Start-ups attract chief legal officers in search of a challenge

For senior general counsel, working in-house for a FTSE 100 or Fortune 100 listed company was once seen as the pinnacle of success. But, now, some top lawyers are shunning corporate life and opting for the excitement and challenge of joining a bioscience or artificial intelligence start-up.

While an in-house role at a large organisation can offer job security, it also typically involves bureaucracy and managing existing staid legal functions. By contrast, joining a start-up offers the freedom to set up a legal function from scratch, and to shape a company’s future direction.

Sean Martin made the shift from Baxter International — a large healthcare company with about 55,000 employees — to a biotech start-up employing around 300 people, where he and his legal team are helping the business develop new treatments at speed.

This new company, Generate Biomedicines, is using artificial intelligence, machine learning and other technologies to make the drug development process more efficient — and to create new drugs on demand. Last year, it raised $273mn in series C financing. Its total equity financing stands at nearly $700mn since 2020.

At Baxter, Martin had been senior vice-president and general counsel — heading a team of about 175 employees around the world and handling all legal, government affairs and compliance matters. By contrast, as chief legal officer and general counsel at Generate Biomedicines, he heads a six-strong legal team who sit about 20 feet from each other.

Martin had been aware of the start-up while he was at Baxter, and was interested in the business. However, he had not been looking to move on from the larger group. “It was a big job and the sort of job I could have done for 10 years and then retired,” he points out.

Then, in late 2021, came the job offer. “I talked to friends and they said: ‘You will regret it if you don’t do it’,” he recalls.

He soon found that, at a small start-up, a senior lawyer has to be able to turn their hand to any area of law — be it data protection or employment.

I am a jack of all trades, using my 24 years of in-house legal expertise

Martin says he enjoys the variety of work. “I am a jack of all trades, using my 24 years of in-house legal expertise,” he explains. “I can do some data privacy because we don’t have a specific data privacy lawyer.”

Paul Swegle, who is currently general counsel or chief legal officer to five start-ups and two emerging companies — in areas ranging from telehealth to medical diagnostics testing — agrees with Martin about the variety.

“Start-ups have a lot of interesting work,” he notes. “There are so many different things for a general counsel to do — to protect intellectual property, to sign contracts, to manage risk, launch a website, and have terms and conditions agreed. It’s important to have someone who knows all these things if you are a start-up.”

Swegle, who is also adjunct law professor at Seattle University School of Law and at Gonzaga University School of Law, highlights how different it can be from a large corporate. “As a senior lawyer in a big company, you might end up doing the same thing over and over,” he says. “You might be the anti-bribery expert or draft contracts all the time, or just do compliance.”

Start-ups often have to move more quickly because they have limited funding, and so they tend to seek lawyers with business experience who can solve problems and minimise risk. In some cases, they will look for lawyers with highly specialist knowledge — life sciences companies, for example, face regulatory hurdles and approvals that are specific to that sector.

For lawyers, the big attraction of joining a fast-growing start-up is financial — there is the possibility of getting stock options in a fledgling company that might one day be highly lucrative if the business is sold or floats.

“Lawyers can get a mix of short- and long-term equity in a start-up which may be heading for an initial public offering or a sale,” says Lisa Owens, managing director of the in-house counsel recruiting team at legal search firm Major, Lindsey & Africa. “More companies are offering high equity packages to GC-level executives and the pay gap between legal and other functional roles has narrowed.”

In addition, the mix of work on offer at a start-up can give lawyers the breadth of experience needed to make the leap to a wider business career.

“More GCs are being given the opportunity to take on commercial responsibility or to move to commercial roles,” Owens observes. “This means that a greater number of senior lawyers are prepared to take the risk of moving to a start-up.”

Owens adds that the role of general counsel in all kinds of business has become more important since the Covid-19 pandemic, as some GCs have taken on additional responsibilities in their organisations. As a result, they have a stronger voice in executive teams.

Senior lawyers who have made the leap to start-ups say they enjoy the fast-moving environment, and working with younger, highly educated colleagues brimming with enthusiasm and new ideas.

Lawyers can get a mix of short- and long-term equity in a start-up which may be heading for an initial public offering or a sale

“There are a lot of younger scientists who have taken this as their first job after their PhDs and there is a buzz around the place, which is exciting, with new people joining every week,” says Martin.

But there are risks for senior lawyers in leaving a secure job at a large company with its steady pay and benefits. “The downsides are that 80-90 per cent of start-ups fail,” stresses Swegle, who is also the author of the book Startup Law and Fundraising. “Momentum is very important for start-ups, and there is very little time for them to succeed quickly.”

However, general counsel can help by working with entrepreneurs to raise funds — and ensuring they do not inadvertently fall foul of regulations and laws.

“Start-ups can be precarious and they can do things such as inadvertently violate securities laws through lack of sophistication or misplaced enthusiasm,” warns Swegle. “They might think: ‘We will pay employees in just stock’, not realising that violates minimum wage laws. Or they might misclassify someone as an independent contractor.”

For many of the senior lawyers who have made the switch, there is a bigger aspect to the role, though: being part of something innovative that could eventually have an impact on wider society. “There is an opportunity to change things and do things that no one else has done,” says Martin. “I am excited to come into work every day.”