Advice from HubSpot’s General Counsel: When, How and Why to Hire Your First In-house Lawyer
John Kelleher joined HubSpot in 2012, seven years after Brian Halligan and Dharmesh Shah founded the company to bring their vision of the inbound marketing experience to life. Today, as the company’s General Counsel, Kelleher works closely with the leadership team to fulfill that vision: helping businesses attract, engage and delight customers with relevant, helpful and personalized experiences. More than 18,000 companies in 90 countries use the HubSpot marketing and sales platform to transform the way they build customer relationships.
Through his work managing legal, IP and corporate compliance, Kelleher has played an important and on-going role in enabling the company’s continued growth and stability. Along the way, he has gained valuable insights and perspectives about when an organization’s leaders should consider hiring in-house general counsel, how they can identify the perfect candidate and what kinds of benefits they can hope to reap by adding the general counsel role to their team.
How do you know it’s time to hire in-house general counsel?
Before joining HubSpot, Kelleher served as the SVP and General Counsel for Endeca Technologies, an enterprise software company serving heavy-hitter, Fortune 500 clients like Home Depot, Office Depot, IBM, Ford and GM. The Endeca leadership team brought Kelleher on board when the company had about 80 employees, and Kelleher helped grow the team to more than 500 before it was sold to Oracle in 2011.
Initially, the Endeca team was undecided about whether they were ready to hire in-house counsel. At the time, the company’s immediate need was for someone who could handle contract negotiations for licensing deals that ranged from $250,000 to more than $1million. “They could have gone two ways,” recounts Kelleher. “They could have hired a full-time contracts person – someone relatively junior who would just focus on the contracts work and not really want to do much more – or, they could have hired somebody who could manage the immediate contract needs, but also be able to support the organization through its various stages – somebody who could grow with the company.”
Kelleher convinced the Endeca team to hire the more experienced person, and joined the company as its first in-house lawyer. Though he spent his first year focused on the transactional side, over the next eight years Kelleher expanded his role with the board and the CEO, providing support for financing rounds, the growth of the management team, international expansion, patent filings and all the legal work associated with growing company headcount, product lines and business units.
Shortly after Oracle bought Endeca, Kelleher’s connections led him to HubSpot, a company that was in a similar stage of growth as Endeca had been when Kelleher joined that organization. The team at HubSpot, however, didn’t need to be convinced to hire in-house counsel. In anticipation of going public, they were proactively seeking someone who had the experience and skills to begin the preparations for that transition.
At the time, HubSpot had about 300 employees and approximately $30 million in revenue. They worked with an outside general counsel who was onsite from three to five days each week. “They probably could have hired an in-house GC a little bit earlier,” Kelleher says. “Though they had someone handling their subscription agreements and almost all their transactional work, they didn’t have anybody who was looking at the full breadth of issues that an in-house GC would cover.”
The reason the HubSpot team waited as long as they did to hire in-house general counsel was their commitment to preserving the company’s deeply ingrained culture, which valued transparency and innovation while shunning bureaucracy and red tape.
“There was a concern, because the culture’s so important here, that bringing on folks from the outside could really harm the business,” says Kelleher. “They waited until they were pretty far into the stage where they knew they were going to go public before bringing some of these folks on board.”
How do you recognize the right person to fit the general counsel role?
Because he’d had a great deal of experience not only at Endeca, but also at Zinio (a San Francisco-based startup he co-founded with two partners), Kelleher gained a lot of first-hand insight into what makes an attorney a good fit as an in-house general counsel for expansion stage SaaS. Apart from the obvious skill sets and work ethic, Kelleher identified four key attributes that make a candidate a particularly good choice:
Someone with a Business Orientation
“You have to find somebody that has a business orientation,” says Kelleher. “You want someone who is not only genuinely interested in the technology, but also in why customers buy your solution or use your service.”
The multiple hats Kelleher wore in his early career gave him valuable business-side experience and perspective that helped him in later roles. As a co-founder at Zinio, Kelleher was directly exposed to and involved in all aspects of developing and building a startup. “Initially, I worked not so much in a purely legal role, but in more of a business role, doing strategic development and even sales to some of our early adopters,” Kelleher says. “I was general counsel for the company so I managed all the legal aspects too, but a lot of what I did was on the business side.”
This dual role was valuable not only to the organization, but also to Kelleher who was able to gain important insights into the entrepreneurial mindset of his fellow co-founders. These insights made him a more effective partner.
Someone Who Really Wants to Learn
That early experience also gave Kelleher the opportunity to ‘walk the walk’ on the second winning attribute for the in-house general counsel: a willingness to learn. “You really want somebody who has the desire and capacity to learn all aspects of the business so they can effectively participate,” explains Kelleher.
In his early days at Endeca and later at HubSpot, Kelleher made an immediate commitment to invest his time getting to know everything he could about each business. “I remember the first few monthly management team meetings I sat in at HubSpot,” he recalls. “They were very data-oriented, and being a fast business, there are a number of unit economics and business metrics that I hadn’t seen before. I had to really dive in and try to understand as much as I could, even the math behind it. If you don’t make this effort, you’ll have no idea what the charts mean or what the discussion is about and you won’t be able to follow along or contribute.”
In addition to giving a GC big-picture perspective, this deep understanding of the product and the market directly impacts many legal-specific tasks. “Unless you really understand the technology, and the motivations of your customer and other stakeholders, it’s hard to give good legal advice,” says Kelleher.
Someone Who is Willing to Keep Pace
As important as it is for general counsel to understand the ins and outs of the product and the various performance metrics, the person in this role must also understand the nature of the expansion stage beast. “It’s about having respect for the business,” says Kelleher. “Having been one of three people to start a company, I had come to understand the risks you have to take and the lens you have to use to move the business forward.”
