How SaaS companies can work with external legal

Building a SaaS product takes time and a large amount of the focus of a founding team, it’s not until you come into your first legal negotiation with a customer that you start thinking about contracts and their implications. Tech companies face a bit of a legal minefield that they need to navigate, usually before having an in-house legal team. Often they will opt to work with external legal teams. From data privacy and security to intellectual property and regulatory compliance, companies in the tech sector must have a deep understanding of the legal landscape in which they operate and how their product fits into this legal landscape. This is often where external legal counsel comes to the rescue – a team of experienced lawyers who can provide guidance and support on a range of legal matters. Seems great, doesn’t it?

Well…yes and no. External legal teams are extremely helpful in providing advice, working with you on redlines, and in general, keeping you protected. But being external they often don’t understand your product, its use case, and areas of risk. They also have their practices and ways of working which are often shoehorned into your processes and can create a disconnect between your sales team closing deals and your finance team invoicing and getting money in the door. Let’s dive into the ins and outs of working with external legal.

Why use external legal counsel?

There are a lot of reasons why a SaaS company might start to use external legal counsel, including:

1. Expertise, in particular, SaaS or industry expertise: External legal counsel can provide specialized expertise on complex legal issues, such as data privacy and security, intellectual property, and regulatory compliance. They have a deep understanding of the legal landscape in which tech companies operate and can provide guidance and support that is tailored to the specific needs of each company. This is especially important when you are early on in your journey and you’re a disruptive product in a regulated industry or you are building an entirely new industry.

2. Cost-effectiveness: Hiring an in-house legal team can be expensive, particularly for small and medium-sized tech companies. Internal legal is also a cost that is recurring and quite specialized making it a hard hire when you start and generalists are your go-to hires. External legal counsel provides a cost-effective alternative, allowing companies to access legal expertise without the high costs of a full-time in-house team. There’s a balancing act here of when you bring legal in-house.

3. Flexibility: work with external legal counsel can be set up on a contract-by-contract basis, allowing companies to scale their legal resources up or down as needed. This provides flexibility and agility, which is particularly important for tech companies that operate in a rapidly changing environment. One of the key areas that this is important is during your end-of-quarter rush when you need to squeeze a lot more out of your legal resources than normally.

How to choose the right external legal counsel

Choosing the right team to work with external legal counsel is critical for the success of any tech company. It can mean not just improvements in quality and quantity of work that can be taken on but it can also mean having a business partner that will advise you on the risks that you’ll have to weigh up along the way. Here are some factors to consider when selecting external legal counsel:

1. Expertise: Look for a legal firm that has expertise in the areas that are most relevant to your business, this can be quite specific, are you going into Europe and need GDPR help? CCPA for US-based customers? Do you have a community as part of your business offering? Do you need someone with knowledge of non-solicitation clauses? Or are there regulatory frameworks that you need to work within?

2. Experience: Choose a legal firm that has experience working with tech companies, especially legal SaaS experience, and experience with enterprise sales, as they will be more familiar with the unique legal challenges that tech companies face.

3. Reputation: Check the legal firm’s reputation by reading reviews and testimonials from other clients. Go a step further and ask to speak to some of their current or past customers if you can. This will help you gauge the value that they can bring to the table and will give you an idea of the quality of their work and their level of client satisfaction. Keep in mind that a lawyer is a large expense so you should do your due diligence just like any other resource attribution in your company.

4. Communication: Communication is critical when working with external legal counsel. Choose a legal firm that communicates clearly and effectively, and that is responsive to your needs. You’ll be surprised how often a lawyer who will respond to an email in an hour or will give you their phone number will be worth their weight in gold.

5. Cost: Finally, consider the cost of engaging external legal counsel. Look for a legal firm that provides transparent pricing and that offers a cost-effective solution for your needs. It’s quite often useful to have a law firm on retainer but look to build in a higher number of hours during the end of the quarter to ensure your sales team is fully supported.

How to manage external legal

Managing external legal counsel can be a challenging task for businesses, especially for those that do not have an in-house legal team. More often than not external lawyers are slow to pick up tech products for contract management and it can make legal management a bit of a black hole. However, hiring external legal counsel is often necessary for handling complex legal matters that arise in the course of running a business so you’ll need to effectively manage this. To ensure that businesses can effectively manage external legal counsel, here are some key tips to keep in mind:

1. Identify the scope of what you want them to do: Before hiring external legal counsel, it is important to identify the scope of both the work that needs to be done but also the scope of their remit. This involves outlining the key contract clauses that require focus and the key clauses that don’t require focus as well as standard timelines for redline turnaround. To be very specific here there are a lot of external legal teams that will fall into one of two buckets. The first are lawyers who do not feel empowered and will raise every change to be reviewed. This is a waste of time, you should not have a senior leader reviewing minor contract word changes. The second type of external lawyers are those hardline lawyers who will try to make commercial decisions without your input. For example not accepting changes to payment terms. These are decisions that should be raised. Ensuring external lawyers understand their remit is very important to help the contract negotiation process.

2. Define the terms of engagement: Once the scope of work has been identified, it is important to define the terms of engagement with the external legal counsel. This includes outlining the fees and expenses that will be charged, the payment schedule, and any other terms and conditions that need to be agreed upon. This will help to ensure that both the business and the legal counsel are clear on the expectations and responsibilities involved. Set up a retainer if it makes sense, this will depend on the volume and regularity of contract work that’s coming in.

