I get it, VCs, you don’t like to meddle in portfolio companies’ operations. But sometimes you need to nudge founders to hire a fractional GC. Here are some signs:
1. It is obvious that the company isn’t having a lawyer look at highly visible materials, and the company website has poorly-written or error-filled terms of service, an outdated privacy policy, or careless marketing statements.
2. Pre-investment due diligence reveals serious gaps in company’s corporate documents, employment agreements, IP assignments, equity grants, and other key documents.
3. Company founders who can’t answer basic questions about the legal or contract risks to their business.
4. Company has mounting legal expenses from using a big, expensive law firm to handle routine contracts, questions, and corporate housekeeping.
5. Company is in a highly regulated industry but hasn’t sought new product-related legal guidance in years, even after product designs have changed or new laws passed.
6. Non-lawyer executives are spending significant time reviewing and redlining contracts.
7. The company uses five or six different law firms for different needs, but no one exercises general oversight over the legal matters of the company.
What are other signs that a portfolio company needs to hire a GC or fractional GC?