Technology Attorney George Brunt on AI IP Ownership, Embedded Legal Counsel, and the Legal Mistakes MarTech Founders Keep Making

SPEAKER_00: Welcome to Mar Talks, the number one podcast for e-commerce and marketing applications. Mar Talks is devoted to covering the latest technology developments that drive the global commerce ecosystem from advertising to last mile. Enjoy all of our content at Rosenstein Group.com slash Mar Talks dash podcast.

SPEAKER_02: And today I want to introduce you to a gentleman who is a man, and I really want you to hear this, studied zoology at BYU and then became one of America's top technology attorneys, wrote the first shrimp wrap software licenses in history shortly after he wrote the first patent in history for the light bulb for Thomas Edison. But then before most people knew what software was, he argued a landmark federal case that every founder today is living inside, whether you know it or not, served as the general counsel for City Corps, ITT, and Alcatel, where he personally managed over 23,000 patents, raised 83 million in capital documentation, then decided that wasn't enough, and went out and co-founded an oil company, my favorite, then bought a chain of Paul Mitchell beauty schools across six states, wrote two books on integrity, which for a lawyer is honestly the ballsiest marketing move I've ever seen, and currently is building what I genuinely believe is one of the most underrated companies in the legal space today.

He thinks like a CEO, he speaks like a professor. And according to his own LinkedIn bio, which I am not making up, he acts like a disciple. Everybody meet the man who has made has been in more billion-dollar rooms than most people have had hot meals. From Island Park, Idaho, the middle of absolutely nowhere, George Brunt.

Welcome to Mark. SPEAKER_01: Daryl, thank you very much. It's a pleasure to be here and to speak with you and your audience. Hope uh something good will come out of it.

SPEAKER_02: Well, you know, uh, there's no guarantees there, and in fact, uh probably not. But you know, I appreciate the uh happy thought. Well, uh, you know, I have to start here since you went to BYU and then Pepperdine. And somewhere on that journey, yeah, you ended up writing the first shrink wrap software license for the Practical Law Institute at the time.

And that was in the 70s. Now, can you just walk me back to that moment? How does a young attorney end up at the frontier of an industry at that point that didn't even exist? SPEAKER_01: Well, you know, well, it was quite a journey.

In my undergraduate, I really wanted to go into organizational behavior. Stephen Covey was one of my professors at BYU, and I really liked what he did, how he looked at organizations and how organizations work and leadership, and I thought that's what I wanted to do. My wife and I counseled about it a lot, prayed a lot about it, and decided to go to law school. So I graduated, went to law school at Pepperdine.

I actually started in pepperdine before the graduation ceremonies because of timing, and went through pepperdine and um became a lawyer. I clerked for lawyers along the way, but it was really at the very beginning. I entered law school in um 74 and graduated in 77. And that was about the time Steven Jobs and Wozniak were working in their garage and developing their Apple computers, and they came out with the Apple IIe.

Right after I graduated, I I worked, first of all, there's a gap between when you graduate and when you get the bar results. So there's about a year there. So I graduated, took the bar, and then I went to work for McDonnell Douglas. And that was another interesting thing on my career because I was, I found myself in charge of the American Airlines, the United Airlines, and the Texas International accounts.

I did all their contracting, I made sure the planes were built that did the deliveries of the planes and all that kind of thing. And each plane was, you know, at that time 40 or 50 million dollars. And so they they were billion-dollar contracts, and I was just barely out of school. So then after I got my bar results and passed bar, I started my own little law office.

And it just seems that the people who were walking in the door were people who were developing software for Apple or they were developing hardware like Winchester disk drives, which at the time were about as big as my desk and were 10 megabytes in size. We had we had lots of companies that would come to us, and I ended up going in-house with one of them, MAI Basic 4. But the way I got into that is there was a company that was knocking off some of their software. And at the time, we didn't know whether software was going to be protected by patent law, by trademark law, by copyright law, by trade secret law.

