In 2011, Jonathan Nelson founded a tech startup accelerator in Silicon Valley called Hackers/Founders Co-op. The company’s website states that it makes founders’ lives “suck less, by 34%,” by providing concierge services preparing them for successful fundraising. Nelson was one of the original contacts who helped the UC Hastings Startup Legal Garage find startup companies to work with.
Now in its seventh year, the Startup Legal Garage was founded by Professor Robin Feldman to offer students the opportunity to work with practicing attorneys to provide free legal services to startups.
Over the years, Nelson has brought a number of companies to the Startup Legal Garage. “The legal issues that startups face are myriad and constantly evolving,” he explained. “It’s very often that startups push the boundaries and definitions of laws written decades or centuries earlier. Being able to face these issues with a law school that’s doing cutting-edge work is invaluable.”
The benefits to students are invaluable as well. “Students get the benefit of real-world experience by working with startup clients under the supervision of practicing attorneys. The fieldwork focuses on the same the legal principles that the students are studying in the classroom components of the course, which are taught by UC Hastings professors. Students bring sanitized versions of the fact situations they work on in the field into the classroom to illustrate doctrinal law instead of having to rely on textbook hypotheticals,” explained Alice Armitage, Associate Professor & Director for the Startup Legal Garage.
Since it started, the Garage has grown from six students to 66 this year, which now includes students from UCLA. Ever resourceful, the Garage classroom has been turned into a “zoom room,” which is a live streaming video station allowing students in Professor Feldman’s biotech module to join together with UCLA students every week. “These are days of limited resources, and this is a great set-up because UCLA doesn’t have to duplicate this class on their campus,” said Armitage. The LA students have also been set up with local startups, broadening the Garage’s network to Southern California.
“We run the Startup Legal Garage on a shoestring and we don’t take payment for our services,” said Armitage. Unlike many lawyers who work with startups in their initial stages, “we don’t request deferred compensation, where we would ask to be repaid if the company reaches a certain level of financing. Our supervising attorneys are not charging for their time either during the course of our projects. It’s a great opportunity for the startups- all the participants are focused on helping these young companies build a solid legal structure on which to build their business,” she explained.
In recognition of the immense value that the Garage has provided to numerous young companies, Nelson has donated shares valued at $50,000 from the Hackers/Founders Liquidity Fund. “Like most technology entrepreneurs, everything that we have we are re-investing in our company, so cash is limited,” said Nelson. “That way, our gift can grow as our company and the legal garage continue to grow.”
Hackers/Founders takes a two percent stake in its portfolio companies, and some of these companies make up the HF Liquidity Fund, which has issued one million shares to its various tiers of investors. Whenever a company in the Liquidity Fund is acquired or has an initial public offering on the stock market, investors in the fund receive a payout.
It’s common knowledge that 90% of startups won’t survive or become profitable, and 75% of startup companies won’t ever return their investors’ money. But over the past five years, Hackers/Founders has executed five M&A transactions from their portfolio of mostly enterprise-focused companies and have multiple portfolio companies exploring exits in markets around the world. Professor Robin Feldman explained that the tech sector has been very creative coming up with ways to compensate and share current and future wealth.
The donation is a recognition of the value that the Startup Legal Garage brings to entrepreneurs. “The Startup Legal Garage has helped companies think through these issues and we are thrilled to be a recipient as well,” said Professor Feldman, noting also that the donation is a long-term investment that will only mature over the horizon of five to ten to twenty years. “Many gifts to the law school won’t bear fruit right away. Their value is realized across time and we are grateful to have them.”