Two ear-piercing siren blasts ring out across the Canary Wharf HQ of fintech unicorn Revolut.
‘May I have your attention please! Fire has been reported in the building! Please listen for further instructions.’
Nobody moves. The office is quiet after hours, but the few still at their desk keep tapping away. Another couple of siren bursts. The alarm interrupts The In-House Lawyer’s interview with the company’s head of legal, Tom Hambrett, at the moment we talk about being the cool head in a fast-growth company. His reaction is to simply offer a drink of water.
A fire alarm is hardly going to register in the consciousness of the general counsel of a challenger bank, who has seen a lot in just under three years. Putting out fires while the company forges on is broadly the job description, after all. However, as more disruptive, tech-heavy companies surface and others mature to multibillion-dollar giants on the public markets, the role of their legal functions keeps evolving. Law firms are also waking up to a new type of client with tight budgets and high demands but the potential to become extremely lucrative.
Hambrett compares the tension of being in the legal team of a high-growth company with the brakes on a race car: you need them to drive effectively and travel at top speeds. As such, The In-House Lawyer spoke to more than a dozen disruptive GCs to assess how their legal teams have changed, whether law firms are adapting and how success is measured.
‘Basically, we’re glorified translators,’ he comments. ‘How do we quantify, summarise and advise on an issue on a piece of framework or legislation or regulation that’s not meant for what we’re trying to do, but it’s the only thing that’s there? That’s the hardest thing.’
Most disruptive GCs were the first lawyer at their companies: Revolut’s Hambrett, Rachael Carolan at What3words, Alice Hou at Citymapper, Ruth Pearson at LendInvest and Ahmed Badr from GoCardless (pictured above) all built legal functions from scratch.
Some expanded rapidly. Hambrett joined Revolut in April 2017 from Herbert Smith Freehills in Sydney and, after becoming group head of legal in late 2018, has grown his team to 45 lawyers and paralegals. They are mostly based in London but also Tokyo, Toronto, New York, Singapore, Vilnius, Melbourne, as well as service offices in Krakow and Porto. Legal’s headcount is expected to double over the next year. The growth has followed the business, which in April 2018 raised $250m at a $1.7bn valuation, with Revolut wanting at least one legal counsel and regulatory compliance manager in each of the markets it has launched in. It also intends to keep 90% of work in-house. The team is split between core corporate and commercial lawyers and product lawyers – specialists who sit within the company’s different product lines, such as credit and equity stock trading, alongside engineers and other staff.
The idea is for the legal team to be integrated with new products from the earliest days of development, with those lawyers reporting directly to line managers while being able to escalate any issues to Hambrett. ‘We’re then covered from a risk mitigation perspective, because there’s always someone looking at it who is not financially incentivised by the product being shipped,’ Hambrett says. ‘If you silo a function like legal, traditionally other companies have had this issue with compliance as well, it can just be seen as a necessary evil or check-the-box exercise.’
The legal team at fintech rival Monzo has similarly expanded quickly – the digital bank raised £113m at a £2bn valuation in mid-2019 – although is leaner at 13 lawyers. Vice-president of legal James Sullivan joined in early 2019 from Estonian fintech Funderbeam, as incumbent Dean Nash took on a broader executive-level legal role. At one point, Monzo was hiring 50 employees a week as it grew to more than 1,200 staff, but the legal team is only hiring a further two lawyers. Early joiners needed to be generalists who could put out fires all over the business but, as it expands, Sullivan expects the team to bring in more specialist skillsets: a technology and IP lawyer is joining in January.
‘When you’re in a start-up, you need someone skilled and experienced in the relevant business area, but when you start to build a broader team you can wonder about the pain points of the business,’ he says. ‘There’s an increasing appreciation across the whole business that these functions are not only needed because we’re regulated but can also contribute a lot of value.’
Unsurprisingly, payment company GoCardless also has one of the larger teams as part of the heavily regulated financial sector. Badr was one of just two lawyers a year ago, but as the business expanded internationally, his legal, privacy and compliance team has grown to 11, including a legal ops manager. Online food delivery company Deliveroo also fields a sizeable team of 23 lawyers globally, mostly sitting in the London HQ. When GC Chantelle Zemba joined the business two-and-a-half years ago there were just four lawyers, with the company having now raised more than $1.5bn.
Most of the companies The In-House Lawyer spoke to, however, have fewer than ten lawyers. Identity verification company Onfido has six, property database Zoopla, invoice finance company MarketInvoice and online retailer Notonthehighstreet have three each, while geocoding system What3words and transport app Citymapper have just two apiece. But while they may be looking to recruit, few foresee rapid growth in their teams – although one GC was criticised during a performance review for not hiring more lawyers quickly enough.
GCs stress it is vital to push the importance of the legal team when the broader companies are moving so fast. Surprisingly, however, no GCs have faced issues gaining headcount and budget when spending priorities might lie elsewhere, such as developers and marketing. Onfido GC Amy Wallace has budget for a legal operations role but told the business to hire another developer: ‘As much as I could be single-minded and say, “Yes, that makes my life much easier,” it doesn’t feel right. I always have to think about what’s best for the business as a whole.’
