So you’re building a tech startup? And asking yourself when should my first legal hire be? Navigating the legal landscape can often be a complex and time-consuming process. Especially for founders. For small to medium-sized tech startups selling B2B software, the challenges of lengthy contract negotiations, managing outsourced legal teams, and ensuring seamless progress can significantly impede the sales cycle. This is when you need to start asking yourself if it’s time to hire an internal legal person to manage this. They can put the legal operations processes in place such as a contract management software designed to streamline the entire process. As we explore the question – “When should my first legal hire be?” – let’s delve into the unique challenges faced by these startups when it comes to balancing the cost of external legal and the amount of internal work you need done.
Understanding the Pain Points
Growing tech startups may find prolonged contract negotiations slow down the race to secure deals a lot. The need for internal legal expertise becomes apparent as founders, heads of sales, or finance invest precious time dealing with external legal teams that don’t understand their product and don’t prioritize their contracts. Often reviewing contract redlines to determine approvals themselves. Additionally, the lack of visibility into the progress of legal negotiations can leave senior leaders in the dark, especially when critical deadlines loom.
1. The Strategic Timing for Your First Legal Hire
As your tech startup navigates the absolute sh*t show of B2B software sales, the decision to make your first legal hire should align with your business’s growth trajectory. Consider factors such as increasing business complexity, scaling operations, and the need for risk management. If contract negotiations are becoming a bottleneck, and legal issues are posing challenges, it might be the best time to bring legal expertise in-house.
Contract Management Made for Startups
Set Tasks, Negotiate Faster
When a startup gets going, navigating legal matters might not be at the forefront of the to-do list. Founders often focus on product development, market fit, and growth strategies. However, as the startup progresses, legal considerations become increasingly critical and the foundations you lay will make for either easy scaling or a mess to clean up. The decision of when to hire the first legal person can significantly impact a company’s trajectory.
Startups typically wear multiple hats in their early stages, with founders managing various roles, including legal tasks. However, there comes a point when the complexity and risk associated with legal matters demand specialized attention. Here are some key indicators signaling it might be time for a startup to bring on their first legal professional:
2. Rapid Growth and Scaling
As a startup begins scaling its operations, the legal landscape becomes more intricate. Expanding into new markets, engaging in complex contracts, or initiating fundraising activities (such as seed rounds or Series A funding) often necessitate legal expertise. A legal professional can navigate these waters efficiently, ensuring compliance and mitigating risks that come with rapid growth.
3. Increasing Regulatory Challenges
Industries are subject to various regulations, and startups are no exception. As a company evolves, it’s likely to encounter a web of legal requirements, from industry-specific regulations to employment laws. Having a legal advisor onboard helps in interpreting and adhering to these regulations, preventing potential legal entanglements.
4. Intellectual Property Protection
Safeguarding intellectual property (IP) is crucial for startups, especially in technology-driven sectors. Whether it’s patents, trademarks, or copyrights, startups need to protect their innovative ideas and products. A legal expert aids in securing and defending these assets, ensuring the company’s innovations remain protected from infringement or misuse.
5. Complex Contractual Engagements
As a startup engages with clients, suppliers, or partners, contract negotiations with enterprise customers become more intricate. From service agreements to partnership contracts, the language and clauses become increasingly sophisticated. Having a legal professional review, draft, or negotiate these contracts helps in safeguarding the startup’s interests and avoiding potential legal disputes.
6. Employment and HR Matters
Expanding the team brings forth a set of employment-related legalities. From drafting employment contracts to navigating labor laws, having a legal advisor can ensure the company complies with regulations and handles HR matters effectively. This is particularly crucial to prevent future disputes or legal complications with employees.
7. Fundraising and Investor Relations
When a startup pursues external funding, whether through venture capital, angel investors, or crowdfunding, legal intricacies intensify. Structuring deals, complying with securities laws, and negotiating terms as a startup requires specialized legal knowledge. A legal professional proficient in fundraising laws can safeguard the startup’s interests during these pivotal moments.
8. Risk Mitigation and Future-proofing
Having a legal expert in the team is not just about resolving current issues; it’s about anticipating and mitigating future risks. They can identify potential legal pitfalls, implement preventive measures, and ensure the company’s long-term viability by proactively addressing legal challenges.
In conclusion, while startups might initially manage without dedicated legal personnel, there comes a stage where the complexities and risks necessitate expert guidance. As the company grows, encounters more regulatory hurdles, engages in complex contracts, and expands its team and operations, the need for a legal professional becomes imperative.
The decision to hire the first legal person should align with the startup’s growth stage, the complexity of legal matters, and the company’s strategic goals. Doing so ensures that legal considerations are not an afterthought but an integral part of the startup’s foundation for sustained success.
If you’re trying to get your startup off the ground, making informed decisions about when to bring legal expertise on board is quite important. An internal hire will not only addresses the unique challenges faced by small to medium-sized tech startups but also provides the operational savvy to implement legal operations tools like Contract Sent to optimize the entire contract management process.
When should your first legal hire be? It’s a question best answered by assessing your business’s unique needs and recognizing the moments when legal expertise can pour fuel on the fire that is your sales pipeline to increase your average time to sale.
