Some questions I'd ask, having been on both sides of the table:
1. For approximately how many start-ups have you been lead counsel for (a) incorporation / LLC formation, (b) angel funding, (c) Series A-[n], (d) IPO? How many in the last two or three years?
2. References? Any clients we've heard of? (The lawyer might not be able to tell you s/he represents Client X if it isn't a matter of public record.)
3. Any litigation experience? (Other things being equal, give me a lawyer who has tried cases - it changes your perspective quite a bit.)
4. Any in-house experience? (In-house lawyers often get some valuable lessons about business life that you just don't get in a law firm.)
5. [EDIT:] Your billing rate? Likely total cost of this matter? Do you do any fixed-fee work for specific types of project?
6. Whom do you use as backup? (Even in a law firm there can be de facto sole practitioners.)
7. Who will actually be doing my work, what kind of background does that person have, and how much work do you do with that person? (An associate who gets a lot of work from Partner X might be just fine, because (i) s/he will have an incentive to keep Partner X happy so the referral work keeps coming, (ii) Partner X will probably talk to the associate a lot, meaning Partner X can ask how your matter is going and may well do a lot of day-to-day mentoring, and (iii) chances are the associate can get ahold of Partner X whenever needed.)
8. How often do you bill? (Some firms bill quarterly, which might be fine, but most companies prefer monthly so as not to get unpleasant surprises.)
9. Is it feasible for us to establish a fee level where you'll call me if you're going over that level? (This is a tall order for many firms' billing systems, but it can't hurt to ask.)
10. [EDIT:] Is your usual inclination (a) to try to negotiate the maximum possible concessions from the other side of a deal, or (b) to accept a good-enough deal quickly and move on? (My experience has been that option b is usually preferable, especially if you're negotiating with someone with whom you're likely to do business again.)
11. [EDIT:] Will you call me with updates, or should I be calling you? (Good lawyers are busy and might not always take the time to provide real-time updates.)
12. [EDIT:] Do you carry malpractice insurance? (Some sole practitioners don't.)
Part of the problem stems from the lawyer mentality that they are meant to be going to war for you. Although everyone in our deal was completely amicable, they spent countless hours haggling over trivial points to "help" us while losing us far more money in their fees.
What I would like from a dream startup lawyer would be:
* Document templates for all common funding/employee/equity situations
* Work done by single, highly qualified lawyer
* An understanding of what actually matters to (and is best for) startups
* The ability to short circuit conversations with the opposing lawyers
* Lower costs by reducing irrelevant overhead (fancy offices, etc)
Someone could charge me twice what a normal partner was charging per hour, and I'd gladly pay it if they did the above, since they would be far more than twice as efficient.
What I found was that with some lawyers, every email and every phone call (no matter how short) will add hundreds of dollars (emails are rounded up to 15 minute increments). Thus, whenever I can, I try to negotiate a fixed fee to get a particular item done (incorporation, fundraising etc) and then I don't have to worry about every minute of time and what that translates to in dollars.
A bill from a law firm is normally more like a proposal / starting negotiation point :)