LendInvest GC Pearson adds: ‘If the priorities of the business are elsewhere, you shouldn’t be asking for budget. You have to understand what the business’ strategy is.’
While attracting applications for roles is easy, finding the right people is not. The major difficulty comes in teaching lawyers to work in what can be risky and opaque situations. ‘Not many people go to law school saying, “I want to be a consumer credits or payments specialist lawyer”,’ Hambrett notes. ‘That creates a perfect storm because you’ve got a thin slice of the market who are naturally risk-averse people and you’re trying to tempt them to take a risk in what we’re trying to do. It’s not a lifestyle choice – it’s different but with the same sort of intensity, it is around the clock.’
Disruptive GCs with small in-house legal teams rely heavily on law firms. But there is a widely recognised tension: the companies have small budgets and high demands, and operate in companies with new business models that are not easily understood. The culture clash between t-shirts and jeans and suits is cliché but valid: one GC says the visit of a group of suit-wearing lawyers once had everyone worried that jobs were about to be slashed.
Wallace comments: ‘The reality is that until we’re paying the big bucks we’re still going to be that small, demanding client that firms might invest in and agree to do certain things for because they think we might make it to the big time.’
‘A lot of firms see fintech companies as something that’s great to have in your portfolio to show you’re cutting edge,’ says MarketInvoice vice president and head of legal and compliance Eoin O’Reilly. ‘Most firms are eager, both in terms of cost and maintaining the relationship.’
Few high-growth companies have formal panel arrangements. Most point to specific partners they like working with and say, while law firms generally show a willingness to learn about their businesses, there is room for improvement. Badr comments: ‘The most common method of engagement is still hourly billing and that leads to some inflexibility on their side and unpredictability on our side, and can add a lot of friction to the process.’
Some companies created ‘cheat sheets’ to bridge the knowledge gap. Others, like Monzo, treat external counsel as though they are employees with company email addresses and an induction on communication values and culture. ‘It takes people a while to understand and we don’t want to pay them to learn about who we are,’ Onfido’s Wallace says. ‘You’d be surprised by the number of people who are so proud of their research about our business model that they come back and tell us, probably incorrectly, what we do.’
The Disruptive GC Network (see box, below) – a group of around 90 UK GCs of high-growth companies established in 2016 – is a major source of referrals. Need a regulatory lawyer in Thailand? Chances are someone has a recommendation. The group also has semi-regular meet-ups and communicates through active channels on secure cloud-based team collaboration tool, Slack.
Unsurprisingly, most make use of alternative providers for lower-cost resource. Contract lawyer provider Lexoo, which has more than 1,000 lawyers in 65 countries and counts blue chip Vodafone as a client, and F-Lex, which initially focused on paralegal support, are widely cited. Many turn to Lexoo, in particular, to provide international resource when expanding into a new jurisdiction.
O’Reilly comments: ‘Lexoo is a good outfit. It pitches lawyers against each other and encourages them to be competitive.’
‘Lawyers have a tendency to say metrics don’t work with legal, but that’s a cop-out,’ Sullivan says. ‘You need to think about how you get the data and then what metrics actually matter.’ The world of disruptive companies is full of workflow tools like Kanban boards and Jira, communicating on Slack and measuring data: key performance indicators (KPIs) and objectives and key results (OKRs) frameworks permeate these businesses. Legal is not exempt. Notonthehighstreet GC and company secretary Kate Burns sets quarterly and annual objectives for herself and the legal team, in line with the wider company. The business also sets a financial target for the year: ‘Half of my job is making sure the business does that in a way that is not going to cost them anything.’
GoCardless’ legal team reports monthly KPIs measuring how quickly it solves issues, how responsive it is and how often it gets things right the first time. It also sets monthly OKRs at a team and company level for projects that are not business-as-usual, such as opening in a new market. Revolut’s legal team members are subject to net promoter scores on top of KPIs – basically, a mark out of five following the delivery of work from other members of the team, including the wider organisation. The team also has a target of no work falling more than ten days overdue. At crowdfunding platform Seedrs, meanwhile, success is measured through feedback surveys and on a job-by-job basis. Seedrs chief operating officer Karen Kerrigan comments: ‘It is outcomes-based. Say we are advising on a new innovation, our success will be jointly assessed with the success of that innovation with the technology and products team.’
Others, however, have looser measures of success. Longstanding disruptive GC Neil Murrin, whose company Trainline made its £1.7bn London Stock Exchange debut in 2019, says GCs constantly struggle with demonstrating value to the business. He uses ‘proxy KPIs’ to show that implementing a certain tool has, for example, helped cut contract times down. Onfido similarly measures speed, but Wallace says it is difficult for legal: ‘I don’t want to focus on how quickly we can turn around a contract, because you could be the most negligent lawyer ever and be really quick.’
Instead, many of the GCs say that being in data-driven businesses means that the expectations around your justification for any answer are higher. ‘Just saying the answer is x without being able to explain your rationale doesn’t fly,’ Sullivan says. ‘People are really smart at Monzo. If you talk about a regulation they’ll go and read it – that has happened.’