We really didn't know, but we had people ripping off our software. And so we sued them, went to court, it was in Boise, Idaho. Um, I was living and working in Southern California, but the the infringer happened to be up in the Boise area, so we sued them in the federal court in Boise. And they they didn't know either.

They didn't know how the law was going to protect them. And so we arrived in that, and you said I argued the case. I really didn't argue the case. I was a pretty junior attorney, but I was involved in managing the litigation and um overseeing it and coming up with the strategies that that we implemented.

And we implemented a strategy of saying it's protected by copyright law, that any expression that's written or put into a tangible medium is a copyright. And there it is, registered the very foundation of intellectual property protection. Yep. You were in the right foundation.

So it was it was a very interesting case. And uh really one of my first well, I'd I had done family law trial experiences and um a couple of uh white collar fraud cases and that type of thing, but that was really my first foray into the technology field. SPEAKER_02: Well, you know, I find it very interesting that you got all this responsibility after essentially being a student hanging out in Malibu. I mean, they just didn't have judgment back then, apparently.

You know, the yeah, you know, and apparently Citicor didn't learn from their lesson because you went and became the GC of Citicor, ITT, and Alcatel after that. SPEAKER_01: Yeah, yeah. I I had a good career there. I was with MEI Basic 4, which was a hardware company.

And what they made is they made very low-power computers with Winchester disk drives that attached to them, and they would go to dentists and people like that and sell the system for the dental office to run its management system, or the Corrugated Box manufacturer to manufacture and keep track of its products. So it was really all these business systems that MEI Basic 4 was doing, but then they split off and they had a software company. And so that this is the Hubco Data Products case in Boise was was while I was working for them.

And it was it was very, very interesting to be in those first parts of the computer, using computers to solve business problems. And we're still doing it today. It's accelerated tremendously. And now everybody's asking the question how is AI going to be protected?

If you develop something with AI, who owns it? Do you own it? You know, so it's is it protected by copyright? Is it protected by trade secret?

What's it protected by? So we're we're kind of in the same field now, just in an accelerated pace. But then, so after I did that, ITT was developing a uh computer program, and they were developing a platform based on the PC, not on Apple. And it was interesting when I first got in there, I said I want to talk to the engineers.

And the CEO said, Why do you want to talk to the engineers? I said, Because I want to know what they're doing, how they're developing their software for their computer, the code. Yeah. Do you code?

No, I don't code. In fact, if you look at my transcripts, the only class I filled in college was uh computer science. Good for you. You're in good company.

You're in good company. It was an interesting class because you just had to you had to develop a program that ran on an IBM, you know, card reader. And for some reason my software program wouldn't run. And and my professor got on he couldn't make it run.

Nobody could make it run. SPEAKER_02: It never ran. It's really hard to make those cards out of parchment paper back then. I mean, it was that was a that was a could have been that simple of a thing.

SPEAKER_01: It could have been a defective card or something. But anyway, bad sheet. So I knew a little bit about computers, but I was certainly no computer genius or programmer, but I knew a lot about the law and how they protect it. So finally I got down to the development um division at uh ITT after they'd hired me to come on.

And I I had come on as the associate general counsel, and shortly thereafter, the general counsel left and went into venture capital in Silicon Valley. It was in Silicon Valley where it was headquartered at the time. And it was ITT information systems. It was the computer part of ITT.

And so I went down, I talked to the software engineers, and I said, How are you developing the ROM-based import output system, the ROM bias for the computer? I said, It's really easy. He said, Microsoft publishes it. So we're just following the book.

And I said, Whoa, what? Microsoft publishes it. You you can't copy that. That's copyrighted.

And uh so I delayed the development program by a good six months, had to develop a clean room with programmers who had never heard of Microsoft, and redevelop the whole development of the ITT extra personal computer because they didn't know. The CEO didn't know, the engineers didn't know. SPEAKER_02: They thought it was open software before there was such a thing. It's published in a book.

