Every startup begins its legal journey the same way: a founder calls a lawyer. Maybe it’s for incorporation paperwork, maybe it’s a co-founder agreement, maybe it’s a panicked call about an IP issue that should have been sorted out six months ago. External counsel handles it, sends an invoice, and life goes on.
But at some point — usually sooner than founders expect — the volume and complexity of legal work crosses a threshold where outsourcing everything stops making sense. The question isn’t whether your startup will need dedicated legal support. It’s when.
The External Counsel Treadmill
Most Australian startups rely exclusively on external lawyers for their first few years, and that’s perfectly reasonable. At the pre-seed and seed stage, your legal needs are episodic: a funding round, an employment contract, an IP assignment, maybe a commercial agreement with an early customer. You don’t need a full-time lawyer for that.
But as you scale, something shifts. Legal work stops being episodic and starts being continuous. Contracts multiply. Employment issues become more frequent. Regulatory obligations grow. You’re fielding legal questions from your sales team, your product team, and your HR lead — often the same questions, because nobody documented the answers last time.
Meanwhile, your external legal bills are climbing. Australian law firms typically charge between $400 and $800 per hour for commercial lawyers with startup experience. If you’re spending $200,000 or more per year on external legal fees — and many Series A companies are — that’s real money being spent without building any internal legal capability.
The problem isn’t just cost. It’s context. External lawyers, no matter how good, will never understand your business the way someone who sits in your stand-up meetings does. They don’t see the product roadmap. They don’t hear the customer complaints. They give you technically correct advice, but they can’t always tell you what that advice means for your business at this stage.
Six Signs You’re Ready
There’s no magic revenue number or headcount that triggers the hire. But there are reliable signals:
1. Your external legal spend exceeds the cost of a salary. The classic rule of thumb: when your annual external legal fees reach roughly twice the fully loaded cost of an in-house lawyer, the economics start to favour bringing someone inside. In Australia, a mid-level in-house counsel (5–8 years PQE) commands a base salary of approximately $150,000 to $200,000, plus superannuation. A senior hire or General Counsel will cost more — $220,000 to $300,000 — but will also displace more external spend and provide strategic input that junior hires can’t.
2. You’re spending founder time on legal work. If the CEO or CTO is reviewing contracts, negotiating NDAs, or managing outside counsel relationships, that’s a misallocation of their highest-value resource: time. Every hour a founder spends playing lawyer is an hour not spent on product, customers, or fundraising.
3. Legal work is slowing down commercial deals. When your sales team can’t close deals because contract reviews take two weeks through external counsel, you have a bottleneck. An in-house lawyer with a set of pre-approved templates and delegated authority can turn contracts around in hours, not weeks.
4. You’re operating in a regulated industry. Fintech, healthtech, edtech, and AI companies face regulatory complexity that compounds rapidly as they grow. If compliance obligations are part of your daily operating environment — not just an occasional concern — you need someone who lives and breathes those rules alongside your team.
5. You’ve raised a Series A (or equivalent). Post-Series A, the complexity escalates. You’ll have investor rights to manage, board governance obligations, more sophisticated employment arrangements (including employee share schemes), and increasing commercial contract volume. This is when most startups start feeling the pain acutely.
6. You’ve accumulated legal debt. Just like technical debt, legal debt is the accumulated cost of things you should have done properly but didn’t. Missing IP assignments, unsigned employment agreements, non-compliant privacy policies, informal contractor arrangements that should have been formalised — these pile up quietly and become expensive to remediate later, especially during due diligence for your next raise.
What an In-House Lawyer Actually Does
Founders sometimes hesitate because they’re not sure what an in-house lawyer would do all day. The answer is: more than you think.
A good first legal hire will typically cover:
- Commercial contracts — drafting, reviewing, and negotiating customer agreements, vendor contracts, partnership deals, and NDAs. This alone can consume 40–50% of their time at a scaling startup.
- Employment law — offer letters, employment agreements, contractor arrangements, workplace policies, and managing terminations. Australian employment law is complex and getting more so.
- Corporate governance — board minutes, shareholder resolutions, ASIC filings, maintaining the company’s statutory registers, and ensuring compliance with the Corporations Act 2001.
