TechCrunch has featured Fenwick startup and venture capital co-chair Cynthia Clarfield Hess in its inaugural list of top startup lawyers. The list is based on feedback from more than 1700 startup leaders.
Focusing on representing leading innovators in the technology space, Hess counsels her clients on a broad range of corporate transactional matters, from formation matters and venture capital financings to mergers and acquisitions and public offerings. Her client list boasts top companies including Peloton, Nextdoor, TripActions, Madison Reed, Molekule, Primary.com and Gitlab.
For more insight and advice for startups, read Cindy’s full profile below (originally published on TechCrunch). To learn more about TechCrunch’s initiative to identify the top lawyers startups leaders love to work with, see this article.
By Eric Eldon, TechCrunch
“Cynthia just gets it! She has ‘your’ hat on. She is not just doing a transaction. She is representing and working for you. Amazing!” — Kara Goldin, Founder and CEO of hint, inc., San Francisco
In late December, we launched our startup lawyer survey and to date we’ve received more than 1700 responses from startup leaders about hundreds of lawyers around the country and the world.
Cynthia Clarfield Hess has been a lawyer in Silicon Valley since 2000, working with all sizes of companies across their needs from company formation on. While you may see her name on various legal rankings services, she still splits her time between all stages of clients.
Read on for more from Cynthia in the full interview, more founder reviews about her experience, as well as more details about her pricing and fee structures.
On simplicity early on:
“Some founders think, ‘Let’s do something new and different. Let’s do this crazy kind of vesting or lots of bells and whistles on voting rights for common holders.’ I say try to avoid those things, especially in the early stage. Focus on your business and less on the legalities. We try to keep things as routine as possible to maximize efficiency so that founders aren’t spending their energy on the legal stuff and they can focus more on the business.”
On messy situations:
“It’s oftentimes around the cap table — figuring out whether the cap table is accurate —we have had situations where we take over the legal work for a company and they think their cap table looks a certain way and they think these are their owners, and yet something was done wrong. For example, if the discount on conversion on a convertible note wasn’t calculated properly — and someone may actually be entitled to more shares, this could mean the representations that the company made in its financing weren’t accurate. We’ve had to go back and get releases from the parties involved, so that everyone understands that this is the state of affairs, and there are no rights to go back and ask for more.”
On startup client relationships:
“I think startup clients like working with me because they know they’re not going to outgrow Fenwick or me. I’m going to be able to work with them all the way through their lifecycle, and there’s something comforting in knowing that when you start with us, we’ve got you covered.”
“Advised on workplace issues, commercial contracts, financing, and IP cases.” — Sid Sijbrandij, San Francisco, CEO, GitLab
“Cindy quickly moves from lawyer to advisor. Her depth of knowledge, ability to get to heart of matters, and willingness to go extra mile make her among the absolute best in the business.” — A senior product expert and past founder
”Cindy is calm in the face of any legal storms. We have weathered several really complicated situations at the board level ranging from IP and trademark issues, personnel issues, and complicated and fast financings. Every time we need her advice and input, and many times even before we realize we need it, we get the best possible advice.” – Josh Elman, Menlo Park, CA, Venture Partner, Greylock Partners
“Cindy is always responsive and has helped us through several key inflection points including financing, hiring a new CEO, executive hires, office moves and numerous other things. She’s always available and offers great perspective and advice based on decades of experience.” — Kathleen Estreich, San Mateo, CA, VP of Marketing & Operations, Scalyr
“Exceptionally valuable strategic partner across all aspects of startup and mature company growth.” — A senior venture capitalist
“Cindy brings a common-sense approach to complex issues, and is an instrumental part of our team. Our Board and management rely on her expert advice and guidance. She always finds a way to be available when we have pressing issues, and coordinates with others in her office for their areas of expertise. Her support has been instrumental to our success.” – Julianne Biagini, San Jose, VP of Finance, CNEX Labs
“Cindy was instrumental in the success of our Series A. Beyond basic execution, she has the experience and perspective to know what terms are reasonable to ask for, what isn’t reasonable, when to push back, and how to get parties aligned. She’s able to give not just legal advice, but effective business guidance.” — Steve Newman, SF Bay Area, founder and chairman, Scalyr
“Cynthia just gets it! She has ‘your’ hat on. She is not just doing a transaction. She is representing and working for you. Amazing!” — Kara Goldin, San Francisco, founder and CEO of hint, inc
“Cindy has provided subtle insight and extremely practical judgment in aid of our progression from zero revenue start up to production revenue business. Cindy’s professional acumen has been extremely beneficial for us as we have faced a multitude of unusual headwinds in this currently chaotic global economy.” – Matthew Gloss, San Jose, CA, VP, General Counsel and Corporate Secretary, CNEX Labs, Inc.
Eric Eldon: How did you get into working with startups? I mean, it’s not the most obvious area of law, what was your journey here?
Cynthia Hess: I sort of fell into it. It wasn’t something I knew about when I graduated from law school; I took a traditional corporate finance route. After graduating from Princeton and then Cornell Law School, I worked in New York City and mostly represented investment banks and underwriters in public debt and equity offerings. I made my way out to the West Coast, and there it was less about representing investment banks and underwriters and more about representing companies. I was a senior associate and a young partner at another firm, and that’s when I first started working with tech companies. That firm represented Amazon.com at the time, and a lot of companies that spun off from Microsoft and Amazon, and that’s when I first started working with technology companies.