Well, well, let's talk. I I'm I'm gonna take a uh wild guess here and assume that we've established rebona fides to talk about software for our audience out there. You know, I don't know. Maybe we're gonna take we're gonna go with it for now.

For now. Okay. Let's talk a little bit about what you're actually building there at business legal management, because I think it's genuinely different. And I want our audience to understand it correctly.

You described it to me as an embedded legal department, which is a great term, by the way, for technologists and software, an embedded legal department, not a fractional, not an outside counsel. Why move through what that actually looks like inside of a company on day one, on week one, on month one? SPEAKER_01: Yeah, well, that's a great question. Uh yeah, we realized that what we were offering was really something unique and it was hard to figure out a way to describe it.

And uh finally we we came upon embedded legal counsel because what we do is we take someone with my kind of experience who's been a general counsel in a major multi-billion dollar company, who's now retired or you know, gone beyond that and but still working, a team of transactional attorneys. And so we to we take this general counsel and this team of attorneys on day one. We go into the client and we sit down with the management team, we attend their staff meetings, we spend two or three days at the company, we get to know them, get to know their business, we meet their team, and then we just become their go-to legal department.

And there's there's more than one of us, there's like 10 of us or 20 of us, depending on the company and how much their needs are. And so you you always get the help you need when you need it. The CEO can call me anytime, and we can put someone on the case. And so it's really quite a good opportunity.

It's a whole embedded legal team. So so uh a come and and there's some big advantages to it for the company. One, it's way cheaper than even hiring a single general counsel. It's way cheaper than relying on your outside counsel and paying them for the types of fees they charge.

And they, general counsels are, I mean, outside councils are really law firms. They're set up to manage problems. They're not set up to be part of the strategic team. And so if you wait until there's a problem, you're gonna pay a lot more than if you've got a member of the strategic team who's thinking those problems through.

I mean, take Uber when it was little. They they didn't know how to hire people, and so they hired them as independent contractors. And that ended up after they grew and got bigger, coming back and biting them because some jurisdictions said no, they're employees, some jurisdictions said no, they're independent contractors. Someone on a strategic team in-house would have stress test those things and made sure it was right as it was going out the door.

Now, outside counsel, they can help you solve the problem once somebody sues you for a misclassification of employees, but it's gonna cost a lot more. SPEAKER_02: So, I mean, it it's essentially it's it's prepared, preparing you for products before they go out the door. It's pre-launch versus post-launch, which I'm sure everybody QAs their software, but do they QA their contracts? Maybe, maybe not.

Now, you you did share some numbers with me, and I I just wanted to put those on the table here for our founders that are out there. You said a company that tries to build in-house with a general counsel and a paralegal and the technology and the benefits, they're looking at roughly a half a million dollars a year from the from the get-go. And you're coming in at about $17,000 a month for a$50 million company, which is about a $330,000 delta. Right.

How is that possible without cutting corners? SPEAKER_01: Well, we've we've got our team put together. Um, we've hand selected our team. Many of our attorneys are women and men who have graduated near the top of their class who want to have a family.

The Jessica Cahun, who runs the law firm, the law firm part of it, she is such a great attorney, brilliant in every way. But she has four kids and she wants to go to a soccer game. She wants to raise a family. So she's doing both.

And she has the flexibility with us to do it. You know, we can send her a client thing, she can handle that. She handles some pretty big clients for us, uh, clients that are in the billions of dollars. And uh then, you know, she has the time to do that.

And so we've duplicated that. We've duplicated her many times over and uh found people who are at the top of their class, but don't they don't want to go to a law firm and we're at 2,000 hours a year. SPEAKER_02: I'm guessing she's one of those parents that doesn't rush on the court and belt the umpire if uh call doesn't go their way either. I don't know.

I think so. Pretty enthusiastic. Pretty enthusiastic. All right, well, you know, we well, that's uh but that clients don't have to worry about that, which is great.