“Until we’re paying the big bucks we’re going to be that small, demanding client that law firms might invest in and agree to do certain things for because they think we might make it to the big time.”
Amy Wallace, Onfido
The success – even if just perceived – of the legal team is all the more important when it comes to applying those brakes and saying no to the business. Some GCs believe it is about finding a way to say yes, while others stress it is about making it as hard as possible to say no and only doing so when absolutely necessary. Zemba comments: ‘I don’t like to say no, because I don’t think the business should be driven by legal. We’re a support function and we should facilitate whatever it is they want to do, especially in this environment where the growth of the company is absolutely critical. If I’m not happy with the legal position, I’ll try and find another way to do it.’
Many are turning to data to quantify legal risk. At Revolut, the team is working towards quantifying legal risk and giving a headline risk mark out of ten, followed by bullet points explaining the reasoning. At the heart of that is communication and creating relationships so that if a Revolut in-house lawyer tells the business something is, say, a 7/10 risk, everyone knows that is too risky. And it is not just about pointing to previous company scars, Hambrett says. ‘Part of me thinks that every time you get slapped, it’s, in a way, affirmation. It gives you a bit of ammunition for future, but you don’t like getting slapped, right?’
Murrin adds: ‘It’s much easier to say no when you’ve got data and talk to the business. If you go to a marketing team, they’ll have every dashboard you could ever think of and be able to demonstrate every pound and the return on investment. We have to do more of that.’
‘The whole thing about being a disruptive GC is that you’re in a disruptive industry, but I’m the least-disruptive person,’ Wallace says. ‘You can’t work in a business like this and try to disrupt the plans, it’s about guiding it in the right direction.’
These companies are growing dramatically, whether it be signing up tens of thousands of customers every day, expanding into new jurisdictions with unique regulations, raising hundreds of millions of dollars, or launching different product lines. The GCs have had to find ways to stay in step with these inherently risky companies, operating with stretched resources and demanding timelines, and therefore see themselves more as risk managers. Zemba comments: ‘We’re not there to eradicate risk, you’re there to manage the risk. It’s different from my other role [senior associate at Norton Rose Fulbright] where you’re trained, and even rewarded, to avoid risk.’
“Lawyers have a tendency to say metrics don’t work with legal, but that’s a cop-out. You need to think about how you get the data and then what metrics matter.”
James Sullivan, Monzo
What3words GC Carolan adds: ‘You need to be able to ask the right questions and get to the core of an issue quickly because there is not enough time to labour over everything.’
But as the disruptive companies grow and attract both larger investment and tougher scrutiny, the GCs are increasingly tooling up with bigger in-house legal departments and budgets, and their expectations for external counsel are similarly rising. An ability to keep a cool head is widely seen as the most important trait. Zoopla head of legal Amelia Guilfoyle comments: ‘In a high-growth company, you’ve got to remain calm because things can move so quickly, but the moment you start to feel that pressure, you just won’t be able to deliver in the way the business needs you to.’
Badr is more forthright: ‘There’s always something going wrong and there’s always more to do than can possibly be done.’
Hamish McNicol and Muna Abdi
The Disruptive GC network grows up
In mid-2017, The In-House Lawyer profiled the Disruptive GC group, a network of UK-based general counsel or heads of legal working in high-growth companies. At that time the group, co-founded by Made.com GC Lisa Gan Tomlins and Uber EMEA GC Matthew Wilson, had 44 members.
There are now close to 90 and the group recently voted in its latest four-person executive committee, led by Onfido GC Amy Wallace.
Wallace, who replaces GoCardless GC Ahmed Badr as chair, is joined by Monzo vice-president legal James Sullivan, Attest GC Emily Lincoln-Gordon and Tabled GC and chief executive Paul Massey.
Wallace trained at Olswang and previously held in-house roles at music companies Sony (where One Direction once played ping pong next to her during a meeting) and 7digital before joining Onfido. Disruptive GC was established in mid-2016 and had previously talked about wanting to run formal events with law firms and third parties. Wallace is an advocate of more informal meet-ups, however, suggesting the membership rotates events between their offices, while Sullivan envisions a Disruptive GC legal conference or series of events they lead themselves, which is not driven by sponsors or firms selling products and services.
‘My view is that we don’t all need a free lunch – we can do stuff that we pay for ourselves just to get together and share ideas,’ comments Wallace. ‘I’ve been to a couple of events and have connected with people afterwards. There’s that trust there, I know they’re coming at things from the same angle.’
Every Disruptive GC network member raves about an active communication channel on Slack. Badr says that every day an issue will come up that members will help with, whether it be recruitment, recommendations, or advice and benchmarking. However, a couple of GCs from companies listed as members claim the group as a whole has gone quiet, particularly on the events side. ‘We’ve not really maintained any connections through it and I’ve not seen much activity from them,’ says one.
Citymapper GC Alice Hou, who until recently was a committee member, says the group has grown to a point where it needs more structure. Prospective members are asked to complete a survey designed to ensure they are from disruptive companies.
‘I know it’s super lame because of course a bunch of lawyers would sit down and write a bunch of rules, but we’re probably at that point,’ comments Hou.