Most startups don’t need a full-time in-house general counsel until legal work fills a senior lawyer’s week, every week. For a typical venture-backed company that’s somewhere around Series B or C, or roughly 75 to 150 employees. Before then, a fractional general counsel on a monthly plan, plus outside counsel for big projects, gives you broader expertise at lower cost. Companies in regulated industries, or closing large enterprise contracts at volume, often hire earlier. Even after you hire, your GC will still rely on outside counsel for financings, M&A, litigation and specialist work.
Key takeaways
- Hire in-house when the legal workload is steady and needs someone inside the company, not because a round closed.
- A first GC’s full cost includes salary, bonus, equity, benefits and recruiting fees, plus the outside counsel you’ll still need.
- A first in-house GC is a generalist. Financings, M&A, litigation and specialist areas still go to outside counsel.
- A fractional GC gives you ongoing counsel that knows your business at a predictable monthly cost, and is the usual bridge from project work to in-house.
- Move from fractional to in-house when the work outgrows the plan, legal sits on the critical path every day, or you’re preparing for an IPO or a sale.
What’s the difference between in-house, fractional and outside counsel?
All three are real lawyers giving real legal advice. The difference is how much of your business they see and how you pay for them.
| Model | What it is | Best fit | How you pay | Limits |
| Outside counsel by project | A firm hired matter by matter | Incorporation, financings, one-off deals | Hourly or a flat fee per project | Spiky bills, and less context on your business |
| Fractional general counsel | An outside lawyer or firm acting as your GC on an ongoing basis | From first hires through roughly Series B | A fixed monthly fee for a defined scope | Not in the building full time |
| In-house general counsel | A full-time executive on payroll | When legal work fills a full week and needs a seat at the leadership table | Salary, bonus, equity and benefits | One person’s expertise, and you still need outside counsel |
Many companies use all three over their life, and often two at once.
What are the signs a startup needs ongoing legal counsel?
Contract volume. If sales deals stall waiting for redlines, or you’re signing several customer, vendor and partner agreements a month, you need someone who knows your positions and can turn documents quickly.
A regulated product. Health data, financial services, lending, insurance, children’s data and hardware with safety rules all bring compliance obligations that need a regular owner.
A priced round. After a seed or Series A priced round, you have a board, protective provisions, information rights and stockholder approvals to manage. Governance becomes recurring work.
Hiring. Every new state means new employment rules, and every hire needs an offer letter and a CIIAA, and any equity grant needs to be priced off a current 409A.
Something unusual. A dispute, an IP question, a data incident or a government inquiry needs judgment fast.
These signals mean you need ongoing counsel. They don’t necessarily mean you need an employee. Most companies meet them first with a fractional plan.
What does a first in-house GC do, and not do?
A good first GC owns the legal function. They negotiate commercial contracts and build templates and a playbook so the sales team can close without them. They run board and stockholder approvals and keep the minute book clean. They work with finance on equity administration and 409A timing, handle day-to-day employment questions, own privacy and compliance programs, and manage outside counsel and the legal budget. Just as important, they’re in the room when the leadership team makes decisions, so legal risk gets weighed early rather than discovered late.
What a first GC usually doesn’t do alone is the specialist work. Financings and acquisitions need a deal team. Litigation needs litigators. Patent prosecution, tax structuring, immigration, export controls and non-US employment each need their own experts. A first GC handles most of the day-to-day legal work and manages the rest, so outside spend goes down but doesn’t go away. Budget for both.
What does a first GC really cost?
More than the salary. In The L Suite’s 2024 survey of private-company general counsel, the median base salary was $300,000 and median total cash compensation was $350,000. A contingency legal recruiter typically charges a fee of 20% or more of first-year base salary, and retained searches for senior roles often cost more.
Example. Assume a first GC hired at a $300,000 base salary with a $60,000 bonus target, benefits and payroll taxes of about $60,000, and a one-time recruiting fee of 25%, or $75,000. The first-year cash cost is about $495,000, before equity. If the company has 20,000,000 fully diluted shares, a 0.3% grant is 60,000 shares. Add whatever the company still spends on outside counsel for its next financing and specialist work. That’s the number to compare against what you spend on legal today, including a fractional plan, which is a fixed monthly fee that’s typically a fraction of a full-time hire’s cost.
The comparison isn’t only about money. An in-house GC knows the business deeply and is always available. A fractional GC brings the experience of a firm that sees many companies at your stage, and the bench behind them. Pick the model that fits the work you actually have.
When should a startup move from fractional to in-house?
Make the move when several of these are true at once. The work regularly exceeds what your fractional plan covers. Legal sits on the critical path every day, for example because enterprise deal volume is high or a compliance program needs a full-time owner. The leadership team needs a lawyer in the building for decisions, not on a call. You’re preparing for an IPO or a sale. Or your total outside legal spend is approaching what a full-time hire would cost.
Some companies make a smaller first hire: a commercial counsel focused on contracts, with the fractional or outside GC staying on for governance, equity and strategy. That can be the right step when contract volume is the main driver.
When you do hire, have your fractional counsel hand over the templates, playbooks, cap table, board records and open matters, and ask them to help you interview. A smooth handoff saves the new GC months.
What should you look for in a first GC?
Look for a generalist who has worked at a startup or with many of them and is comfortable doing the drafting, not only supervising it. They should explain risk in business terms and offer a way to get the deal done, not only reasons to say no. If you’re in a regulated industry, experience in that area matters more than almost anything else. The best first GCs know what they don’t know and call in specialists early.
In the interview, give candidates a real contract to mark up and ask how they’d spend their first 90 days. Your board members and current outside counsel have usually worked with many GCs and can help you assess candidates. A first GC usually reports to the CEO.
Common mistakes
Hiring to cut costs without mapping the work. If the person can’t cover most of your legal needs, outside spend stays high and the total goes up.
Hiring too senior, too early. A GC from a large company may expect a team and a budget you don’t have yet.
Waiting too long. Unmanaged contracts, missed approvals and messy records are expensive to clean up before a financing or a sale.
For more, see How Do I Choose a Startup Lawyer?, How Can Startups Avoid Wasting Money on Lawyers?, Why Your Startup’s Lawyer Is Not Your Lawyer and What Does My Startup’s Board of Directors Need to Approve?
If you want ongoing counsel without a full-time hire, see Westaway’s General Counsel plans.
