Tips and tricks for high growth tech startups setting up their legal support

Tips and tricks for high growth tech startups setting up their legal support

We sat down with Paula Pepin, previously SVP and Head of Legal at Hootsuite and now leading business development growth for Western Canada at Caravel Law, to discuss how high-growth tech start-ups can prepare for success by hiring a strategic and experienced fractional in-house lawyer. 

In the early days of a tech start-up, founders will often rely on traditional law firms to support their ongoing legal needs. 

But as those companies move into the revenue generation phase, the need for legal support increases rapidly. Contracts with customers need to be negotiated and partnerships for expansion need to be signed.  High-growth companies can’t afford a one-week turnaround time on these key agreements. 

They also can’t afford for their legal agreements to be negotiated in a vacuum by an external lawyer who isn’t focused on “closing the deal” because they don’t understand the business’ growth objectives or risk tolerance. In this context, high-growth tech start-up founders often find it tricky to find the right service model to support their growing legal needs.  

In this post, we look at what high-growth tech businesses need to think about when setting up their business for success with the right legal support.

Legal plays a strategic – not just tactical – role in growing your business

“Average Contract Value” or “ACV” is a metric used by every tech company to measure the average value of a customer agreement. The word “contract” is central to this metric. Without selling their products or entering into key partnerships, companies won’t meet their business growth objectives. Yet founders often view their lawyers (who help them draft these critical contracts) as a thorn in their side and a necessary evil rather than a strategic partner. 

When founders realize their traditional law firm can no longer support the volume and turnaround time required to negotiate key business agreements, they start looking for their first in-house lawyer. When they do this, they will too often focus on hiring inexpensive talent and will settle for an inexperienced lawyer, often with only a few years of experience in private practice. 

Founders don’t realize that investing in a junior, inexperienced legal resource might significantly impact their ability to grow the business. Rather than hiring a full-time junior resource who is focused on churning out agreements without thinking about the bigger picture, founders should consider hiring an experienced fractional in-house counsel

Experienced fractional counsel will have previously worked in-house in various companies, so they’ll understand what a successful in-house legal function should look like. They won’t only focus on contract reviews but will also advise on important topics such as decreasing negotiation friction with customers, improving internal negotiation and papering processes and training front-line salespeople. Investing in someone who has worked in-house and built a successful contracting function will allow the business to sign contracts faster with less friction.

A legal partner with real-world business experience is ideal

Your legal partner should see their role as one that supports the velocity of the business. In their early days, it will be essential for them to focus on putting together a frictionless contracting function so contracts can be negotiated, reviewed, and signed as quickly and efficiently as possible. Once that contracting function is in place, they will need to spend time understanding where the business is going and how they can support its future growth. 

A great legal partner will be dialled into the future strategy of the company. Some tech companies will grow 200% or more year over year. Founders and in-house lawyers need to be very clear about what will drive the work in the legal organization and how their legal function will cope. Will the increase in workload be driven by the number of new clients? Entering new global markets? Launching new products? An IPO? New product integrations? Strategic partnerships? Is it all or several of these things?

In my first few months at Hootsuite, I spent a ton of time reviewing revenue projections and calculating how much revenue each of our lawyers could manage to ensure we always had the right amount of legal support to close the deals that were coming down the pipeline. I also had to be dialled into all other company strategic initiatives (M&A, strategic partnerships, product integrations, new product launches, global expansion) to understand how those would impact our legal function. As revenue was increasing rapidly, it would have been a disaster if that analysis had not been completed. Our legal department wouldn’t have been able to support our company’s initiatives, and our sales would have suffered as a result.  

 In-house counsel needs to be seen as a partner – not a blocker 

For a lawyer to be effective within an organization, they need to be as deeply integrated into the business as possible. This helps avoid creating an environment where the team views legal as a blocker that slows things down. An in-house lawyer needs to be approachable and open to help foster a culture where legal is seen as a strategic partner. 

To effectively integrate your in-house lawyer into the business, they should be given time to deeply understand your product or service and how it’s sold. They should also be introduced to every department head, and learn about those departments, their pain points, the growth opportunities and where the risks might lie. Finally, they should sit in on executive meetings to understand the company’s vision, where the company is going, and what the growth objectives are. Having your in-house lawyer integrated into the business will allow them to proactively support and guide the business rather than act reactively to matters that are brought to them. 

They also need to be strong communicators and have the ability to translate legal concepts into plain language. They must learn to provide verbal and written advice succinctly and in words that are easy to understand. If a lawyer uses overly technical legal lingo, they’ll be seen as unapproachable or intimidating, and the team will likely avoid coming to them with questions.  

Avoid hiring a lawyer coming straight from private practice 

When I work with tech clients looking to make their first in-house hire, my first piece of advice is typically not to hire someone coming straight from private practice. There’s a massive learning curve going from private practice to an in-house role, but the learning curve is even steeper for someone moving from private practice to a first in-house role in a tech company. That’s because of the speed at which these high-growth organizations are moving, the complexity of their products, and how risk-tolerant they are.

Lawyers in private practice are trained to spot every single risk and flag it for the client. When they join a tech company, they must change that mindset completely. They have to go from flagging risk and saying, “We can’t do this,” to recognizing the potential risk, analyzing the actual risk, presenting that information to the exec team,  and accepting that the exec team might decide to move forward with the business decision despite the risks flagged.. 

The best hires are generally people that have worked in-house previously, specifically in business-minded in-house legal functions. Those lawyers understand how a business is run, how decisions are made, and the importance of looking “outside” the legal issues. They know how strategic the role of legal is within a business, and they’ll have the right traits, abilities, and comfort with risk to help a company succeed. It’s not the tech experience that’s so important for a first hire, but the in-house experience of understanding how practical they need to be and how to balance and manage risk in the context of a high-growth company. 


Need help finding your first in-house legal hire?

Finding the right legal hire to support your business is instrumental in helping your tech company achieve its growth goals. Caravel has over 70 qualified and experienced lawyers with deep in-house experience to help support your growth. Our innovative engagement model allows you to hire a part-time experienced lawyer who will set up your legal function for success. Get in touch with our team to find out more.


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