Startup founders tend to spend a lot of their time focusing on hiring. The most successful founders can quickly identify key skills and red flags in areas way outside their core competency: think of a technical founder hiring a sales leader, for example.

But making a first in-house Legal hire is an especially delicate decision.

Most founders have no direct experience in law, so how can they identify what kind of lawyer will best suit their business? Should the first Legal hire be an experienced General Counsel (GC), or someone at an earlier stage in their career? And what happens to your external law firm: how will you define their responsibilities once you’ve appointed an in-house lawyer?

Getting these questions right is important because a strong Legal hire can transform your approach to key milestones like funding rounds and acquisitions. Not only that – an in-house legal counsel is often a critical partner to the CEO and Board when it comes to corporate governance and risk management.

We talked to experienced lawyers to find out when to make that first Legal hire, and what qualities to look out for.

Every company is different, so it can be tough to pinpoint a hard and fast rule for bringing a lawyer on board. But to Anushka Herath, Associate General Counsel at HSBC Innovation Banking, “if you hit a headcount of 50 people and you don’t yet have a lawyer on the team, it might be worth thinking about kickstarting a hiring process."

Timing is often an important consideration when founders are searching for a first in-house lawyer. According to Bianca Stewart, Director of Legal at automotive marketplace Motorway:

Founders should also consider the nature of their sector. Startups operating in verticals with lighter regulation may not need an in-house Legal resource as early as companies in highly-regulated spaces like fintech or aviation.

Unsure whether a full-time hire is the right step? There are alternative options, says Edward Bird, founder and CEO of legal tech startup Solomonic.

A first legal hire “will be doing things that in private practice would be way below and way above their private practice pay grade, probably on the same day,” says Anushka.

“‘Business as usual’ jobs might include managing contracts, employment agreements and potentially elements of the company equity plan. But at the same time, founders may entrust lawyers with highly significant strategic projects concerning compliance, governance and risk mitigation.”

The variety and scope of a role in a startup or scaleup is exciting to many lawyers, but the comparative lack of structure in startup environments can be a culture shock. “The jump from private practice to in-house at a startup is pretty significant,” says Bianca. “As well as organisational culture, lawyers have to get used to working without the institutional support and infrastructure that in a large corporation or law firm exists to help them do their work.”

To thrive in a less structured work environment, lawyers getting used to startup or scaleup culture need to reorient their bias to learning and progression, rather than an obsession with avoiding mistakes. “Founders are likely to be more forgiving of errors compared to a private practice context,” says Edward, “as long as there is a clear intent to learn from mistakes and use the failure to improve.”

Getting comfortable with being uncomfortable is part of the reality for an in-house lawyer. And emphasising the business reality, while maintaining compliance, is a necessary trait for successful legal hires. As Bianca points out:

The profile of the lawyer you choose to hire matters, but there may be a case to hire emerging talent over experience.

On one hand, a senior lawyer joining as General Counsel is likely to offer authoritative strategic advice to the CEO and Board – but that authority comes at a price. According to Glassdoor, the average compensation for a GC in the UK is nearly £160k per year – a steep figure for cost-conscious founders. “What you get with a General Counsel is a true strategic partner,” says Anushka. “They are a business leader that happens to specialise in legal affairs – much like a CFO is a leader of the company who happens to focus on finance.”

So what are the merits of hiring a lawyer earlier in their career who might come in with a title of Head of Legal or Senior Counsel? “A lawyer who’s still on a learning curve may be more likely to eagerly jump into projects and ‘muck in’ with the team,” says Edward.

Thankfully, companies may be able to get the best of both worlds.

“One route could be to welcome a senior lawyer – a partner at a big firm, or a seasoned startup GC – as an angel investor,” suggests Edward. “You will get the benefits of their guidance without the cost outlay of bringing them on as a member of the team – indeed, they are helping finance the business at the same time. They will be able to contribute to important milestones like VC fundraising, and they’ll also provide sensible input when the time does come to make your in-house hire.”

Almost all startups will have a relationship with one or more law firms, either on a retained basis or to execute particular projects that need legal input. These relationships are often formed in a company’s earliest days – potentially even at incorporation – so will normally predate the first in-house Legal hire.

For a lawyer taking up a role as a startup’s first salaried legal representative, then, it’s important to clearly define areas of responsibility.

“Once you have an in-house lawyer, you probably don’t want your law firm to be responsible for ‘business as usual’ tasks like contracts – that way, costs can add up very quickly and the value they add is not as significant,” says Anushka.

Understanding your law firm’s attitude to the day-to-day work is likely to inform how and when they will add value: “As a startup it’s never good to feel like you’ll get a bill every time you send your law firm an email,” says Bianca. To Anushka, failing to set clear boundaries works against the interests of all parties: “When the balance is wrong, an in-house lawyer can end up acting as a highly-paid go-between for the law firm and the founders. That isn’t an effective use of anyone’s time.”

And an internal lawyer can add value to a huge range of processes across functions, observes Edward. “A good lawyer can execute at speed. In addition to their core responsibilities, that skillset is invaluable to, for example, your sales success. I’ve often seen strong legal work, delivered at pace, be the difference between winning and losing a deal.”

The right in-house Legal hire can drive real change in your approach to corporate development.

That said, there’s no easy set of rules that define when you should hire your first lawyer, or what kind of lawyer will benefit your business most.

Part of this answer is driven by business priorities: understanding your sector’s regulatory landscape and the complexity of your compliance obligations could define whether a more senior General Counsel or a relatively junior lawyer would be the best fit for your company.

The other side of the coin is cultural. Lawyers joining a startup need to exhibit a determination to get out of their comfort zones, embracing the massive range of tasks that fall to an early-stage company’s first Legal hire.