Yeah. You said you've got a team of 10 behind you right now, and then every company gets a dedicated principal. So when the when a CEO calls you at nine at night in a panic because they just got a turn sheet and it's got a clause that they're like terrified is gonna bankrupt the company. What actually happens?

Who who picks up the phone and their curlers? SPEAKER_01: Yeah, the CEO just calls me. Uh that's they they they generally call the principal consultant with a question like that. We can review it, we can read it.

We've seen it before. We can help them answer the question right off the bat. If there's transactions or documents that need to be changed, we can get one of the attorneys to do it. SPEAKER_02: Well, you know, you I'm a sucker for for comparison tools and for rating tools.

And you actually have a business legal rating tool on your website. Can you can you share with me a little bit more about that? How does how does a founder use that and what does a bad score mean? SPEAKER_01: Yeah, yeah.

I I think my my wife actually suggested that. She said, you know, you you should develop a system so people can rank themselves, so they can look at their own issues and they can self-assess where they are. And so that's what we really did. And it's right there on our website.

And a person can go on there and put in some of their key agreements and it'll web crawl out, it'll review their website, it'll give them a score in the end, and then they can look at it and they say, hey, you know, we're doing a great job. We're triple A, we have triple A legal rating. But most companies don't do that. Most companies go through it and they say, you know, we got a C legal rating.

There maybe there's some issues out there that we need to address and and keep track of. You know, they don't have privacy terms on their website, or they don't classify employees, or they don't keep records. And, you know, did you go through the assessment at all? SPEAKER_02: I did not.

I did if you go through that assessment, I'm afraid from what it might tell me. It probably would say you're in desperate need of counsel, you're a walking liability, and for heaven's sake, don't ever hire someone that works directly for you in office. That's what I'm guessing. That's what I'm guessing.

SPEAKER_01: I don't think it'll be that bad, but it does, it's it's really just a feedback mechanism. We can all use feedback in life. And especially I often compare it, I most businessmen are they don't realize that they are swimming in a legal environment, that that everything around them, everything they do is defined by laws. They get into business and it's a sweet business, and they they think they're helping people.

And a good example is is truth in advertising or for marketing companies, and technology marketing companies are in the kind of marketing company. They they believe in their product and they make claims about their product, and that's fine, but they need to have some scientific evidence that backs up those claims. And, you know, you've seen people get huge fines, personal and company fines. I remember one company back when I was doing a lot of direct sales companies who they were making misrepresentations about what a person could earn.

And it's it's not an easy question because a person could earn millions of dollars. And they had people who did earn millions of dollars. And so the CEO would not think, well, I'm violating the law by saying you could earn millions of dollars. Here's Jim Smith over here, and he's earning millions of dollars in my company.

But the FTC has stricter standards for that, and uh you you have to document it and say at the same time, but the average person uh earns uh$19.20 or whatever, whatever the real facts are. You you have to um you can't omit things. SPEAKER_02: And yeah, OnlyFans gave me that message when I tried to start my site, and I was uh I was very relieved by that.

Yeah, yeah. I think 19 was an optimistic assessment, but I'm glad they have that. SPEAKER_01: I mean, would I like to see if they can bag that up with data, you know? SPEAKER_02: Well, let's hope they never do.

SPEAKER_01: The the CEO is helping people, he's helping people earn money, he's helping people sell products, he's he's helping a vast amount of people, and he doesn't realize he's swimming in an ocean of regulations and laws. I mean, they're just the tax code is but the the FTC regulations dwarf it. And the Department of Education dwarfs that. I mean, it's just there's so many things that can impact your business that it's it's great to have a strategic advisor on your team.

Why don't why don't CEOs hire a strategic advisor, a legal advisor who can help them with strategy from the very beginning? What do you think? SPEAKER_02: You managed 23,000 patents at Alcatel. And today I'm watching Martec founders file patents by the hour on AI native products.

