GLS Startup Law

Introduction

“If you don’t define your risk appetite, the market will define it for you - usually at your expense.” – Matt Glynn

Every startup operates with risk - but the most successful ones decide upfront how much they’re prepared to take on. Your legal policy sets out the rules of engagement for your business: how you’ll comply with the law, where you’ll draw the line on liability, and the principles your lawyers and commercial teams will follow when negotiating deals.

PAA: What is a business legal policy?
A business legal policy is a documented set of principles that defines how a company will comply with applicable laws and the level of legal liability it is willing to accept when conducting business.

PAA: Why is a legal policy important for startups?
Because it ensures consistent decision-making, protects against overexposure to liability, and aligns legal strategy with the company’s commercial goals.

Why This is Important

This is an important stage of the start-up journey because:

◼️Defines risk appetite – Clarifies the limits of acceptable legal exposure.

◼️Guides negotiations – Ensures consistent positions in contracts and disputes.

◼️Supports compliance – Aligns operations with applicable laws and standards.

◼️Speeds decision-making – Reduces back-and-forth on legal questions.

◼️Aligns teams – Keeps founders, executives, and lawyers on the same page.

◼️Protects brand – Avoids risky practices that could damage reputation.

◼️Prepares for growth – Scales into new markets with defined risk parameters.

◼️Informs investors – Demonstrates mature governance and risk management.

◼️Reduces disputes – Minimises grey areas in liability acceptance.

◼️Consequences of Not Addressing This Issue – Avoids unnecessary legal battles over low-value issues.

PAA: When should a startup create a legal policy?
As early as possible - ideally before entering major contracts or regulated markets.

PAA: What factors influence a startup’s legal risk appetite?
Industry regulations, market norms, funding stage, brand positioning, and tolerance for dispute resolution costs.

Consequences of Not Addressing This Issue

1. Legal Implications

◼️Entering contracts with hidden liabilities.

◼️Exposure to penalties for non-compliance.

◼️Inconsistent legal positions undermining defence strategies.

2. Founder Relationship Issues

◼️Disagreements on acceptable risk levels.

◼️Conflict between commercial and legal priorities.

3. Commercial Implications

◼️Lost deals if terms are set too conservatively without strategy.

◼️Overcommitment to liabilities in pursuit of sales.

4. Operational Implications

◼️Confusion in execution due to unclear legal boundaries.

◼️Increased cost and time in contract negotiations.

5. Biz Valuation Issues

◼️Due diligence red flags for potential investors or buyers.

◼️Reduced attractiveness to strategic partners.

PAA: What happens if a business has no legal policy?
It risks taking on excessive liabilities, making inconsistent decisions, and suffering reputational or financial damage from unmanaged legal exposure.

What You Should Be Doing

◼️Identify Applicable Laws – Determine which laws govern your operations.

◼️Assess Risk Appetite – Decide the maximum liability you’ll accept.

◼️Document Compliance Stance – Define your approach to meeting legal obligations.

◼️Set Contract Guidelines – Establish negotiation positions for key terms like indemnities, warranties, and limitations of liability.

◼️Align With Strategy – Ensure the policy supports growth objectives.

◼️Engage Stakeholders – Get founder, investor, and senior team buy-in.

◼️Train Teams – Ensure sales, ops, and legal understand the policy.

◼️Review Regularly – Update as the business evolves or laws change.

PAA: How do you develop a business legal policy?
Assess your regulatory environment, define your compliance approach, set your liability boundaries, and document these in a format that can guide day-to-day decision-making.

Balancing Legal Priorities and The Need to Launch Fast

Startups often need to move quickly - but that doesn’t mean accepting unlimited risk. A lean legal policy can be implemented early, then expanded over time as your business grows.

PAA: Can a startup’s legal policy change over time?
Yes - your risk appetite should evolve with your resources, market position, and operational maturity.

How These Risks Can Play Out

WeWork – Overcommitting to Lease Liabilities
WeWork’s aggressive expansion involved signing long-term leases with massive obligations, far exceeding its financial safety net. When growth slowed, these liabilities became a major contributor to its valuation collapse.

Boeing – Supplier Liability and Safety Compliance
While not a startup, Boeing’s 737 MAX crisis showed the catastrophic cost of misaligned compliance and liability assumptions, leading to billions in losses and reputational harm.

Tesla – Product Liability Exposure
Tesla’s direct-to-consumer model and rapid innovation exposed it to lawsuits over product defects and safety claims. Its legal policy around settlements and recalls significantly impacted brand perception and costs.

PAA: What are examples of businesses suffering from poor legal policy?
WeWork’s lease overexposure, Boeing’s safety compliance failures, and Tesla’s product liability disputes.

Key Legal Definitions Related to This Issue

◼️Legal Policy – A company’s documented stance on legal compliance and liability risk.

◼️Risk Appetite – The level of risk a company is willing to accept in pursuit of its objectives.

◼️Liability Cap – A contractual limit on the amount of damages one party can recover from another.

◼️Compliance Stance – The organisation’s chosen approach to meeting its legal obligations.

PAA: What is the difference between legal risk and liability?
Legal risk is the potential for laws to be breached; liability is the actual legal responsibility to pay damages or remedy harm.

Final Thoughts

If you don’t set your legal boundaries, you’ll discover them the hard way - through disputes, losses, or investor pushback. A clear, practical legal policy empowers your team to make fast, consistent, and safe decisions, while signalling to the market that you are a serious, well-governed business.