Moreover, 84 per cent of those surveyed said that legal expenses are increasingly being scrutinised, with 21 per cent saying this is “always” happening, and another 27 per cent saying it is happening “often”.

According to Nicholas d’Adhemar — the founder and chief executive of Apperio, who is a former lawyer and PE investment manager — “inflation may well be a factor as the cost of everything is going up”.

“However, there is something more fundamental at play here: VC and PE firms are facing increasing compliance and regulatory matters, which inevitably drives up demand for expert legal advice,” he said.

AirTree general counsel Nick Brown (pictured) agreed, noting that he and other VC legal counsel have “definitely found that legal fees have increased this year”.

This can be explained, he outlined, due to a “combination of additional work required to comply with a complex regulatory environment and more complex deals and structures”, which he believes is consistent with the experience of other VC and PE legal counsel.

The regulatory environment that VC and PE counsel operate in, Mr Brown continued, is becoming ever more complicated, and keeping up to date with changing regulations and the resulting compliance obligations “is always a challenge”. 

“The general tech market downturn is also changing the risk profile of the deals we’re doing, so making sure we’re on top of market developments, and the risk appetite of the business is becoming more important,” he said.

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Moreover, some other problems, Apperio detailed, rest in the organisational structure of investment firms: “deal teams want to move quickly on competitive deals and are empowered to initiate matters with law firms directly”.

“This often happens outside the purview of the in-house legal team. The survey found that 81 per cent of respondents indicated that some matters are initiated without their knowledge.

“This puts in-house lawyers working for investment firms in a difficult position of trying to manage expenses over which they have little visibility, let alone control,” said Mr d’Adhemar.

A potential recession, Mr Brown added, could also see some companies struggle to raise capital.

“We’ll likely see deals happening with different structures to what’s been standard for the past three or four years, and with lower valuations from the 2021 peaks. This will require VC lawyers to be adaptable, flexible and creative in finding solutions that strike the right balance between a company’s need for capital and the adequate protections of the money invested on behalf of an investor,” he advised.

This all said, Mr Brown remains excited about his work in the VC and tech spaces.

“The ability to play a part in helping to fund the next generation of great Australian and New Zealand companies” is what is getting him out of bed in the morning, he noted.

“The next 12 months might be tougher for the tech industry than we’ve experienced in a while, but the future is bright,” he said.