And some of the claims they're making are defensible. Some of the ROI claims they're making are not in terms of efficiency gains, in terms of automation gains, in terms of headcount decrease requirement for uh, you know, what does a founder actually need to know before they spend$15,000 on a patent attorney? SPEAKER_01: Well, that's a really good question. And by the way, it's probably easier to manage 23,000 patents than it is a small patent portfolio, because with 23,000 patents, if someone comes at you with a patent, you've probably got a patent they're infringing and you can work out something.

If you have 20 patents, someone can come at you with a patent and you can face real issues, or you might not have the money to enforce your patents. And so it's i i it's very strategic about what you do with patents. But in the end, nowadays, the way companies are evaluated, your patent portfolio is a big part of your evaluation. Your not just your patents, but your copyrights, your trade secrets.

Sometimes when a big retail chain goes out of business, their biggest asset is their trade name. But patents are the same thing. And it's like I've got one client that they probably got about 30 patents, and some of their patents are very they they they can take potato starch and mix it with plastic and make the plastic stronger, more durable, and yet biodegradable. So it's, you know, there's really, really interesting patents out there.

And when someone starts infringing it, then you've got to have a war chest or you've got to have someone on your side to help you enforce those patents. And you have a duty to enforce them. There's a document called latches. If you don't enforce them, you can lose them.

So yeah, it's uh it's it's a complicated environment that people are in in business, and you need a strategic legal advisor on your team. And you need it from the very beginning. SPEAKER_02: I'm sorry. Brought up the FTC is actively going after Martech companies right now for deceptive AI claims.

You know, AI generated fake news, just being one of those, but algorithmic pricing that discriminates by zip code. You were at the front lines of the last major tech regulatory way with telecoms you were like equity regulations and internet law. How does this moment compare? And do you see, do you think founders of these AI solutions are more or less exposed than they think they are?

SPEAKER_01: I think they're more exposed than they think they are. And I think it's a it's still an uncertain field. We still don't know exactly what's what's gonna happen. I had a client talked to me today whose he he designed this great program.

It's gonna solve a lot of problems. And uh immediately when he describes it to people, they see its value. How's how's he gonna protect it? Well, if it's part of a machine process, perhaps a patent, certainly with copyright, but here's the catch is he came up with the concepts and used AI to do the programming.

So who owns the copyright? It's gonna be, and it hasn't been determined by courts yet. I mean, there's some advisories out from the patent office and that type of thing, but it remains to be seen. And so I think having someone strategically on your team is is a good bet right now to help you see the environment you're swimming in.

I think I think it's I think it's even greater than when software first came on. A AI is going to change the world much more. SPEAKER_02: Well, I I I take your point. I mean, we've we're developing tools that are developing tools that are delivering product that are being sold.

It's like who wrote it? Who could take claim? Most developers now are using AI development tools. And they're amongst the most sticky of the products that are out there.

And there seems to be a rush by the VCs to invest in these tools. And as you've just brought up, we still haven't got the case law on who owns the IP that is derived from those in the end. I'm sure that there's something that the development tool firm is signing away, but how much is what's going to actually come out in litigation? Now, here's another thing that came up in our in our prep call that I know is gonna resonate with the founders.

And it was when you mentioned enterprise software contracts, where a$250,000 deal lands on the desk of Lockheed's legal department and they want to redline 75% of it. Walk a founder through what happens without in-house counsel in that scenario versus with you already in the corner. SPEAKER_01: Well, that's that's where the business experience really comes in. It's just not working.

I've seen contracts not happen because of both sides legal marking up the contract so that's and so what you really have to do is sit down with the CEO from a from years of experience and say, this clause is they're right in their markup, but it's not important. This clause they missed, but it's really important. And and explain the consequences and the risks to the CEO. In my opinion, the CEO always has to, he's the final decision maker.

