Struggling to find success with funding rounds and need help to rectify the situation? In this interview, which is a part of a series in partnership with content creators the Startup Van, the head of partnerships at SeedLegals shares his company’s experiences of dealing with funding rounds and shares tips to help your business overcome its challenges.
“Growth hacking a funding round is something that we talk a lot to founders about and even run workshops for them on. This is because fundraising can be a really time-consuming process for founders, it’s actually one of the lowest value-add activities. All you’re doing is focusing on fundraising rather than actually executing the business.”
So says Matthew Rowell, head of partnerships at SeedLegals, which is a startup created to help fellow startups with their funding rounds.
It arose out of a simple question: Why are the legal processes when creating a business so expensive?
The founders of SeedLegals, serial entrepreneur Anthony Rose and serial investor Laurent Laffy, found themselves discussing this question at a dinner party in Rome.
What they came to call a startup legal automation platform was launched just six months later, disrupting the legal process by cutting the time and cost for completing an stage funding round.
It’s proved successful. SeedLegals currently closes two startup funding rounds for businesses every day, which it claims makes it the largest organisation closing startup funding rounds in the UK. Those using the service receive free legal help direct from in-house lawyers for every step of their startup journey.
Creating an agreement
Until now startups raising money have required significant legal agreements — if they’re doing things the right way, at least.
For example, the Initial Founder Agreement defines things such as who owns what, and what happens if one of the founder drops out — which happens more frequently than one might anticipate.
The product’s intellectual property then needs to be protected and once the startup is at a stage where it can approach investors, it might be necessary to create a non-disclosure agreement.
If funding is agreed in principle, the lawyers are then called in once again to draft documentation such as Term Agreements, Capitalisation Tables (referred to as a “cap table”), and Seed Enterprise Investment Scheme (SEIS)/Enterprise Investment Scheme (EIS) Advance Assurance (proof of eligibility for a form of tax relief that makes startups attractive to investors).
But all this leads to a very basic question, says Matthew: “Why do we always pay lawyers for when most of the agreements are just boilerplate?” — by which he means the same basic text copied and pasted each time.
Answering this question forms the core of SeedLegals, he continues, which is a “platform to handle everything a founder needs to do to close a funding round”.
Often the “legal” work undertaken by lawyers is simply the drudgery of bouncing Word documents around to all parties, including the investor’s lawyers.
Nearly always there are changes, causing a new version of the document to be sent out. The process can drag on for a very long time.
Law firms often don’t even make profits from this kind of work, says Matthew. It’s mainly undertaken simply to create a relationship and thereby encourage lucrative business when the company is established.
He adds: “A lot of law firms are our biggest fans. A lot point startups in our direction so they don’t just turn them away. We even have two law firms that invested in us.”
The difference with SeedLegals is that all agreements can be changed in just one click online. Put simply, SeedLegals puts digital technology at the heart of legal processes.
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Improving the process
But it’s not merely about replicating those traditional process. Much of SeedLegals’ value to business founders comes from leveraging the data the platform provides.
“Because we’ve had over 500 rounds go through the SeedLegals platform, we can actually tell founders roughly where they should set things,” says Matthew. “It might be, where should my valuation be given this size? How much should I be paying myself as a salary in these agreements? What provisions should I be putting in this round given how much I am raising? We can give each of them an answer.’’
And that’s before we get to the growth hacking component of the service.
“We can do things that previously just were not economically possible,” adds Matthew.
Core to this is what they call “Instant Investment”, a tool born from the speed of their platform-based online approach, with the intention of never letting a startup miss out on an investment opportunity because of the grinding legal processes taking place during a funding round.
Matthew explains: “Let’s say if you were closing a £500k funding round and then you meet a new investor at a dinner party. They want to put in £10,000. Rather than saying ‘you need to wait until my next funding round’, you can send out an proposal via email from SeedLegals.com and then they can sign that instantly.