- IP and data — ensuring the company actually owns its intellectual property (you’d be surprised how often it doesn’t), managing trademark filings, and overseeing privacy compliance.
- Fundraising support — while you’ll likely still use external counsel for the mechanics of a capital raise, an in-house lawyer can handle much of the preparation, due diligence coordination, and ongoing investor relations.
- Managing external counsel — perhaps most importantly, an in-house lawyer dramatically improves the efficiency of your external legal spend. They can triage what actually needs to go to a specialist, provide context so external lawyers aren’t starting from scratch every time, and push back on unnecessary work.
The cumulative effect is significant. Companies that hire their first in-house lawyer typically see a 30–50% reduction in external legal spend within the first year, while actually getting more legal work done.
The Alternatives: You Don’t Have to Go All-In
Not ready for a full-time hire? There’s a growing middle ground.
Fractional General Counsel. The fractional GC model has gained significant traction in Australia. A senior lawyer works with your startup one or two days per week on an ongoing retainer — typically $3,000 to $8,000 per month — providing strategic legal oversight without the full-time salary commitment. This works well for companies between seed and Series A, or those with moderate but consistent legal needs.
Legal operations platforms. Tools like Josef, Checkbox, and even well-configured contract management systems can automate routine legal work — NDAs, standard customer agreements, employee onboarding documents. They won’t replace legal judgment, but they can dramatically reduce the volume of low-complexity work that otherwise consumes lawyer time.
Secondments and contract lawyers. If you have a specific short-term need — a funding round, a major commercial negotiation, a regulatory filing — consider a contract lawyer or law firm secondee for three to six months. This gives you in-house support without the permanent commitment.
Hiring the Right Person
When you do make the hire, resist the temptation to recruit the most senior lawyer you can afford. Your first legal hire doesn’t need to be a General Counsel with 20 years of experience. In many cases, a commercially sharp mid-level lawyer (5–8 years PQE) with a background in technology, venture capital, or commercial law will be a better fit.
What matters more than seniority:
- Commercial pragmatism. You need a lawyer who understands that their job is to help the business move forward, not to eliminate every conceivable risk. The best in-house lawyers are enablers, not gatekeepers.
- Breadth over depth. Your first lawyer will be a generalist by necessity. Someone who has touched contracts, employment, IP, and corporate work — even if they haven’t specialised in any one area — will be more useful than a deep specialist in one field.
- Startup culture fit. A lawyer coming from a large law firm or corporate legal team will experience culture shock. Look for someone who’s comfortable with ambiguity, can work without a team of paralegals and support staff, and is willing to do everything from boardroom strategy to their own document management.
- Equity alignment. Consider offering meaningful equity as part of the compensation package. It aligns incentives and attracts lawyers who genuinely believe in what you’re building — not just those looking for a comfortable in-house role.
The Cost of Waiting Too Long
The biggest risk isn’t hiring too early — it’s hiring too late. Legal problems compound. A poorly drafted customer contract becomes a dispute. An informal employment arrangement becomes a Fair Work claim. A missing IP assignment becomes a due diligence nightmare that delays or kills your Series B.
I’ve seen funding rounds delayed by months because a startup couldn’t produce clean corporate records. I’ve seen acqui-hires fall apart because IP ownership was ambiguous. These aren’t abstract risks — they’re concrete, recurring problems that an in-house lawyer would have caught and fixed long before they became crises.
The Bottom Line
If you’re a post-seed Australian startup spending more than $150,000 per year on external legal fees, or if your founders are spending meaningful time on legal work, it’s time to seriously consider bringing a lawyer in-house. If you’re not quite there yet, a fractional GC arrangement can bridge the gap.
The right legal hire won’t just reduce your legal spend — they’ll make your business faster, cleaner, and more fundable. And in a market where investors are scrutinising governance and compliance more closely than ever, that’s not a luxury. It’s a competitive advantage.
If you’re weighing up whether it’s the right time for your first legal hire — or if you need fractional GC support to bridge the gap — get in touch. We help startups at every stage build practical, proportionate legal functions that scale with the business.
For related reading, see our guides on co-founder agreements and IP assignment — two areas where early legal attention pays outsized dividends.
