With AI and machine learning breathing down the neck of the vast quantities of dull contract checking, which currently goes on in many law firms, it’s no wonder startups are training their guns on this sector.
Legaltech is, naturally, driving down the cost of legal work, and the new wave of these startups range from the “Uber of Lawyers” (Lexoo, Linkilaw, Lawbite) that create a lawyer marketplace, to AI-driven services (KIRA, Luminance, ThoughtRiver) that improve efficiencies inside law firms.
Gradually, certain aspects of the law are going to be done better by software companies than law firms. And that applies particularly to contracts.
SeedLegals claims to be the first legal automation platform to fully manage startup funding rounds. The idea is that companies and investors can build all the docs to negotiate and close a funding round online, with lawyers being optional (they say).
Obviously the aim is to shrink funding rounds from months to a matter of days as a result.
Using this process, in theory, investors could be added dynamically in a sort of Continuous Funding model and no longer need to be constrained to 12-18 month events. That would be investment being deployed faster, with more time and capital for founders and investors to concentrate on building their businesses.
Currently lawyers create custom documents for each transaction. That means 18 weeks, on average, to complete a funding round, with legal fees starting at £3,000 for a simple seed round to £20,000 and up for each side for later-stage rounds.
SeedLegals says it can beat that, allowing a startup to get to a signed Term Sheet for just £99 and complete a funding round for £1,500, with expert assistance each step of the way.
The startup comes out of the personal experience of serial entrepreneurs (and SeedLegals co-founders) Anthony Rose and Laurent Laffy — Rose faced the problem when fundraising for his two previous companies, Beamly (acquired by Coty in 2015) and 6Tribes (acquired in 2016); Laffy experienced it as a serial VC and angel investor.
Rose says: “When I founded my first startup I paid lawyers a huge amount of money for funding round legals. After selling Beamly I started 6Tribes and when it came to do our first funding round I noticed I was being given the same contracts as before with new names stuck in. I figured, why am I paying so much for something that’s so formulaic?”
Laffy: “I had the same experience. I have invested in over 40 early-stage companies. I was being given the exact same documents for every investment, and being charged extortionate fees for a process that takes months.”
Rose also realized that, after mentoring a startup about the legal and funding process, there were plenty of other startups that could use such a platform.
How does it work?
SeedLegals lets you enter all the key details about your company, your team, shareholders, directors, cap table, valuation, amount you’re looking to raise for your next round and more. Using this data it helps you build the agreements you need to hire new team members, manage your shareholders, create and negotiate a term sheet, build your Shareholders Agreement and Articles and close your next funding round.
This replaces spreadsheets and Word docs with a database-driven platform. You enter data once and the system uses pre-built knowledge, deal data and document automation to dynamically build all the outputs.
SeedLegals also functions as a collaboration platform, enabling you to work with an advisor and investors to interactively complete negotiations and close your round. Once complete, contract information is stored in the cloud and updated on your company dashboard, including new shareholder and cap table information. That means the company profile is always up-to-date and ready for the next round.
The idea is that SeedLegals will do for a startup’s legals what Xero does for its accounting.
Since March this year, 200 companies have signed up to use the platform to do their legals, with 6 companies completing funding rounds on the platform. The goal is that within 12 months, 25 percent of all U.K. funding rounds are done on SeedLegals.
For companies looking to build and manage their team, the £19/month plan lets you create employment agreements, hire contractors, do NDAs, have founders complete their Founder Service Agreements and IP assignment, and build and manage the shareholders and cap table. It’s also available as a fully functional 30-day free trial.
Then, when the startup is looking for investment, its £99 Term Sheet plan lets them do everything it needs to get to a signed term sheet.
It’s a flat £1,500 to complete the funding round, which includes all the help a startup needs from SeedLegals’ team of in-house funding experts and lawyers (turns out you can’t quite get rid of them after all).
In the U.K. there are 500,000 new company registrations every year, of which 100,000 are classed as high-growth startups planning to complete a funding round in the year. Many of those will have follow-on rounds.
In due course they plan to expand into Europe and the U.S., which has 10x the market size. The company is bootstrapped right now, but plans to raise its first external round in Q2 2017.