The exponential growth of the Silicon Beach tech scene has not only changed the landscape of the Los Angeles area’s business community, but has also created a significant opportunity for in-house legal talent as these companies engage with firms to aid and guide their growth. Though the COVID-19 pandemic has admittedly upended the hiring landscape for many companies, strategic GC hiring has continued for many tech startups even amid the current uncertain environment. Indeed, these hires may prove more critical than ever as companies navigate new challenges posed by the pandemic, including regulatory and compliance, labor, and privacy issues.
Often, the most significant factor that can swing the balance in favor of onboarding a tech startup’s first GC is, simply, efficiency of legal spend. When companies reach the conclusion that it makes more financial and logistical sense to bring on an internal legal hire, rather than continue to engage with an outside firm. The point at which companies reach this conclusion depends on the industry and life cycle—but when this determination is reached, it’s likely to assume that a GC search will soon be underway.
Indeed, as spending is scrutinized more closely during the pandemic, bringing on a GC will save attorneys’ fees due to the sheer volume of previously outsourced work that this hire will now take on. Many companies have more legal work than ever before as they manage their response to the pandemic, from navigating furloughs and layoffs and closing manufacturing sites to charting the course to eventual reopening. In general, it’s more efficient from both a cost and time perspective to have an internal resource on hand for these issues and questions, rather than turning to outside counsel. In addition to the immediate cost benefit this hire will offer a tech company, this individual will also be able to guide further expenditures and serve in an advisory capacity across the business more broadly.
Industry also plays a major role in this calculus. Generally, companies that operate in heavily-regulated industries, such as health care and privacy, tend to need a GC earlier on in their lifecycle in order to help them navigate the associated complexities that these regulations entail. This reality has only been heightened during the pandemic. It’s true that companies in some fields—like pre-IPO companies that have now tabled these plans due to the market downturn—may put a planned GC hire on pause. However, many consumer-facing tech companies are facing increased privacy issues and need extra support at this time. Others, like healthcare-adjacent companies, are continuing to sell their products through the pandemic, or may anticipate a significant rebound by the end of the year. For those reasons, they are continuing to make strategic GC hires not only to help them chart through the current challenges, but also to position themselves competitively for an expected uptick as normal business operations eventually resume.
Though the COVID-19 pandemic has certainly slowed some hiring activity, it has also highlighted the importance of the GC as a counselor across many aspects of the business, particularly for emerging industries in tech as they deal with new challenges created by the current environment. Still, it’s not always simple to find a candidate who is the right fit and provides optimal value add to a startup in a critical phase. In general, these searches can be made all the more difficult considering the candidate profile for a GC tends to be somewhat distinctive:
Companies are often looking for a GC who understands their product and where the industry is headed. GCs for tech companies also tend to have an entrepreneurial spirit and a greater tolerance for risk. Finding a candidate of this profile could take somewhat longer than filling a GC position in more traditional industries. That being said, the current uncertainty might play to the advantage of tech companies in search of the perfect GC, as some candidates might be more willing now to roll the dice on an early-stage company whose mission and future they believe in.
As companies decide whether to move ahead with GC searches, efficiency of legal spend will remain a paramount consideration. So too will their ability to bring on a strategic hire that has the right background and expertise to steer a company through the unique issues it may be facing at this time. As LA tech startups continue to operate and even grow in these times, GC hires will serve as important strategic counselors through not only the legal challenges that have emerged during the pandemic, but also in navigating businesses more broadly through an unprecedented time in history.