I was curious how important it is for a software startup to seek legal council during the fundraising/growth stages. Basically, I don't want to be up a creek if we have some data breach or hack. How helpful could a lawyer be in mitigating such an event? I.e., does it make more sense to seek the best CS guys to protect our data and prevent a breach in the first place, or can we defer the investment in prevention and rely instead on lawyers to recover damages in the event of a breach?
How helpful could a lawyer be here?
Not much, as I will explain here.
Is it more important to seek the best CS guys to protect our data or seek a lawyer who can seek damages in the event of a breach.
Focus on having competent staff and robust systems rather than expecting the judicial system will be effective (or even willing) to grant and enforce remedies.
Your inquiry suggests that you are at the fundraising stage. Investors, especially those aware of the reality and cost of legal proceedings, are likelier to feel more confident if they know the implementation of your business is relatively safe than if the "reliability" conveyed to them is the picture of some lawyer going to court. Investors know that legal proceedings take much longer and involve much more uncertainty than the execution of a thoughtful plan of IT maintenance & monitoring.
Even if both the court and lawyer were fair and expeditious, nothing guarantees that losses will be recoverable. Perpetrators of malicious attack(s) might be located far beyond the jurisdiction of your court/country --if not outright unidentified--, whence a court's finding that your systems were hacked will be pretty much inconsequential in remedying (let alone reversing) a data breach.