One of the early hires, even if it’s not an internal hire, may be an external resource, that you’ll need to make for your startup is a legal team member. This legal resource will help you to get your software as a service contract into a shape that will protect your business, protect your intellectual property, build value, and help you get money in the door faster. We’ve written this guide up so you know what to look for when you want to find a SaaS lawyer because it can be a difficult process to find one that helps you accelerate your startup’s growth.
Why should I find a lawyer with industry experience?
Having a lawyer with industry-relevant experience is important for a lot of very pertinent reasons. Contract law works differently across industries and the standards that are applied to different industries can be very important to know. This is particularly important for tech companies that are selling to enterprise customers. On one hand, you have enterprise customers who have certain enterprise-level expectations of what their procurement processes should look like. On the other hand, you have your business and your investors who are putting pressure on you to standardize things as much as possible. Having an industry-experienced lawyer can help you balance this by drawing on the following:
Knowledge of Industry-Specific Laws and Regulations: Different industries and jurisdictions are governed by different laws and regulations. Think of the use of DPA’s in software as a service agreement as an example. A lawyer with experience in a specific industry will have a deeper understanding of the legal landscape and be able to provide more effective advice on these details and representation at an industry-standard level. They will also be familiar with the unique issues and challenges that arise within that industry, allowing them to provide more tailored solutions to their clients. This can help you with the SaaS contract negotiation process.
Understanding of Industry Standards: Lawyers with industry-specific experience will have a better understanding of the standards and practices that are common within that industry. Understanding what is standard for liability caps or payment terms is extremely useful when it’s time to push back against customer requests. This knowledge can be invaluable when negotiating contracts, drafting agreements, or advising clients on business practices.
Connections within the Industry: Lawyers with experience in a particular industry will have developed relationships and connections within that industry. These connections can be beneficial in many ways, including providing access to resources, facilitating negotiations, and providing a better understanding of industry trends and developments. For SaaS companies, you’ll find that lawyers also have connections to VCs and other forms of funding from their industry relationships.
Efficient and Effective Representation: Lawyers with industry-specific experience are often able to provide more efficient and effective representation because they are familiar with the relevant laws, regulations, and industry standards. This can save time and money for clients, as well as increase the likelihood of a positive outcome.
At the end of the day having a lawyer with industry-relevant experience can provide many benefits for clients in terms of more effective representation, tailored solutions, and a deeper understanding of the unique issues and challenges that arise within a specific industry. There are a lot of lawyers out there that are trying to break into the SaaS industry so make sure you ask for references to ensure they do have the relevant experience.
What makes SaaS contracts different?
Software as a Service (SaaS) contracts differ from other types of commercial contracts in several key ways:
Service-Based: SaaS contracts are primarily focused on the provision of services, as opposed to the sale of goods or products. The provider agrees to provide access to software applications or platforms via the internet, rather than selling a physical product. Why is this important from a contract perspective? One of the main reasons that this is important is because of the way that intellectual property is treated in this process. There is no transfer of the intellectual property which means it needs to be treated differently than a traditional sales contract.
Subscription-Based: SaaS contracts are typically subscription-based, meaning that the customer pays a recurring fee for ongoing access to the software service. This differs from other types of contracts, such as one-time sales, where the customer pays a single fee for ownership of a product. Keeping this in mind there are several implications for payment terms that align with the way you bill customers.
Flexible Terms: SaaS contracts are often more flexible than other types of contracts. Customers can typically scale up or down their usage of the service as needed, and providers may offer a range of pricing plans to accommodate different customer needs. All of this is built into your pricing and should be addressed in your contracts.
Data Privacy and Security: SaaS contracts often include provisions related to data privacy and security, as the provider is handling sensitive customer data. These provisions may include data protection requirements, data breach notification obligations, and limitations on the provider’s use of customer data. A lot of SaaS contracts for enterprise customers now require DPA’s and detailed outlines of your infrastructure.
Intellectual Property Rights: SaaS contracts may include provisions related to intellectual property rights, as the provider may be licensing software or technology to the customer. These provisions may address ownership of intellectual property, license terms, and restrictions on use. Understanding where IP rights sit and what happens to the IP after the termination of the contract is very important to outline clearly.
SaaS contracts are distinct from other types of commercial contracts due to their focus on services, subscription-based pricing, flexible terms, data privacy and security provisions, and intellectual property considerations. Understanding these differences is important for both providers and customers when entering into SaaS contracts and an understanding of these concepts comes from an experienced SaaS lawyer.
Why does a lawyer with SaaS experience make sense?
Many founders ask the question, “Should I have a lawyer with software as a service experience for my SaaS company?” The short answer is yes, and the long answer is YES.
Legal Considerations for SaaS Companies
Before delving into the reasons why a lawyer with SaaS experience is essential, let’s examine some legal considerations for SaaS companies. Some of the key legal issues that SaaS companies should be aware of include:
-
Terms of Service and Privacy Policies: SaaS companies need to have comprehensive terms of service and privacy policies in place that accurately reflect their services and how they will be used, a SaaS lawyer will dig into the use case of your business and build this out for your startup specifically
-
Intellectual Property: As we outlined above intellectual property is critical to the success of a SaaS company. It is essential to protect your company’s intellectual property rights, including trademarks, copyrights, and patents. A SaaS lawyer will design contracts with this in mind but also help you navigate custom legal workaround partnerships that might treat your IP differently
-
Data Privacy and Security: SaaS companies deal with large amounts of sensitive data. Therefore, they must comply with data protection and privacy laws such as the General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA).
-
Contractual Agreements: An experienced SaaS lawyer will go to bat for you when it comes to contracts and help you not just get them in place but also negotiate SaaS contracts for you.
Why a SaaS Lawyer is Essential
Now, let’s explore why a SaaS lawyer is essential for your SaaS company:
1. Expertise in SaaS-Specific Legal Issues
A lawyer with SaaS experience has expertise in the specific legal issues that affect SaaS companies. They understand the nuances of SaaS agreements, such as service level agreements (SLAs) and data security agreements. They also have experience with data privacy laws, intellectual property laws, and other legal issues that are specific to the SaaS industry. Hiring a SaaS lawyer ensures that your company is legally compliant and that all legal matters are handled correctly.
2. Protecting Your Company’s Interests
A lawyer with SaaS experience can help protect your company’s interests in several ways. For example, they can help you draft contractual agreements that ensure you retain ownership of your intellectual property. They can also help you negotiate favorable terms with customers, partners, and vendors. A SaaS lawyer can also help you respond to legal threats or disputes, protecting your company’s interests in court if necessary as well as manage contract management in mergers or acquisitions if you go through an exit.
3. Keeping Up-to-Date with Legal Changes
The legal landscape is continually changing, especially in tech, and SaaS companies must keep up-to-date with the latest legal developments. A SaaS lawyer can help you stay on top of legal changes that affect your company, such as new data privacy laws or changes to intellectual property laws. This ensures that your company remains compliant with the law, reducing the risk of legal disputes or penalties by bringing this expertise into your centralized contract management.
4. Cost-Effective Legal Services
Hiring a SaaS lawyer may seem like an added expense, but it can save you money in the long run. SaaS lawyers can help you avoid legal disputes and penalties, which can be expensive to resolve. They can also help you negotiate better terms with vendors and customers and ultimately speed up the sales pipeline to cash in the bank cycle.
