Artificial Lawyer recently caught up with New Zealand-based Claudia King, CEO and Co-founder of new legal automation start-up, Automio. We discussed how she got started on the road to legal tech, what the route from lawyer to entrepreneur has been like and what lessons she learned about trying to secure funding that she can share with Artificial Lawyer’s readers.
First, congratulations on developing Automio, it looks like a great use of automation for lawyers. Could you briefly explain to the readers what it does and how it creates interview flows that will populate legal documents?
Automio is your very own interview bot and document-builder in the cloud. You train Automio to ask questions and produce customised output based on what it learns from you, your employees or clients. You don’t need to learn a programming language to use Automio, you just draw ‘flows’ with your finger or mouse.
The Automio marketplace also lets lawyers and law firms set up branded stalls that can be linked with their own websites so they can sell automated legal documents directly to existing and new clients.
Where did the idea come from initially and was there a eureka moment when you first clearly defined what the software would do?
My dad, Dennis, who passed away last year, first discovered document automation [as an idea] in the early 1980s. He became very interested in it as he knew it would be a game changer for the legal industry. So this would have been dad’s first eureka moment. Over the years dad wrote flowcharts of document assembly logic for legal documents by hand with the goal that one day technology would allow him to easily translate these flowcharts into software, so that law firms could automate their precedent legal documents, and be more efficient. We still have dad’s handwritten flowcharts, some are hundreds of pages long, it would have taken a lot of dedication and perseverance to create them.
After we met our software developers and now business partners, Matt Sagen and Mike Mitchell, they suggested that we take our document automation software a step further and provide an online marketplace where the flows built using the automation tools can be sold to others. This would have been our second eureka moment as previously we had not considered selling our flows to other lawyers and end customers online.
The marketplace concept was a game changer as it gave a big point of difference from the other document automation software out there. After the expense I’ve experienced in paying for development with my online law firm Legal Beagle I could see the huge potential of offering this to lawyers so they can easily sell self-service products online without having to pay for expensive custom development in the same way I have.
From the point of defining the outcomes you wanted, how did you fund the very early stage of getting a working prototype? And when you worked with the first group of programmers, what was that experience like?
We had two prototypes built. The first prototype was built by a different software company and we funded this ourselves. The experience with the first software company was an interesting one and I learnt a lot, but we didn’t get them to build Automio. It was at about this time we met our developers and now business partners, Matt and Mike, who understood what we wanted from the get go.
Getting the first prototype built was an important step as it had some limitations that Matt and Mike were able to improve on when they built our second prototype. The second prototype was funded in part by us and in part by Callaghan Innovation, which is a government funded entity that co-funds research and development projects.
You set yourself a goal of gaining NZD $600,000 to take the project forward. How did you estimate this amount?
We knew we needed (NZD)$76,500 to get a basic marketplace built. At this stage we’d already had the automation tool built. But we decided to aim higher as there was a heap of other development we wanted to do, plus we needed to pay for advertising and marketing for pre- and post-launch. Plus we wanted to pay flow writers to write some flows, so when we launch the marketplace there will be a bunch of flows already for sale in it. This way law firms can dip their toe in and buy some that are readymade.
After launching my online law firm Legal Beagle in 2012, I became experienced in growing an online business using digital marketing. I had a good handle on how much it costs, so I was able to put together some advertising and marketing budgets. Matt was able to write a development wish list and estimate the costs of that also. We came up with an amount needed of about $590k, so we decided to go for $600k.
The aim was to offer 25% of the company for the investment, but given that at this stage Automio presumably had no, or little revenue, how did people respond to that? Did they reply: ‘Show me your income stream and then we’ll look at it?’ Or, did they see where the potential straight away?
Most investors that we approached could see the potential straight away and we told them right off the bat that at this stage we were ‘pre-revenue’. We had a pretty strong financial model to show to investors, which helped. We had help putting this together by Ian Frame, who is a well-known guy in the NZ investment community and now also a director of Automio. We showed him our financial model and he took it away and performed some surgery on it. This has been invaluable to us.
Who did you approach for this? You mentioned family and friends, but which tech and seed funds did you talk to, what did they say and what was the outcome?
We approached friends, family and people I knew who I felt believed in me and would be open-minded to a very early stage tech investment. We did approach our local angel investment group, but we raised the $600k before we had a chance to pitch to them. We didn’t approach any other tech or seed funds, although they were next on our list.
In terms of advice to other legal tech entrepreneurs out there, what advice would you give to people who perhaps don’t have a social network of contacts that could invest, as I guess many young legal tech pioneers may not always know lots of wealthy people? What should they do?
You’d be surprised, if you’d asked me a year ago if I had a bunch of potential tech company investors in my social network I would have said no.
The reason I decided to approach family, friends and acquaintances was because after my dad’s funeral (where I mentioned Automio in the eulogy) some family friends sent me an email and said they would like to invest. This gave me the courage to write to a list of other family, friends and acquaintances who might be interested in investing.
So my advice to young legal tech pioneers is get prepared with a pitch and a financial model and then write to a list of grandparents, aunts, uncles, parents’ friends, past teachers and lecturers, and then go and pitch to them. If they can’t invest they might know someone who does.
You can also probably get business support through government funded organisations in your area. A good thing to do is get them to connect you with an entrepreneurial mentor who can help you with your pitch and financial model, and hopefully you can tap into their networks.
Now that you have the funding I guess you have new, though good, problems, such as how do you spend the money? As a start-up founder you’re now moving from ideas, to products, to building a managed business with financial targets, how much of a challenge is this transition?
Yes, there is certainly no shortage of challenges on the tech start-up journey!
When the money from investors started coming in last year I was almost too scared to spend it. But with the planned launch later this month we’ve had plenty to spend it on, although I’m very conscious that every dollar is so precious.
One challenge is looking forward and planning for the future when we’re so busy right now. Our developers are flat out and we need to take on more developers, but finding time to recruit and train is difficult. As we haven’t launched yet, we don’t know for sure what the customer uptake is going to be so it’s difficult to know exactly how long the runway is, and if/when we’ll need to go out and do our second capital raising round.
The transition for me personally will be a big one because I am going from being a lawyer to a tech company CEO who is responsible for selling the software.
And finally, back to Automio. The launch is officially this March, how will you be monetising this and what level of uptake are you expecting from the legal market, both in New Zealand and globally?
Our marketing efforts will be targeting New Zealand lawyers and law firms initially, although there’s nothing to stop lawyers worldwide from using Automio, or other industries using it. In the lead up to launch we’ll be releasing helpful content and giveaways about helping lawyers to monetise their intellectual property and using automation, as well as case studies of how law firms are already using Automio.
We have an early adopters group who have been using Automio for at least 6 months or so now, so we’ll be drawing on their user experiences. We also have a series of webinars to give helpful information about lawyers using automation for efficiency gains and to monetise their IP, as well as more in-depth training sessions on how to use both the Automio automation tools and marketplace. After launch we’ll also provide helpful content with digital marketing for their legal products (as many law firms struggle with this) and how to help younger, more tech-savvy law firm partners convince older partners to invest firm resources into automation.
My launch goal is to sell 100 subscriptions in the first week with our launch offer, and after that I have specific sales goals to reach. We plan to quickly move into Australia and we have an Aussie law firm as an investor who will assist with this. I’ve seen through our early adopters group that there are a lot of lawyers out there who are actively seeking out ways to keep themselves and their law firms ahead of the wave of change that’s about to hit.
The legal industry is a traditional one, but I’m confident Automio will be well received and uptake will be good as lawyers seek to build sustainable, resilient law firms that will stand the test of time.