After I moved here in early 2000 — right before the dot-com bubble burst — I was working with many startups, and lawyers were in short supply, believe it or not, back then. People couldn’t get their work done fast enough and companies were going public really quickly. I remember my very first day on the job in the Bay Area, I was going to an organizational meeting for an IPO of a tech company where I hadn’t even met the company yet and I was company counsel!
It was for a company called eGroups, which never went public because of the tech bubble bursting — they were sold to Yahoo and it became Yahoo Groups, which was a major product offering within Yahoo products. That was really fun.
That was my inauguration into Silicon Valley. When the bubble burst, I did a lot of incredibly interesting work doing corporate reorganizations and figuring out the right way to do pay-to-play and down round financings, and all the other craziness that went on.
Eldon: What percentage of the companies that you work with today are early-stage, would you say?
Hess: I’m co-chair of the startup practice at Fenwick, but startup, to us, means anything from one or more founders thinking of an idea and getting initial funding all the way up through a multi-billion valuation private company that’s still considered a startup, like a company I’m working with now, Peloton. So I work with companies all across that spectrum, and then even post-IPO, including companies such as Fitbit and GoPro.
I work with a handful of public companies, but my main focus area is on startups, and I do like to work with them from formation. However, I don’t always work on them from the initial formation; for example, Fitbit came to me around the Series C stage. I started working with Peloton a little over a year ago. They transferred from a different law firm as they were thinking about heading into high-growth mode.
Many of the companies that I work with I have incorporated, such as GoPro, which I incorporated back in 2003, and Nextdoor.com and TripActions. Overall my work is fairly evenly spread between brand new companies through their very late stage rounds and their IPO. I would say my work is split about a third each among early, middle, and later stage companies.
I think they like working with me because they know they’re not going to outgrow Fenwick or me. I’m going to be able to work with them all the way through the lifecycle, and there’s something comforting in knowing that when you start with us, we’ve got you covered. We’re going to be able to work with you through whatever happens, be it an IPO, an M&A exit, buy-side M&A, litigation or other disputes. We can help with your trademark and patent needs if you’d like as well as commercial deals. The firm can handle it and it’s very nice knowing that the left hand knows what the right hand’s doing.
Eldon: Can you share some examples of times you helped a company navigate something messy, whether it was from another law firm or just something that happened to them?
Hess: “It’s often times around the cap table — figuring out whether the cap table is accurate —we have had situations where we take over the legal work for a company and they think their cap table looks a certain way and they think these are their owners, and yet something was done wrong. For example, if the discount on conversion on a convertible note wasn’t calculated properly — and someone may actually be entitled to more shares — and this could mean the representations that the company made in its financing weren’t accurate. We’ve had to go back and get releases from the parties involved, so that everyone understands that this is the state of affairs, and there are no rights to go back and ask for more.”
Eldon: So what’s the kind of advice you provide an early stage founder, let’s say like from start through Series A when it comes to working with lawyers and thinking about what the legal issues are that you have to do deal with? Or that you could potentially ignore.
Hess: Well, I would say call your lawyer early in the process. Call me early and often. If something doesn’t compute for you, or you’re confused about how to handle something, I’m always willing to take a short call off the clock and help avoid a problem that could rear its head in six months or a year. We’d much rather spend a few minutes noodling on something with you than having to deal with a larger problem later.
I would also say try to keep things simple. Some founders think, “Let’s do something new and different. Let’s do this crazy kind of vesting or lots of bells and whistles on voting rights for common holders.” I say try to avoid those things, especially in the early stage. Focus on your business and less on the legalities. We try to keep things as routine as possible to maximize efficiency and so that founders aren’t spending their energy on the legal stuff and they can focus more on the business.
A lot of our “form documents” are the way they are for a reason. They’re tried and true and everybody knows what to expect. If you try to do something too funky, people are going to be spending more time trying to figure that out and more money is going to be spent on legal documents and negotiating back and forth. Sometimes that makes sense, but sometimes that’s a waste of time and money. If your company is going to be successful, it’s not going to matter whether you had a special extra voting right, for example. What matters is you spent the time making this company successful, and everybody wins.
Eldon: Gotcha. Tell me a little bit more about where you see the legal industry headed. Where do you see this evolving? Like what do you think a firm like Fenwick will be like in 10 years?
Hess: Well, we’re always changing. All the trends that are happening in the legal market are things that we’re internalizing. We discuss these issues all the time, so as startups are popping up to perform legal services at a more fixed, flat-fee rate, we’re innovating our business too.
Eldon: How do you deal with investor conflicts?
Hess: Most of our work is on the company side. The last time I looked, at this it was either 85/15 or 90/10 that we’re company counsel versus investor counsel. But that doesn’t mean that we don’t face conflicts, too, because we do represent investors, both venture investors as well as strategic investors. We have conflict waiver language with most of our investor clients that allows us to represent companies in their portfolio.
Eldon: How do you decide which entrepreneurs to work with at the earliest stages?
Hess: A lot of our business comes from referrals by founders to other founders, and that’s an endorsement. And sometimes referrals come from VCs. It’s in their interest to have their portfolio companies represented by good counsel. It helps them sleep at night.
Originally published February 19, 2019 on TechCrunch.