By Lucy Morris
The UK start-up scene is now worth over 1 trillion, thereby positioning the UK as the third most valuable start-up ecosystem on the planet (thank you, Dealroom.co). Founders across start-up, breakout and scale-up phases universally face critical decisions about scaling their operations, with the issue of finding the appropriate time to hire a General Counsel or in-house counsel as a particularly contended subject.
In reality, early-stage companies face many of the same legal challenges as large corporates that are backed by 50+ in-house lawyers and a panel of Magic Circle-level firms. General Counsel and in-house counsel offer a significant amount to growing businesses, both in terms of managing traditional legal risks, in other words, commercial contracts, IP protection, funding, mergers, regulatory compliance and disputes, as well as strategic business partnership. There’s a growing talent pool of commercially savvy in-house lawyers that go beyond the traditional scope, often picking up DPO, Company Secretarial, People issues and strategic business advice. While there are several later-stage circumstances that require substantial legal support (stating the obvious: IPO preparation and M&A), a growing business can see the value in hiring a GC before facing major transactions, severe risk or reputational damage.
It goes without saying that in a landscape where funding is scarce, having a senior lawyer on the leadership team that can support executives, manage reputation and ensure compliance with regulators, is a very attractive prospect. Moreover, being able to tackle legal processes earlier and proactively manage a company’s risk profile can be an indicator of a start-up’s long term success. By having this expertise integrated, a GC can tailor legal advice to the unique challenges of the sector.
Although, all of this depends on timing. Some key considerations include:
- Engaging legal counsel during the initial phases can establish a robust foundation, ensuring proper company structuring and compliance readiness for funding opportunities. Nevertheless, it’s important to consider how much legal work there is and whether this can keep a full-time headcount busy; an option may be found in the flexibility of the part-time talent pool, contractors and fractional counsel to ease this burden.
- When external legal fees exceed the cost of a full-time in-house counsel, it becomes financially prudent to consider an internal hire. This shift not only manages costs but also provides dedicated and tailored legal oversight. Although, it should not just be an economic decision – ensure the business is culturally ready for a legal eye.
- As start-ups engage in intricate activities and complex business transactions, such as securing funding, expanding into new markets, or navigating M&A, the need for specialised legal expertise inevitably becomes paramount. Once a company reaches this stage, it’s a fight for immediate compliance: a role often too big for one lawyer. This is precisely where hiring mistakes can occur, as the time restraints to recruit and subsequently onboard become increasingly tight.
Ultimately, the decision to hire a General Counsel should be aligned with the company’s growth trajectory and the complexity of its operations. By monitoring legal workload, founders can make informed decisions to safeguard their ventures and promote sustainable growth.
As noted by the Financial Times, increasing numbers of traditional private practice lawyers are looking for the challenge, pace and breadth of life in a start-up, but are finding that the right match for them can be time consuming.
For founders hiring a first counsel: we can provide thoroughly vetted talent, market updates and wider support as you scale. If you’re hiring now or in six months, reach out for an introductory conversation.
For lawyers with an interest in joining the scale-up community: there are many pathways in. Please do not hesitate to reach out for a confidential conversation.