He has to decide what risk he's willing to assume and what risk he isn't. But he really needs someone who can explain the risk and help him handicap. Do you have uh many times I sit down with the CEO and said this is an important thing, there's a 20% risk of it happening. There's an 80% risk that you'll never see any consequences from.

That helps the CEO in making a decision about what he's gonna do. Now, there's some things that are, you know, this is against the law, you can't do it. But there are some things that there's a clause in a contract, you could do it this way, you could do it that way, this way, there's an 80% risk, this way, there's a 20% risk. So you can help you can help handicap that.

And that's, I think, of more value to a CEO than anybody who just says, technically, this should be redlined. SPEAKER_02: Well, you know, de-risking an investment in a software company is certain, certainly something the board is interested in. And uh, you know, the earlier they can have a competent counsel involved on these issues, I think the more interested they're gonna be in in managing their risk and exposure in that investment. Now, speaking of which, you've raised 83 million in uh venture capital for just one of your companies.

What does a VC grade legal paperwork actually look like? And what do founders get wrong in their fundraising docs that quietly erodes their their uh position when uh they get the term sheet, which uh can have gotten pretty draconian. SPEAKER_01: Well, you know, it's you're you're gonna deal with some exemption usually from the Securities Exchange Act. Need to invest with so many accredited investors and so many unaccredited investors, and you have to paper all of that.

You have to make sure that uh there's a subscription agreement that the person subscribes to where they make representations about their sophistication and that kind of thing. And you can have, depending on what the exemption is, so many of them. In the case when I did it, being an attorney myself, I went to Venable in Washington, D.C.

, which is a large law firm in Washington, D.C., and had them do the paperwork because I didn't want to prejudice it for my own company. But and and it cost$100,000 to have them do the paperwork.

Sure. But you know, but we raised$83 million. So, you know, it was it was worth doing. SPEAKER_02: Well, you weren't, I'm sure you weren't exposed.

I'm sure you were exposed. Now, you've actually written a couple of books on integrity as a business principle. One that was co-authored with Steve Albrecht. And in this startup world where move fast and break things has been the gospel for a decade, and a lot of those things that got broken were legal and ethical guardrails.

Make the case that integrity isn't the right thing. It's actually the smarter business play. SPEAKER_01: Yeah. You know, I I think I learned this a little bit from Jim Donald, who was the CEO of uh Digital Switch Corporation before it got acquired by Alcatel.

And then um as a part of Alcatel, he ran the company for a little while, but uh he sold it and for seven billion dollars, I think, or something like that. But uh he would always say, do the right thing right now. So it was important to him to get things done, but it was important for him to follow the process. So in the in the book, I make the case that there's there's a set of principles that if followed will always get the same result.

And there's a set of, there's a hundred set of principles that if followed will not get the result you're looking for. And so the the fastest, most efficient, most effective way to accomplish anything is to follow the rules that are time-tested to achieve that result. And you can always receive that result, receive that result. And that's what I mean by integrity.

I mean constantly doing the right thing right and following that prescription. And so I've just released another book this last week on Amazon. It's called Pattern Recognition. And I was inspired, I attended a Tony Robbins seminar, and Tony Robbins asked the question what is the most important skill you can have?

And a lot of people said leadership, honesty, empathy, a lot of different things. And he said, No, he says the most important skill that you have to have in life is pattern recognition. And then he didn't go into it a whole lot, but it made me start thinking about it and studying it. And I I wrote a whole book on it, on pattern recognition, the master skill that changes everything.

And but then I realized I've kind of written the same book. I've written a book on integrity, which is follow the pattern and you get the result. And I wrote pattern recognition, which is follow the pattern and get the result. The problem is, is a lot of us don't see the patterns we're following.

So learning how to recognize, you can't change something you can't see. So learning to recognize that pattern, it's so funny because we can see the pattern in our bank accounts, we can see the pattern in our relationships, but we don't, we don't realize that it's a pattern that we're following it because it's inside of ourselves. So we have to kind of step out of ourselves and look at and say, you know, bank account is showing me that I'm not following a very good financial pattern.