“It will immediately update the agreements and the cap table, and handle all of the resolutions for you allowing you to continuously fund.”
Because of tools such as this, among investors SeedLegals tends to get a thumbs up too.
Matthew says: “We have some fantastic investors on the platform who are great advocates who say hey, until all investment is done by AI allocating capital, all funding rounds should be done on SeedLegals. We very much hope it will be an industry standard.”
SeedLegals: A startup starting up
With its office in London’s South Bank, it’s easy to forget that while SeedLegals might help startups, it’s also a startup itself. It occupies a nascent disruptive sector Matthew refers to as “legal tech”.
“I think there will be more and more startups disrupting the legal space,” he adds. “We’re basically a legal tech platform.”
This is perhaps one of the most interesting things about SeedLegals’ story. It’s not just a new business. It has created the concept of startup legal platforms. Matthew admits other companies are starting to operate in the same space, and it’s not hard to imagine a situation when all startups will be routed through a platform such as SeedLegals. Using traditional law firms might seem absurd.
Perhaps understandably, with the calibre of the founders behind SeedLegals — two men described as “serial entrepreneurs” and formerly behind businesses such as LastMinute.com — the early days for SeedLegals weren’t as experimental as an average startup based around a good idea.
The very early days were about creating awareness in an industry that’s charitably described as antiquated, says Matthew.
He adds: “This was a sorely needed digitisation. Startups immediately got it and people just got the value proposition very early on.”
The team were rewarded with rapid growth rates but nonetheless they maintain startup principles in key areas. They A/B test frequently and it can be something as basic as the title of an email sent out to subscribers.
“That’s part of the growth hacking mentality,” says Matthew. “You’re always striving to optimise and experiment to see what actually works best.”
Unsurprisingly, the company is already looking at moving beyond the UK and beyond just taking care of early stage fundraising (Matthew notes the company sometimes helps established businesses get funding, in addition to startups).
Matthew adds: “I think as a startup, there’s always so many different opportunities. It’s just working out what is the thing to execute next month and the month after, with an eye to the future — but at the same time being laser-focused on what we actually want to execute in the short and medium term.”
Starting up 101
Here’s some tips if you’re creating a startup and would like to implement the philosophy of growth hacking.
1. Keep your eyes and ears open
SeedLegals’ story reveals many truths but the most basic is that there’s an entire industry around assisting startups and it’s one that is constantly evolving. After all, those who create startups and financially back them are inherently interested in doing things better and smarter.
So look and ask around at every stage of your startup story. Services such as SeedLegals are just one example of how the startup process can be made easier. Another recent innovation has been equity crowdfunding services such as Seedrs or CrowdCube, which can be an option in place of seeking angel investment.
But more than the actual value of such services, by using them you’re indicating your progressive attitude to potential investors — and that can only be a good thing.
2. Don’t be traditional
Similarly, once the business is formed there’s absolutely no reason to do things the same old way.
Old fashioned businesses rent an office somewhere but times are changing and this is considered an unnecessary expense nowadays. Virtual teams of home workers are becoming the norm. Tools such as Slack make this not just feasible but also empowering.
As well as creating a website, effort should be invested within social media apps or even chat apps such as WhatsApp. You might want to google “social selling”, for example, which is another disruptive business process.
Put simply, wherever there’s an online platform then you need to (a) evaluate it, and (b) exploit it if it fits your business objectives.
3. No right or wrong way
There is no right or wrong way with startups.
While there will be fundamental expectations of quick growth and rapid product testing/evolution, how you achieve the goals is up to you. In fact, this can lead to an intoxicating and potentially chaotic freedom so therefore a key trick is to decide what techniques you’re going to use—and stick to them.
Matthew mentions how SeedLegals uses what many consider to be a core growth hacking technique of A/B testing, for example. There will almost certainly be times when this might produce negligible results, especially considered the extra effort involved.
But it’s unlikely they would abandon the technique without there being something that they quantifiably know is better that can replace it.
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