get on with the lawyers and then there's always like the bill. And when the bill comes, they're like, holy shit, this is expensive. Right? What you're basically saying is if you know that you need something, whether it is I need help with this regulatory thing, I need help, we're buying a company, whatever, talking to the law firm upfront and saying, this is what I think I need. Can you guys give me some sort of ballpark as to what it's going to cost? And therefore that prevents immense shock. There still may be some variability in the bill depending on the work done.

• 26:01Speaker 02

  Yeah. I think it's a two way thing, especially when we're dealing with, with new companies or folks who maybe haven't engaged with a law firm like ours.

• 26:13Speaker 02

  That frequently. We also, we also don't want to be surprised. At the end of the day, it's like, well, I'm paying for that. So we like to kind of engage and say, okay, here's what we're thinking for a budget. What are you thinking? Is your, you know, here's why we think, you know, just like any pricing, interaction with anyone. So you, you, you, we want to have that conversation as much as you all do. Not every firm does though. They'd rather surprise you sometimes and say, okay, well, yours is money.

• 26:45Anthony Pompliano?

  By the way, not a good idea to tell the lawyers. I'm not paying that. They're lawyers.

• 26:52Anthony Pompliano?

  Let's talk maybe a couple of war stories, like, maybe don't scare everyone, but like, when you're starting a company, you're ambitious, you're excited, you think you're going to get rich, all the benefits of entrepreneurship. Can you tell us a story that will make people question whether they should start a company after understanding some of the complexities and challenges from the legal side?

• 27:18Speaker 02

  Uh, yeah, sure. I mean, you know, it's, it's rarer than not, but you know, we've seen companies that have been started by people who thought they were really great friends, or were both going to contribute very different, but valuable services to the company. And it turns out, one or the other didn't, or, and these are multiple horror stories, or someone stole the code, and you can't find the code, and this is my brother-in-law, and now we're going to sue them. And these are not like mom and pop stuff. These are really good companies,

• 27:59Speaker 02

  we thought, that fall apart because of those reasons and end up in horrible litigation. So I kind of, kind of come full circle. You really ought to know who you're going into business with, if you're giving them equity interest in what they're doing, and make sure they don't.

• 28:17Speaker 02

  End up in a place where you can't stand them. And it's, I'm not saying that glibly. I mean, literally, we've had to be in the middle of conversations between the founder and the CTO or the CMO because they won't talk to each other. Because I didn't say I was gonna do that and I feel like I should have more. And that only happens, by the way, when the company is worth more. Is when you realize you should have kept more for yourself. So, a lot of that interpersonal stuff, it can get really, really ugly. We could probably write a book about it.

• 28:50Anthony Pompliano?

  Yeah. Another key piece, I think, to a law firm is, some law firms are what I would call like litigation hungry.

• 28:58Speaker 02

  Yeah.

• 28:58Anthony Pompliano?

  At the drop of a hat, they want to sue everyone. It's like, go score shirt and in those scenarios, obviously, they're driving fees, but also there's sometimes ego or intellectual, you know, kind of reward from going and doing this stuff. But when you're dealing with corporate matters, having a law firm, I think, that like, wants to avoid litigation, but if gets pushed.

• 29:20Speaker 02

  Yeah.

• 29:20Anthony Pompliano?

  Can end the litigation.

• 29:22Speaker 02

  Sure, for sure. The other war stories, I would say, before I address this is arguments or just shock between, you know, founders and owners of their company and their Series A or Series B investors, who, you know, if you haven't really protected yourself in the right way, you end up seeing founders like, well, why am I, I feel like I'm working for so and so. Well, I mean, if we had been in here a little earlier, we maybe have been able to help you on the documentation, but you kind of are. And that's a horrible position to be in and you don't want to work, right? The way you had envisioned. And again, this comes back to, make sure your documents are right, make sure the people who are negotiating with your investors are protecting you.

• 30:06Speaker 02

  We stepped into a scenario where the founder, who's tremendously talented fashion person, she was like, is this, she shows her, is this right? And then she was showing me the board composition. This is her company. She just launched it. She would have two seats and the person who gave her some money on the seat would have three seats. And I'm like, nope, that's not right. That's your company. So, and it sounds obvious, but it's not necessarily obvious because when you're starting a company, someone's going to write you a big check. You're like, oh, you should probably get something. And your lawyers really need to be out front on that issue, for sure. But then coming back on the litigation point, that's one of the biggest quicksands a startup or early

• 30:51Speaker 02

  stage company can have. It's super expensive. It creates tremendous uncertainty around your company. It obviously wards off potential investors because they don't want to invest in the company's litigation. So, not being in one is a great idea, but knowing how not to be in one is an even better idea. And so, if you get sued or someone's threatening to sue you, stay calm, relax, and don't be afraid to engage somebody to say, okay, I'm going to call them and try to work this out as opposed to, they just said this, we need to hit back with that. And we may get there, and when we do, we'll hit them hard. But kind of trying to negotiate, mediate, and work through issues is really important. We

• 31:36Speaker 02

  had a situation where a client had a disgruntled executive, I would call him president level, who just up and left and then thought he had a put right on the equity he had, which he didn't, and hired some really nasty law firm to say, we're going to sue you to collect this money. And, you know, we were like, well, you just own shares. You don't actually have any of these rights. And threats and threats and threats. And then just really, oh, we're going to go to a lawsuit. We're going to the SEC. And so, you got to stick, we stuck with it, had a bunch of conversations, sent them a notice, said, you're a regular shareholder, please, you know, stand down. And ultimately, they just faded away when

• 32:19Speaker 02

  they realized we were going to go for their bluff. You know, someone less experienced might have wrote back a letter and started off a war, which would have, I think, really hurt the company in that instance. So, it didn't hurt that the person on our side who was having those conversations is a former federal prosecutor, to your point. So, they know there's some real teeth behind that if it doesn't fall apart.