What is the financial pattern I should be following? And then I do that for each of the areas that I cover in my other books, which is how do you have integrity in the social setting? How do you have it in a financial setting? How do you have it in a physical setting?

All these you know different areas of life. So yeah, I've really enjoyed uh I I'm sure that I learned probably no one will read any of my books, but I've learned a lot in writing them. And Stephen Govey always taught, if you want to learn something, teach it. SPEAKER_02: Yeah, yeah, I mean, he he had he had a point there to a certain extent.

Now I'm I'm dying to ask you this, you know, and and no names needed need to be uh mentioned here, but can can you think of a time when a founder asked you to help them do something that that technically it was legal? It was about board, but you pushed back and and what happened after that? SPEAKER_01: Well, yeah, yeah, I can think of some things like that because you know what, everybody's gonna make some mistakes and people want to accomplish something that is beneficial, you know.

People want to go out and they want to serve others and they want to provide a better life for others, and their their goals as a CEO are usually, you know, the more people I serve. Cal Worthington, you uh car dealer in Los Angeles used to say, sell to the masses, eat with the classes. And really what that means is solve the problem of the biggest problems you can for the most people you can, and you'll earn the biggest rewards that you can. And so there's there's lots of instances like that.

But I I do remember some instances where maybe someone wanted to uh continue to make a representation that was technically against the law or even just against the correct principles. And and usually in those circumstances, there was a price to pay at the end. Either you didn't accomplish your result that you were hoping to accomplish. I've seen that happen many times with CEOs, or you get a negative result.

SPEAKER_02: So don't push the, don't don't push it, don't push it too hard when it comes to the legal side of the equation. SPEAKER_01: Yeah, and and and and it's really more important to follow the correct principle than it is the law, because the law is sometimes, and I'm not saying break the law, but I'm I'm saying sometimes in my own case in California for a long time, I tried to always follow the speed limit. My wife convinced me that I was a hazard on some of the freeways.

I was a hazard because people have to go out around me on both sides, right? So is it true that sometimes you can follow the law, but to get a bad result? Um and that's just an easy example, but you you can never break a correct principle and get a good result. SPEAKER_02: Yeah.

Well, today, if a if a VC is evaluating a Series A or Series B Martech or AI company and they want to do a quick legal health check, what are the five questions they should be asking the founders that most of them aren't asking? SPEAKER_01: I think do you do you have a compliance department? Do you have someone who's responsible for compliance? Do they keep records?

Is it vetted by legal? And then is it documented at the top level? I mean, one of the things that a CEO one time didn't want to sign the document that set forth the standard by which the business would operate. And I said, you gotta sign it.

You know, it can't be signed by a vice president, it can't be signed by uh your legal officer. It it comes from you. Every every, in fact, you not signing it will give license to everyone in the company to not follow it. You know, it it's it's gotta come from the top.

And so that's one of the questions that I'd really want to know is does the CEO live the principles of culture of the company? And another question might just be what is the culture of the company to get to five. SPEAKER_02: That's that's my that's my question. That's my question.

I'm asking what the culture is. Yeah, it does come down to values and what's going to differentiate one company for another, oftentimes it is what are the values of the company? And you can measure those with a legal rubric as well as uh uh a survey. But either way.

SPEAKER_01: And Al could tell everybody in the company knew that we did the right things right. And you'd never get in trouble for doing the right thing right. You'd always be supported. But that has to come consistent.

It has to come consistent from the top. SPEAKER_02: Yeah, that'll be uh, you know, that's uh I wonder how that plays out in the world of startups where you've got a founder who has promised certain numbers of performance to a board and then has to go back and report to them that uh those numbers were wildly optimistic. Is there any due diligence that uh a VC can do to not be in that situation from a legal perspective? SPEAKER_01: Yeah, I think from a legal perspective, I mean they can they can uh have representations made and they can back out of the deal or something if those representations aren't lived up to.

