04 August 2022 |

For Startups, Incorporate Legal Early & Often


At Vol. 1 Ventures, part of our value proposition for founders is to help them get their companies started. And for us, that means a lot of things—Stevie handles a lot of the legal side by acting as a General Counsel for companies, while I focus more on product and go-to market strategy. 

When it comes to fintech and crypto, a lot of these things are interconnected: legal and compliance influences a lot of product, go-to market strategy, content marketing, and other functions a company needs to execute in 2022. 

What advice do we have for portfolio companies? Well the honest answer is it’s a case-by-case basis depending on where your company is, but here’s some general advice that companies should think about. 

Incorporate Legal/Compliance Before, Not After

One of the most frustrating parts for compliance in general is retroactively fixing mistakes. One way to solve that? Incorporate legal and compliance early and often in the product building process—whether you’re thinking about your core product or something ancillary like user education and financial literacy. 

For a lot of companies in fintech (consumer and enterprise), compliance sits within the product development pod—this forces PM’s and other stakeholders to run things through compliance, since they’re actively helping build the product itself. 

Retroactively fixing anything is a nightmare, but in software development there are sprints and time carved out to do just that. Similarly, with software development taking much more of an iterative approach compared to legal and compliance, it’s a bit simpler to incorporate changes and improve upon a foundation.

Compliance structures don’t work like that. With legal and compliance structures, a lot of the issue revolves around the fact that once they’re decided on internally, they’re pretty set in stone. A lot of times companies use outside counsel, who aren’t intimately familiar with the company and their long term vision. Lastly, I think a lot of younger companies set their compliance standards at a high level and don’t go granular enough initially—when you realize that your content team or specific products have different rules and regulations depending on what your building, you may have to make dramatic changes to the high level structure you initially came up with. All this makes it a lot more difficult to change legal, compliance, and regulatory structures within a company—and we haven’t even gotten to the ever-shifting rules and regulations in fintech and crypto. 

Compliance Touches Everything

Another issue we’ve seen crop up a lot is dealing with an internal debate on whether compliance is necessary on X decision, Y product, or Z marketing. 

I hate to break it to you all but compliance touches everything in a financial ecosystem—whether that ecosystem is in fiat currency or crypto. The financial world is highly regulated, and as you can see with the recent cases around securities law and insider trading in crypto, as long as federal regulation is unclear it’s way better to be safe than sorry. Dealing with fines from the SEC or other regulators isn’t just a nightmare, it can severely cripple your company’s ability to fundraise and build regulated products down the line. 

The biggest issue I’ve seen from companies is usually around marketing—whether it’s content via blogs or newsletters, social media like tweets and IG posts, or community building initiatives like Twitter Spaces and Clubhouses. Because these projects are so external facing, they’re also more likely to get noticed by regulators too (regulators don’t really look into a company’s internal comms unless they have a reason.) 

One system I’ve set up in the past required compliance to review every external-facing blog post that went out—while it was a tremendously tedious process, the company was highly regulated and it probably saved them a lot of headaches with regulators. While that’s probably a bit of overkill, it makes sense to develop your marketing and content strategy in tandem with your legal and compliance team. Again, when it comes to dealing with regulators, safer is always better. 

Thanks for reading! If you have any thoughts or questions, email me at [email protected]