Part of being the right fit is about knowing how to work within the parameters of a fast-moving environment. “There are times when you have to weigh the risks and make the call,” explains Kelleher. “Do we spend a ton of time on this, or do we do a ton of research? Sometimes you have to be willing to make the decision even though you may not have all the information. Otherwise, you’ll lose the opportunity.”
But this capacity to keep up with the company must be balanced with a depth of experience. “You have to make decisions fairly quickly, but those decisions need to be based on something other than just your gut,” Kelleher emphasizes. “This is where experience can play a big role. Experience can help you process the information quickly to help you accurately weigh the risks and make the right calls.”
Ultimately – Someone Who Can Make Smart Recommendations
A business orientation, willingness to learn and ability to balance agility with experience all come together in an individual who can help proactively guide a company forward. “Ultimately, you want somebody who’s going to make some decisions and recommendations versus just providing a menu of possible options without any accompanying opinion,” says Kelleher. “You want someone who will give direct, informed advice about which option is the right one for the business and the right thing to do. This second part is often the critical part of the trusted advisor role. Your GC will not only help put the decisions in context with the business and what is legal, but with the ethical approach – how do we do the right thing for our customers, team and other stakeholders long term, even if it means hurting the business in the short term.”
How can an in-house general counsel help you succeed?
The right GC will be an important member of your team, providing guidance, momentum, stability, and perspective:
When Kelleher arrived at HubSpot, he arrived with the benefit of having just managed a very similar growth situation at Endeca. “There was a lot going on when I joined HubSpot, and one of the benefits of having seen a similar situation play out over my eight years at Endeca was that I knew how to prepare for an IPO, assist with international expansion, issue spot for product development and many other areas for scaling a business,” says Kelleher. “I arrived with a good idea of exactly what I needed to look at. In fact, I had a checklist which ultimately became a project plan for the pre-IPO working group we set up.” Kelleher knew which areas needed to be looked at and how to efficiently approach the process the company needed to get through.
A GC with this kind of hands-on experience will help you avoid unforeseen pitfalls and roadblocks that might otherwise derail your plans.
“Lawyers, CFOs, heads of HR, all those type of G&A functions are often wrongfully associated with slowing things down,” says Kelleher. “They are not typically considered to be innovative or transparent as much as bureaucratic.” Kelleher believes, however, that instead of adding red tape to the process, the right GC will be instrumental in keeping things moving forward.
“Ultimately, it’s a people business,” says Kelleher. “As an in-house GC, you understand the personalities, what motivates people and what’s driving certain things. It’s really hard to get that insight as outside counsel where you are not sitting with the team day to day.” An in-house GC who has the business sensibility and in-depth understanding of your product and market will help you navigate legal issues quickly and safely, enabling you to push ahead successfully. Your in-house GC will also understand your culture and adapt to it. “HubSpot’s culture is unique and part of our competitive advantage. It took me a while to get it, to really understand that our culture code was not just a Slideshare deck, but how the team really worked,” Kelleher says. “The GC has to not only integrate in the culture but be a proponent of it. Great companies protect their cultures and are especially wary of ‘outsiders.’ As a new GC, you need to work hard to show the team you get it and that you will be not just a supporter, but a promoter of the culture.”
“In the end, people need to trust that you’re not going to be just a blocker – somebody that says no, drags out the process or tries to change the culture for the worse,” Kelleher says. “It takes time to build that up that trust, but that’s the key.”
By having in-house counsel who are integrated with your business teams, you make it easier for your legal team to help you proactively avoid potential issues. “Members of my team participate in key meetings with their business partner teams,” says Kelleher. “For instance, as the business partner to the sales and services team, one team member attends the weekly sales manager meetings. For much of the discussion, she’s not contributing, but every meeting brings up one or two items on which she can provide valuable advice that we may have otherwise missed.”
Keeping these lines of communication constantly open is critical to heading off potential issues before they become problems. Working closely and developing an on-going dialog helps build the trust of the team so they feel comfortable bringing questions to their legal counterpart. “This is the way to head off legal issues,” Kelleher says.
“If folks think going to the legal department is only going to hold things up or ‘get them in trouble’, they won’t engage. That’s when you can easily lose sight of what’s going on and things become a big headache for everyone involved.”
“An important part of the role I’ve played at HubSpot and at Endeca is to be a trusted advisor,” says Kelleher. “Entrepreneurs and founders are very smart, very driven people. Their agility and decision-making abilities are qualities that make them successful in their role. But, at some point, you get to a stage where there’s a lot more at stake and the decisions are more complex.”
This is the stage, Kelleher explains, where it’s best to have an impartial party provide some informed perspective. “If you haven’t seen the movie play out before, you’re going to need a sounding board,” he says. “The right in-house GC is someone you can bounce issues off of.” Ultimately, this kind of exchange applies to the entire management team, not just founders.
“Think about who on your management team can be that impartial, trusted advisor,” Kelleher suggests. “It can certainly be your CFO or your COO, but your in-house GC can play part of that role with a different perspective.”
Kelleher recommends taking a long-term view when considering hiring an in-house GC. “If you have aspirations to take your company to the next stage, you should think about hiring somebody that can grow into the GC role versus just hiring a contracts attorney or someone to do the transactional work,” he says. “Find somebody who will be your trusted advisor, someone who has what it takes to get you to the next stage. Because, you don’t know what’s going to come up next. All kinds of crazy things come up, and when they do, you’re going to want somebody on your team that can play that role. And that’s often the general counsel.”