• 32:43Speaker 02

  But by and large, I think that, you know, you're gonna, if you, sometimes you gotta fight and you fight. But again, that's a real big distraction for your guys' businesses. So avoiding that's probably a better idea if possible.

• 32:54Anthony Pompliano?

  It's a classic. Sometimes the best way to fight is not to fight at all.

• 32:57Speaker 02

  Yeah.

• 32:58Anthony Pompliano?

  Yeah, makes sense. Before I let you go, help folks understand, I think, when you're evaluating the law firm, can you try them out?

• 33:10Speaker 02

  Again, I didn't hear what you said.

• 33:11Anthony Pompliano?

  Can you try them out? And what I mean by that is, a lot of founders, they may go through the process we talked about earlier, testing and talking to a couple. I find that they just hire the law firm and then it's like, you're our law firm. And many of the successful founders, hey, here's a project, you know, work on that first. And almost there's like a double opting into the relationship until eventually it's okay, this is the law firm that we're gonna go with for either all or majority of the legal work. Like, what have you seen on that front that companies have done well?

• 33:47Speaker 02

  You know, it's, excuse me, it's a funny thing to watch sometimes where you can see, especially the last 18 months, really smart people pivot the entirety of their business successfully and change a lot of what they're doing. And yet, when it comes to their lawyer who they don't like, and it's just from personal experience, find it like that, you can't do that, you know, it'll mess up the business, it'll, you know, really screw things up. And that's just not true. To the extent you're not happy with your counsel, you don't have to marry them forever. In fact, the ethics laws that applies to lawyers

• 34:27Speaker 02

  require anyone who's been asked to stand down to be super helpful in transitioning work and deals and even sit with a new counsel to make sure they're fully up to speed. So we have an obligation as a profession, if there's ever a change of course, to do that in a way that doesn't cost much money to the client and make sure the client's business is seamlessly moved around. And so, just like you would change out I don't know, a non-functioning internal resource. You can do that with a lawyer, maybe even easier way. Now, you don't want to get in the habit of changing your lawyer every few hours, a few months,

• 35:10Speaker 02

  because that will make a bad impression. One, it will cause, that would cause disruption internally, but it would also not be good luck to the investor community.

• 35:22Anthony Pompliano?

  And I guess on that point, the big law firms, there's not many of them. And investors know most of the lawyers. The lawyers eventually meet most of the companies. And so there's obviously attorney-client privilege, but I do feel like a lot of investors understand what it means when certain law firms work with certain companies, and then also if certain law firms are not being used. And so how does that play into either the law firm that the startup chooses, or even potentially investors that you're eventually going to raise from, et cetera?

• 36:03Speaker 02

  So a couple of things there. One, you know, if there's, there's investment firms that you want to engage with that'll have a certain expectation as to the counsel you're using, both in terms of quality and ability. And when it's with a firm they know, or is within a bucket of firms that they deem is an acceptable segment of the industry, that's fine usually. But I would, you know, this is a little counterintuitive to my, my practice. If you have a really good lawyer at a, at a, at a good firm, I don't know if you necessarily

• 36:46Speaker 02

  have to jettison them without, you know, having an honest discussion with your investor if it's that important to you. Because there are other lawyers who are very capable, who aren't at a big law firm, or at a, you know, highly renowned boutique, that are, you know, fine. So that's a give and take between you and your investor on that, on that point. In terms of...

• 37:11Speaker 02

  You have to be very careful. Obviously, we live by very rigid conflict rules. So we are not able to represent an investment firm into tech. And then when we're representing a company they invest into, we have to get waivers from both sides and tell them, oh, we actually have a relationship over there. And then there are all sorts of... We can still move forward if everyone wants us to with very specific rules around. You can't have the same people working on it. You have to kind of set up some ethical walls between the accounts. And that happens a lot. And it's not necessarily... You don't need to silly look over your shoulder and say, ah, they're telling your secrets to the investment firm.

• 37:55Speaker 02

  That's not happening.

• 37:58Anthony Pompliano?

  Where can people find you or find Reed Smith if they want you on their side?

• 38:04Speaker 02

  Well, thank you. They can call you. They can direct me. But ReedSmith.com, and my name's Konstantin Karides. It's pretty easy.

• 38:16Anthony Pompliano?

  Konstantin and I have a lot of fun because every once in a while, I just call him and I say, hey, what do you think about this situation? And after he gets done talking shit to me and telling me how dumb I am, then he gives me really great advice. So I appreciate you.

• 38:27Speaker 02

  Yeah, no. Pop likes, as he said, I know what I'm gonna do. Pop is the epitome of, I know what I'm gonna do before I talk to anybody. And I'm not actually sure you're listening to anybody as you go through that process. But you know you have to go through it. And then you end up exactly where you started out. But you're mostly right that road.

• 38:46Anthony Pompliano?

  Well, and Konstantin gave me a thumbs up. Perfect. All right. Konstantin Karides, everyone.