Congrats! You’ve Been Hired as General Counsel of a Venture-Backed Private Company. Now What?

Author: Priya Patel

Hiring the first general counsel (GC) is an important rite of passage for companies that have evolved from a small startup to a growing private company, and for the person brought on to fill this role, it can be a tremendous opportunity to prepare and shape the company for its next stage of development. However, it also can be a challenging role – most initial GCs we work with are hired from outside the company, so they are charged with managing the legal affairs for a company that they are not already familiar with. Here are a few key pieces of advice I offer to incoming GCs of my late-stage clients. (For guidance on when companies should hire their first GC, see this Cooley GO article.)

Understand the company’s governing documents

Venture-backed companies are, in many ways, creatures of contract. By the time a company is in a position to hire a GC, the governing documents typically have been carefully negotiated and renegotiated over the course of several financings and reflect a delicate balance among stakeholders. For most venture-backed companies in the US, the primary documents will typically follow the National Venture Capital Association (NVCA) model of venture financing documents and will contain provisions that govern who sits on the board of directors, what types of company actions require the approval of particular directors or stockholders, what the conditions are to trigger a “drag-along” in the context of a sale of the company and much more.

It is critical that a new GC understands these documents. I always encourage new GCs to read and digest them and learn the balance of power that they reflect. As company counsel, we will often brief new GCs on critical provisions of the company’s governance documents and provide a “cheat sheet” summary of key terms so our GCs have the main company information at their fingertips.

Get to know your stakeholders

In addition to understanding the contractual ground rules for the company’s governance, you will need to understand who governs the company and the dynamics behind the documents. This begins with the board of directors. Each board is different, and as a new GC, you may find that your new company’s board meetings bear little resemblance to the board meetings you are used to. Take the time to learn about the board members, their preferences, and their relationships in and to the company and its industry. Speak with other executives of the company to get a feel for the board members’ historical areas of expertise, focus and concern. Review prior board materials and meeting minutes.

Learn about how the board has operated thus far, not only from the perspective of how this group of directors makes decisions about the company in their capacity as fiduciaries, but also from a mechanical perspective. This includes things like:

• How often are board meetings scheduled?
• Are they in person or by videoconference? How is the agenda prepared and circulated?
• How are minutes kept?
• Are the meeting materials circulated a day in advance? A month in advance? By email or something else?
• Are there board committees and committee meetings? Are there any nonvoting observers who join board meetings?

You also should understand the company’s stockholder base – not only in terms of the economics reflected in the cap table, but also the dynamics among the various stockholders. For example, you should know if there is a departed founder who still remains involved in company decisions, major stockholders who are not represented on the board, or investors who are subject to particular requirements or have unique priorities or concerns.

In addition, don’t be surprised if the company’s governance does not immediately reflect your sense of “best practices.” You may be coming from a company whose board had additional structures, such as a dedicated audit committee and compensation committee, with focused areas of oversight. There may have been more sophisticated policies and procedures in place to address key areas of risk, such as cybersecurity and privacy compliance, or to monitor, reflect and report on environmental, social and governance (ESG) risk matters. It’s important to take the time to observe and identify a shortlist of the most important changes you want to make versus trying to make all the changes at once. You may very well meet resistance if you try to reshape the company or board into something different than what it has been previously or introduce new policies or procedures to address areas of risk exposure for the business too quickly. It’s better to take the time to observe, learn about your company’s governance and try to meet your company where it is at before fundamentally changing how it operates. This brings me to my next point …

Integrate with your team

I love working with companies when they bring on a GC because it’s often a sign of bigger things to come – whether what’s on the horizon is another stage of financing, an initial public offering (IPO) or some other type of exit, like an M&A event. A key part of the GC’s role is often to help the company prepare itself for such an event (or more often, prepare for all of these events in the hopes that one of them will happen!).

It should not come as a surprise that at the moment you are hired, various items related to the company’s legal function may not be 100% buttoned up. If your prior role was at a company with a fully built-out legal department, you may notice things about your new company that you want to fix (some, perhaps, urgently).

If so, you should of course work toward fixing those things. But also understand that existing legal was likely doing its best with limited resources and balancing a variety of competing demands. For an incoming GC of a growing venture-backed company, a little empathy and humility goes a long way! The GCs I’ve seen with the most success have been those who take the time to learn about the company and how existing legal has navigated prior challenges and priorities. They have thoughtfully planned within that context and aligned with their company in view of its trajectory, goals and resources. Appreciating what your company and its people have been through – and keeping that in mind as you help them scale the next mountain top – will make all the difference as you settle into your new role!