My Lawyer Says Slicing Pie Won’t Work
When I speak with lawyers about Slicing Pie they usually ask a lot of great questions to which I can reply with ease. After all, I speak to lawyers all the time and it is rare that I get a question or concern about Slicing Pie that I can’t answer. I have yet to find a legal issue anywhere in the world that makes implementing Slicing Pie impossible (although I suspect there would be problems in North Korea…)
I’m always happy to speak with lawyers about Slicing Pie, it’s one of my favorite things to do because I love the moment when the model “clicks” for them and they realize the power of how it works. Most lawyers I know are keen to learn new skills and willing to rethink conventional thinking, but some are not.
Sometimes, when a founder approaches an attorney with the Slicing Pie concept, the attorney will respond with something like, “grumble, grumble, that won’t work…grumble…tax issues…grumble, grumble…too complicated…investors won’t like it…grumble…hard to implement…blah, blah, blah…”
This is an understandable response. Slicing Pie concepts are new and often run counter to traditional thinking. When a lawyer tries to incorporate a high-level introduction of Slicing Pie with her intimate understanding of traditional models she sees all sorts of red flags. For instance, issuing equity on a rolling basis can easily create unnecessary tax consequences, not to mention potentially time-consuming administration. Additionally, at first glance, Slicing Pie seems to have ambiguous outcomes which could turn off potential employees or investors. None of these problems are difficult to solve, but the solutions may not be immediately apparent.
Startup companies usually aren’t the most lucrative opportunities for lawyers, especially during the formation stage. Many lawyers like working with startups, however, not only because it’s fun, but also because it can lead to interesting and profitable legal work down the road.
Corporate formation includes picking a type of entity, filing with the government, and executing a number of fairly standard contracts like shareholder agreements and operating agreements. It’s not terribly interesting work and it does not pay well even when founders want customization on the contracts. However, it can be a necessary evil for start-up attorneys because when it’s done wrong it can be difficult to unwind. It is for this reason (and others) that attorneys tend to stick with what they already know.
If your lawyer is confused by your explanation of Slicing Pie he or she may attempt to make an extremely compelling case why you should not use it and how much better off you will be if you use a traditional equity split model. After all, lawyers are professional argument-makers. I’m always ready to respond to arguments and concerns because I live & breath Slicing Pie every day. Founders who are in the process of learning the model themselves may not be prepared to address all of the lawyer’s concerns.
Faced with all the reasons why you should stick to a traditional model, a founder may start second-guessing the value of the Slicing Pie model and reconsider using it. Please, do not let your lawyer talk you out of using Slicing Pie.
Before you speak to your lawyer, be prepared:
- Review the post on overcoming objections
- Bring a copy of The Slicing Pie Handbook
- Bring copies of the Slicing Pie summary sheets
Here are some talking points you can use during the conversation with a concerned lawyer:
- Slicing Pie is a complete model for equity allocation and recovery. All the typical concerns that usually pop up are addressed.
- Slicing Pie has been implemented by startups all over the world.
- Slicing Pie companies face exactly the same tax issues faced by any other equity model and all the issues can be addressed.
- Mike Moyer, the inventor of Slicing Pie, is happy to speak with any lawyer who is interested in learning about the model. He will also provide sample contracts and be on call to answer questions at no charge.
Again, most lawyers are smart, reasonable, open-minded people, but the concept may not resonate right away. The goal of the conversation isn’t to teach Slicing Pie to your lawyer or even to convince her that it works. The goal is to encourage her to take the time to learn more about it as part of her professional development. They know how to get up to speed quickly on new concepts and they shouldn’t charge you for learning Slicing Pie or even to draft a basic agreement. Knowing Slicing Pie and having the tools to implement will benefit her legal practice and not just you as her client.
In my experience, once someone understands how Slicing Pie works it will be obvious why it works and implementing it will seem much more straightforward. If your lawyer doesn’t want you to use Slicing Pie and isn’t willing to learn about how it works: find another lawyer!