3. Maintain open communication: Effective communication is essential for managing external legal counsel. It is important to establish clear lines of communication and to maintain regular contact throughout the engagement. This will help to ensure that any issues or concerns can be addressed promptly, and that progress is being made towards the desired outcomes. One of the easiest ways to do this is to implement a contract management tool such as Contract Sent that will allow for all of your communication to be captured and easily surfaced to the team.

4. Establish reporting and feedback mechanisms: In addition to maintaining open communication, it is important to establish reporting and feedback mechanisms for managing external legal counsel. Like every other team in your SaaS business, your legal team should have a dashboard that clearly shows their progress on tasks and weekly meetings should give you further information on this. These meetings include regular progress reports and feedback sessions, as well as providing clear guidelines for how and when to provide updates on the status of the legal matter. This will help to ensure that both the business and the legal counsel are aware of any issues or concerns, and can work together to resolve them.

5. Ensure compliance with legal and ethical standards: Businesses should ensure that external legal counsel adhere to all legal and ethical standards. It seems counterintuitive that you need to do this for legals but are it is a part of your business that can cause a lot of impact it’s important to cross your T’s and dot your I’s. This includes verifying that the legal counsel is licensed to practice law in the relevant jurisdiction and that they are not subject to any disciplinary actions or complaints. It is also important to ensure that the legal counsel is following all relevant laws and regulations and that they are not engaging in any unethical or illegal practices.

6. Review and evaluate performance: It is important to periodically review and evaluate the performance of external legal counsel. This should be part of building an ongoing relationship with them and it should be built into your work with them. This includes assessing their ability to deliver the desired outcomes within the agreed-upon timeline, as well as evaluating their communication and collaboration skills. This will help businesses to identify any areas for improvement and to make any necessary adjustments to the engagement.

Working with external legal counsel is a part of your business that, if done right, will cut down on a large headache in the future. It’s an important aspect of running a tech business that will be able to attract funding at a later stage. By following these key tips, businesses can effectively manage their relationships with external legal counsel, ensuring that they receive high-quality legal services that meet their specific needs and requirements.

How to communicate effectively with external legal teams

Effective communication is a crucial aspect of getting your legal team humming, particularly when it comes to managing SaaS commercial contracts. Contracts are the foundation of your relationships with your customers as well as the foundations of how you’ll go through rounds of funding in the future. They can be complex documents and when you start to customize them by selling to enterprise customers they require careful attention to detail. When communicating with legal teams about commercial contracts, there are several key strategies that businesses can use to ensure clear and effective communication.

1. Clearly define what you need from your contracts: Before approaching your legal team, it is important to define your objectives for both the commercial contracting process and the management of the contract data. This means understanding what you want to achieve through your contracts, the essential terms, those that are negotiable, any potential risks or concerns that need to be addressed, and how you want your contract data managed at scale. Having a clear understanding of your objectives can help you to communicate more effectively with your legal team, as you can provide them with clear instructions and information about what you need.

2. Provide detailed information about use cases: When communicating with legal teams about commercial contracts, it is important to provide them with as much detailed information as possible. This means providing background information on the product you have, how customers use the product, what data the product processes, outlining the key terms of your base contract, and identifying any relevant legal or regulatory requirements. Providing detailed information can help your legal team to understand the context of the contract and to identify any potential issues or risks. It’s always good to give the legal team a demo of your product.

3. Work with legal to use plain language: Contracts are often written in legal language that can be difficult for non-lawyers to understand. When communicating with your legal team about commercial contracts, it is important to get them to use plain language that is easy to understand. This means avoiding technical jargon and legal terms that may be unfamiliar to people in your team who need to be part of the conversation, such as salespeople. By using plain language, you can ensure that everyone involved in the contract understands the key terms and provisions and understands how to justify and negotiate them. Putting a salesperson in a position where they have to explain limited liability to a customer is not something that you should be doing.

4. Be open to feedback: Your legal team will likely have insights and suggestions on how to improve the commercial contract that you have as a base. It is important to be open to their feedback and to consider their suggestions carefully. By being receptive to feedback, you can work collaboratively with your legal team to create a contract that meets your objectives and mitigates any potential risks or concerns. This will help you to use their expertise because they may have a lot more insight into the nuances of contracting than the template MSA you got online.

5. Establish clear lines of communication: Effective communication requires establishing clear lines of communication with your legal team. This means setting up regular meetings or check-ins to discuss the status of the contract, any issues or concerns, and to provide updates on progress. It is also important to establish clear guidelines for how and when to communicate. This communication shouldn’t be one-way, the legal team also needs to be notified of changes to your product to keep your legal agreements up to date.

6. Understand the legal framework: When communicating with legal teams about commercial contracts, it is important to have a basic understanding of the legal framework that governs the contract. This means understanding the relevant laws and regulations, as well as any industry-specific requirements that may apply or region-specific laws based on where your customers are based. By having a basic understanding of the legal framework, you can work more effectively with your legal team and ensure that the contract complies with all relevant requirements.

In conclusion, effective communication is critical to working with external legal on commercial contracts and the SaaS contract negotiation process with customers. By clearly defining your objectives, providing detailed information, using plain language, being open to feedback, establishing clear lines of communication, and understanding the legal framework, you can work collaboratively with your legal team to create a contract management process that will help you scale while mitigating risks.