Funding rounds are crucial steps to growth for most startups, but closing them can cost a bomb in legal fees and take months to complete.

SeedLegals has designed a fast and affordable alternative.

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The online service provides founders with all the legal documents they need to set up a business and close funding rounds in an on-demand platform. It claims to be the first fully automated instant legal service for startups.

SeedLegals, a London-based startup itself, says the system can reduce the time and cost of closing a funding round by 80 percent.

“When you work with a lawyer, you pay them to give you things that are insanely in your favour, and the other party pays a lawyer to give them things insanely in their favour,” cofounder and CEO Anthony Rose told Techworld. “They go backwards and forwards and eventually they settle in the middle.

“SeedLegals transforms that. As a founder, you log in, add your team members, give them roles, and you build your cap table. SeedLegals’ platform does all the arithmetic, which gets complicated. We say that lawyers make mistakes, machines don’t. It will get the numbers right. Then it leads you through every document you need for your funding round and suggests the things that you’ll want.”

Startup founders can use the system to set the deal terms and negotiate them with investors. It combines a step-by-step workflow, tutorials and machine-generated documents in a modern user interface to generate the documents founders need at every step.

Every document is created, shared, negotiated and signed on the platform, from investment agreements to share certificates.

Legal issues in fundraising

SeedLegals draws on extensive funding data to show where a round is likely to settle, giving founders evidence to negotiate terms and agree on them more quickly.

Terms sheets are automatically updated when changes are made, and the system builds all relevant documents that it affects.

A legal agreement is a set of contract points or deal terms that you want that are then encoded in a lot of legalese,” says Rose. “We separate it so you can set the deal terms and the platform builds the legalese.”

Startups that have used the service include Bunckerex, an online marketplace for shipping companies to buy fuel, augmented reality smartphone app Skignz, and Thrivemap, which helps companies make hiring decisions by using data analytics to assess the cultural fit between current teams potential new recruits. Each of them went on to raise £150,000 – £400,000 from angel investors, friends and family and SeedCamp.

“Everything’s in one place so it was super easy to understand where we were in the process and be able to update investors as to where we were in the process,” says Thrivemap’s founder Christopher Platts.

The platform shows founders how common legal issues such as liquidation preferences can affect negotiations.

It also covers more complex provisions such as additional investment post-closing. For example, a founder who wants to raise £300,000 and gets to £200,000 can either accept that or keep going for the target and risk investors dropping out or stalling the business development.

“We solve that problem by adding that they are going for £200,000 with another £100,000 any time within a set time period after that,” explains Rose. “This allows them to close the round, get the early investment and add more as it arrives.” 

Read next: Five common legal mistakes startups can avoid

Startup founders are often unsure how much investment they should seek to raise, the value of their company and how much equity they should give away. SeedLegals draws on information from around 300 funding rounds to show that founders give away a median of 15 percent equity in a round. 

It also helps founders decide how they want to run their companies, such as how many board meetings they would like to have and the type of governance they want. They can then apply these to the funding negotiations.

“There’s a huge amount of variation, but hundreds of lawyers have looked over all the legalese, so we’re pretty confident that it’s going to be right,” says Rose.

Complex and unusual negotiations can still cause issues, as Thrivemap found out. The deal structure included complications such as options agreements and institutional investors that meant they needed to use further tools to close the round.

“It can get a little bit tricky when you’re including things like match funding, institutional investors and things like that,” says Platts. “That’s where it becomes limiting, if there are unusual legal structures in place. But if you’re going through a first round the templates are very easy to use and straightforward.”

How SeedLegals has developed

Rose developed the idea for SeedLegals after his own experiences going through the funding process after founding startups including Beamly and 6Tribes. He had grown tired of paying exorbitant fees to lawyers for repeating the same legal agreements and wanted a cheaper, faster method. After meeting SeedLegals cofounder Laurent Laffy at a party, he began to form the concept for a more efficient alternative.

Laffy was a serial investor and VC who was the founding investor in Lastminute.com and has a portfolio of more than 40 early stage investments including Graze and Secret Escapes. Together they developed the SeedLegals platform.

Laffy spent six months analysing funding rounds to find out what they have in common and created the key terms. The legal knowledge was added from a team of three lawyers, which is headed up by a chief legal officer with ten years of experience working on funding rounds.

They went on to launch SeedLegals in 2016. Rose and his business partner bootstrapped the startup in its early days and then raised £1 million in April 2017. The company launched the next month and has attracted 2,000 companies since, which between them are involved in two funding rounds per day. In total, around 300 funding rounds have now either been closed or are currently in play.

Read next: The reality of Series A fundraising for startups

Rose doesn’t know another funding platform that removes the need for lawyers. He views his main competitors as lawyers giving away free templates and legaltech startups building efficiency solutions for lawyers.

“They’re either lead gens for lawyers, or ways for lawyers to do exactly what they’re doing but more efficiently,” he says. “Our goal is the opposite. It’s a self-service platform that with our team’s help can make everything lawyer-free.”

He hopes to add further features integrations and expand on its potential as a collaboration platform by integrating a number third-party products and services, such as an “invest now” button on investor matchmaking platforms.

“2017 has been about building a platform that solves the base problems more efficiently. 2018 is about using technology to do things that people just couldn’t do before.”

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