Why scale-up COOs spend loads of time with lawyers (and why this isn’t necessarily a bad thing)

One of the most surprising things about my role as COO is the amount of time I spend with lawyers. Like many people, my only previous experience of working with lawyers was when I bought a property. It was a pretty slow and expensive encounter that did not engender much confidence. So, I was nervous about working with lawyers in my role as COO.

After four years at quantum engineering company Riverlane, I now have eight law firms on standby, as well as our own general counsel. This includes firms for ‘general’ legal work; those we use for fundraising, immigration and patents; and legal counsel in the US, Germany and Denmark. This might seem excessive, but it is not uncommon in the scale-up world.

In this article, I chart my path from legal naivety to someone who navigates lawyers with relative ease, while offering useful tips for how best to work with lawyers as you scale up. My journey spans a ‘pre’ and ‘post’ general counsel world.

Getting set up

To help set up your company and produce key collateral, such as employment contracts and option plans, I recommend using a specialist start-up legal firm. Preferably a firm that’s a one-stop-shop with different lawyers to draw on.

Like many companies in the Cambridge area, we worked with Chris Keen at Taylor Vinters (now Mishcon), a firm focussed on high growth start-ups. It was helpful to learn what was ‘standard’ in the market and what pitfalls to avoid in our early days. Aside from their excellent advice, the best thing about working with Taylor Vinters was their speed. As a scale-up, I often need a response within 12 hours and legal documents drafted in 48 hours. Getting their quick, expert advice was invaluable and they were always my first port of call in the first few years.

For those start-ups who don’t quite yet have the cash to hire a full-service law firm, many companies use Seed Legals to help produce their core collateral. The British Venture Capital Association also shares model confidentiality agreements and documents for early-stage investments to get you started.

You can also plug in-house legal networks as a good source for tips and precedent documents e.g., TechGC, Disruptive GC, Juro community, etc. but as a non-lawyer you're always safer with qualified external counsel than trying to interpret these approaches yourself.

As things get meatier

As we began to grow from 20 to 50 people at Riverlane, the challenges moved from more ‘off the shelf’ to ‘seriously meaty’ - particularly when managing our many partnerships and burgeoning commercial relationships.

As COO, I’m often involved in negotiating agreements with external partners, including governments, quantum hardware firms, and enterprise companies. I work closely with Riverlane’s business development team on these partnerships, but also need legal counsel to ensure that we address the key legal and business risks – especially in areas such intellectual property – whilst still getting deals done as quickly as possible. By this stage, using external counsel to support our rapidly growing commercial negotiations meant that I was in danger of blowing my legal budget!

It became clear that we needed an in-house general counsel who intimately understood our business and who could offer continuity across multiple, long-term (often protracted) negotiations in a cost-effective way. We also needed someone with a commercial bent, who could provide me with practical, ‘been there, done that’ support. However, we weren’t sure we could generate enough work for a full-time in-house lawyer.

Here, I’d advise you to consider a part-time arrangement with an experienced in-house lawyer - ideally one who has worked in, or for, early-stage companies. Enter Anthony Tabor, an amazing lawyer with experience working in-house for a variety of companies ranging from multi-nationals to start ups. This has worked brilliantly for Riverlane and is a model that many other scale-ups follow until they have enough work for a full-time general counsel.

We now have almost 100 people at Riverlane and Anthony continues to do most of our legal work. He understands our business, knows our teams and provides commercial nuance. I also still draw on Mishcon and other law firms for more specialist advice on employment, immigration, and cybersecurity, for example, and I envisage this mixed model working for us in the medium-term.

Taken together, I spend about £10k a month on legal fees. This spend would be much higher if I sent all our work to an external counsel.

As things get international

There is inevitably a point at which your firm will want to go global. And you’ll then need local legal counsel to help you understand and navigate the laws of your new location. If you use a global law firm, they may have a local office that can support you. I’d also suggest you ask your business network for recommendations. The key is to make sure you get the right local advisors for the job. So, do your homework and make sure you consider a few different options.

General advice on working with lawyers

1.      Treat lawyers like any other professional relationship. Ask around for recommendations, meet your lawyers face to face (where possible) to help build strong relationships, and sign a letter of engagement, which sets out the terms and the costs. You might be spending a lot of time with this person, so make sure you pick someone with who you’d be happy to have a gin and tonic!

2.      Expect your lawyers to be expensive. They are highly trained and can save you from a world of hurt in the longer-term. At the same time, they usually bill you for their time in minimum six-minute increments (sometimes bigger for large international firms) and can therefore be incentivised to rack up the hours. So, be selective about when you work with a lawyer, and which lawyer you work with for which project. You may be offered a fixed fee for delivering a piece of work (for example, drafting an options plan), while other projects may be offered at an hourly rate. Remember that while you understandably need certainty on costs, there are some things you might ask your lawyer to help with where the amount of work cannot really be known at the outset. To save costs getting too high, it may be better to negotiate an estimated fee and put a cap on this asking the lawyer to come back to you in advance if it looks like it might be exceeded.

3.      Hunt out a rising superstar in a law firm. And when you find that rising star, stick to them like glue (Maeve O’Hare we miss you!). Only bring in partners when you face major strategic issues or have a scary meeting to attend.

4.      Be very clear about agreed work, expected response times, and how many lawyers will be involved in a particular project. I haven’t always been brilliant at this. I still find some lawyers pretty intimidating, particularly the corporate ones, and haven’t always been able to push back. During a recent fundraise, I found myself on a call with 15 different legal representatives from three different law firms and realised that I was paying for them all. So, be brave, and set and police your expectations. Don’t be afraid to give feedback about the quality, timing and nature of the service you are provided. Which leads me onto my final point...

5.      Know when to ‘use’ a lawyer. There is no easy answer here. You need to be judicious and save costs and manage your cash runway in the early days of a start-up, but you also want to make sure your company has a sound legal footing and that you don’t end up in hot water. As you grow in confidence over time, you’ll get a better sense of when you need to call a lawyer and when you think you can handle a situation yourself. You’ll also learn which type of lawyer you need for which job. If in doubt, ask! I am a big fan of asking ‘stupid’ legal questions and have actively asked lawyers to ‘hold my hand’ when we’re moving through a negotiation or situation that I haven’t experienced before. You may think you’re saving lawyer money by not asking that question, but it may bite you in the long term and I’d always rather know than not know.

Summary

On the whole, I’ve really enjoyed working with lawyers. Most are insanely bright, work at high speed, and are prepared to put in long hours to help you succeed. They also tend to be incredibly well connected. We get many investor introductions from our lawyers, and they are brilliant at putting you in touch with other scale-ups and CEOs/COOs, so you can compare notes and share best practice.

At the same time, I’ve definitely made some mistakes along the way, in terms of how or when I work with lawyers. While this is all part of the learning curve of being a generalist COO, I hope this article prevents you from making a few of the rooky mistakes I’ve made. When you get a full-time general counsel, they will inevitably take on all the work I’ve outlined here.

Finally, I’d urge you to treat the COO-lawyer relationship as one of your most important. Given the amount of time (and money!) I spend with lawyers, and the rich and complex problems we try and solve together, it’s definitely one to invest in for the success of your company.