From from just a regular perspective, though, you know, if they can't deliver closely to what they say they're gonna deliver, there better be a really good reason, an unforeseeable reason, a reason that great minds sitting around couldn't have anticipated, right? Because I think that's what you expect of your CEO, is that he's gonna put the right players on his team to make sure that those types of situations don't happen. Yeah, well, I've still got a job, so they're not doing it.

It's not a strategy, but you're right. They they still have a job sometimes. And so and you've seen, I mean, a lot of businesses fail or go under for failing to meet their expectations. On the other hand, Jim Donald at Alcatel used to say, I'm not gonna let some snot-nosed 25-year-old analyst on Wall Street tell me how to run my company.

So that's that that's another aspect of it is other people will make representations about what you should be doing. And you may not agree with those representations. You may say, Yeah, I could get there if I took shortcuts, but I'm not taking shortcuts. SPEAKER_02: So stick to your values.

Yeah. Well, you just got described the sweet spot for your model as companies between 10 million and 150 million in revenue. So late series A through the growth stage. And what's the tell?

How does the CEO know that they've waited too long to bring in-house counsel? SPEAKER_01: I think one tell is when the CEO is spending too much of his time managing legal issues, dealing with attorneys, hearing complaints, working with disputes. It can be very distracting to the growth of your company. If you're the one, well, first of all, if you have someone on your team from the very beginning, you're probably not going to be dealing with those in the first place.

But second of all, if you if you hire, you've been out there for two or three years, you're growing and you're starting to deal, or your CFO is starting to deal with those problems, you're spending a lot of money on legal. I think it's time to bring someone in who knows what they're doing to manage that environment. You wouldn't, you wouldn't have your HR person manage your finances, or you wouldn't try and manage them yourself because they take too much of your time. You want to focus on marketing and sales and satisfying company needs and employees.

And so why would you have manage your own legal issues or have someone who's not trained in either the business or the legal side manage your legal issues? SPEAKER_02: Well, this brings us to our last question, George. And I do ask everyone this when it comes to advice. You know, you've been in rooms where people have and it will never get near, you know, that billion-dollar deal, that landmark litigation case, companies at the edge of what at the time was possible.

What's the one thing you know now that you wish every Martec and e-commerce founder listening today could hear before they make their first big legal mistake? SPEAKER_01: That's really a good question. You know, um, I have had lots of those experiences and sitting in those rooms, and I've I've found that the best CEOs, the ones who run the biggest companies for the most part, are very humble people and very willing to bring in, surround themselves with people who they think are smarter than them.

I would doubt that sometimes, but that's what they're looking for. They're looking for people who are smarter than them to help them see the nuances of every situation. And I've been surprised by that because I thought, well, probably most CEOs are narcissists who are demanding and don't listen to other people. I haven't found that among the great CEOs that I've known throughout my life.

I've I've found very humble people willing to surround themselves with excellence. And I think that's the best advice I could give is surround yourself with excellence. SPEAKER_02: So if your CEO is a narcissistic psychopath, it's probably not going to go that far. Just some food for thought.

And uh, you know, I'll I'll look forward to the comments on this episode. But George, I want to thank you so much for spending some time with us today. It's been extremely educational. SPEAKER_01: Thank you, Daryl.

It's I love your questions and I love your podcast. I think it is making a big difference in people's lives. SPEAKER_02: Thank you so much, and thanks to everyone out there listening. We'll see you next week.

SPEAKER_00: Thanks for listening to Mar Talks, the number one podcast for e-commerce and marketing applications. Be sure to subscribe wherever you listen to podcasts, and while you're at it, leave a rating and review. To find out more about how the Rosenstein Group can help you find the right leaders for your client development teams in Martech and e-commerce. Please visit our website at Rosenstein Group.

com.