When should a Series B SaaS company hire its first legal counsel?
Some practical signs that your business may have outgrown its current approach to legal support.
For a growing SaaS business, legal work has a habit of creeping up on you.
At the beginning, it's usually manageable. You have a law firm for the important matters, some standard customer terms and perhaps a CFO or CEO who handles the occasional contract negotiation.
Then the business grows.
Larger customers want their own terms. Security and data protection questionnaires become more demanding. New products and markets bring additional regulatory questions. Investors expect better governance.
Before long, senior management is spending a surprising amount of time dealing with legal matters, and the external legal bills are not getting any smaller.
It's often around Series B that someone asks whether the business should hire its first lawyer.
It's a reasonable question, although I wouldn't use the funding round alone to make the decision.
A relatively small SaaS company selling into heavily regulated industries can have more complex legal needs than a much larger business operating with straightforward customer contracts.
What matters is the nature of the work, how frequently it arises and whether the existing arrangements are still working.
Five signs worth watching
1. Contracts are getting in the way of sales
Enterprise contracting is often where the problem first becomes apparent.
Your Sales team has agreed the commercial terms, but the customer's legal or procurement team has a lengthy list of changes to the MSA, DPA, liability provisions and security schedules.
Some requests are reasonable. Others aren't. The difficulty is that nobody has clearly established which positions the business can accept and where it needs to push back.
The result is familiar: repeated external legal reviews, management escalation and deals taking longer than they should.
Questions worth asking:
- How long does it take to get from commercial agreement to signature?
- Are the same clauses being negotiated repeatedly?
- Does Sales have agreed fallback positions?
- Is there a clear process for escalating material contractual risks?
A basic contracting playbook, agreed risk parameters and sensible templates can make a considerable difference. You don't necessarily need more lawyers. You may simply need a better way of doing things.
2. The CEO or CFO has become the unofficial legal department
In smaller companies, someone in senior management usually ends up coordinating legal matters.
That's understandable at the outset. But if the CFO is spending several hours each week instructing lawyers, managing contract negotiations and chasing compliance issues, it's worth considering whether that remains a good use of their time.
The issue isn't that management should stop making legal risk decisions. Those decisions often have important commercial implications and belong with the business.
It's that someone needs to prepare the options, make recommendations and ensure decisions are followed through.
Questions worth asking:
- Who coordinates external legal advisers?
- Who maintains an overview of outstanding legal matters?
- Are lawyers being instructed consistently?
- How much management time is being consumed by routine legal work?
3. Legal advice is available, but nobody owns the follow-through
External lawyers are useful, and a good GC should know when to use them.
But there is a difference between obtaining advice and managing legal risk across a business.
A law firm might advise on privacy requirements, for example. Someone still needs to work with Product, Engineering and Security to decide what changes are required, who will make them and when.
The same applies to contracting, employment, intellectual property and regulatory matters.
Without clear ownership, advice can end up sitting in an inbox while everyone assumes somebody else is dealing with it.
Questions worth asking:
- Who is responsible for implementing external advice?
- Are legal responsibilities allocated clearly?
- Is there a practical process for tracking material risks?
- Can management readily identify what remains outstanding?
4. Every contract or legal question feels like starting again
This is one of the more avoidable problems.
If a business is repeatedly negotiating the same clauses, asking the same questions and reviewing similar risks, there is probably an opportunity to standardise the process.
That doesn't mean creating a large compliance manual that nobody reads.
It may mean having a sensible set of templates, agreed contracting positions, clear approval thresholds and a central place to store signed agreements.
Questions worth asking:
- Are contracts negotiated consistently?
- Can employees find the latest approved templates?
- Are signed agreements and key obligations recorded?
- Do teams know when they need legal approval?
Good legal processes should make commercial work easier, not introduce another layer of bureaucracy.
5. The business is becoming more complicated
Growth brings legal complexity, although not always in a predictable order.
For a SaaS business, the pressure might come from entering another country, introducing AI functionality, handling more sensitive customer data or taking on larger contractual commitments.
It might also come from investors asking questions about IP ownership, regulatory compliance, corporate records or contractual liabilities.
Individually, these matters can often be handled externally. Taken together, they may require someone who understands the whole business and can decide what needs attention first.
A practical checklist
If I were advising a CEO or CFO considering the company's first legal appointment, I'd start with these questions:
- Are customer contracts regularly taking longer to close because of legal negotiations?
- Is senior management spending substantial time coordinating lawyers or dealing with routine legal issues?
- Are external legal costs increasing without much improvement in how legal work is managed?
- Do the same contracting or compliance questions keep coming back?
- Are responsibilities for legal and regulatory matters unclear?
- Would it be difficult to locate important contracts or prepare for investor due diligence?
- Does the business need ongoing legal judgement rather than occasional specialist advice?
There isn't a magic number of boxes to tick.
But if several answers are yes, it's worth looking at whether the current model is still appropriate.
So, what should you hire?
I generally see three options.
Continue with external law firms. This can work perfectly well where legal work is occasional, discrete or highly specialised. There is little point employing someone simply to manage a handful of matters each year.
Bring in a fractional General Counsel. This can be useful where there is a recurring need for experienced legal judgement, contract management, external counsel coordination and better internal processes, but not enough work to justify a full-time senior hire.
Appoint a permanent in-house lawyer. Where the workload is substantial, regular and needs daily attention, a permanent appointment may be the better long-term investment.
The options aren't mutually exclusive. Most in-house lawyers, including experienced GCs, continue to use external firms for specialist work.
The key is to match the arrangement to the actual workload and commercial needs of the business.
What should the first 90 days look like?
If the decision is to bring someone in, whether permanently or fractionally, I'd suggest keeping the initial objectives fairly straightforward.
First 30 days: Work out what's going on.
Understand the business, review the major contracts, look at external legal expenditure, identify recurring problems and agree on the most important risks.
Next 30 days: Fix the obvious bottlenecks.
Improve contract templates, establish agreed negotiation positions, clarify approval responsibilities and put some structure around external legal instructions.
Final 30 days: Put the basics on a sustainable footing.
Create a manageable legal roadmap, establish reporting to management and make sure key documents, responsibilities and outstanding matters are properly organised.
Obviously, every business will have different priorities. The point is to make an early, practical difference rather than spend three months designing an elaborate legal function.
A final thought
Having worked in senior in-house legal roles, I've seen how much easier life becomes when legal support is properly integrated into the business.
The best legal function isn't necessarily the largest. It's one that helps people make sensible decisions, understands the company's commercial priorities and doesn't make everything unnecessarily complicated.
For a Series B SaaS company, that might mean hiring a full-time lawyer. It might mean having an experienced fractional GC available a few days each month. Or it might mean improving the way existing external advisers are used.
The important thing is to understand where the legal work is coming from, who owns it and whether the current arrangements are helping or holding the business back.
If you're weighing up these options, I'm happy to compare notes. A short conversation about your current workload and contracting processes is often a useful starting point. You can get in touch here.