Artificial Lawyer (AL) recently caught up with Anthony Seale, the former Clifford Chance associate who founded end-to-end deal platform Legatics, to find out where the legal tech startup has got to and what it’s focusing on now.
First up, what does Legatics do? In short, it helps lawyers to speed up many of the aspects of running a deal, reducing ‘admin’ and generally automating those part of a transaction process that are susceptible to this approach.
It was born out of the frustrations of Seale as an associate that the deal processes, especially in the area where he worked, in finance, were far too cumbersome and that there ‘had to be a better way of doing things’.
The platform can ‘automatically analyse a loan schedule to generate a conditions precedent (CP) checklist’ – which is a big efficiency step. It does this with proprietary pattern recognition algorithms.
It can then make their CP checklists update themselves as relevant actions occur. ‘There is no need for junior lawyers to trawl through the week’s emails updating each line item,’ they add.
And it can ‘automatically generate transaction bibles from CP checklists, documents lists or KYC lists in your firm’s traditional house format’.
‘Time spent creating hyperlinks for every line, renaming hundreds of files and writing an index is a thing of the past’ they conclude.
It’s the kind of the thing that any junior transactional lawyer – in this case in relation to finance deals – would appreciate, reducing tedious and low value ‘admin’ work.
But, now the big question, and where AL and Seale get chatting: this all sounds very handy, but do clients want this? And, moreover, how is this startup, which has been a member of Allen & Overy’s FUSE programme, doing now?
Seale begins by noting that some very large law firms are now clients of Legatics, which was first started back in May 2015. Herbert Smith Freehills is one they can mention, another is Allen & Overy, though the latter is not a surprise.
‘We now have between 15 to 20 clients, mostly in the EU and Asia, and also the EU side of US firms. Most of the law firms are global,’ Seale says.
And that’s a good score for a startup that demands that lawyers change to some degree the way they work and need to integrate Legatics into their work patterns.
Changing work patterns also clearly alters time/work expectations and billable time calculations, which in turn may impact how partners running deal teams may scope out time/cost factors for doing client work.
In short, if you put your startup in the middle of transactional patterns that have existed for decades then you’d better have a product that really can help and be easily adopted, otherwise you’ll have a lot of annoyed lawyers on your hands. But, in Legatics’ case, the intervention seems to have worked, and worked well.
Proof of this came in the form of a £500,000 ($639,000) funding in Oct this year, from a combination of angel investors and venture partners. As part of the investment round, two non-executive directors joined the Legatics board: Simon Black, a former member of the Board at magic circle firm Allen & Overy (….this firm keeps coming up…), and Andrew Jameson, previously Head of Investment Banking for EMEA at Japan’s MUFG, one of the world’s largest banks.
All good so far, and proof that this startup that is now three years and five months old has come of age. But, what’s next? The simple answer is: growth. But where?
Seale explains that their approach to deal running is well-received in the Asia-Pacific region and they are doing more business development efforts there now. ‘We’re getting great interest there,’ Seale adds.
In the US things are a bit more challenging as American deals tend to flow in a slightly different way, which make Legatics’ approach not quite as easy to synch into the process.
Overall, Seale is very upbeat. ‘We could rapidly expand our customer base,’ he adds.
And that in turn means hiring more people. The challenge the small company now faces is that it needs people with legal skills who understand how a finance or M&A deal is run, who appreciate the challenges of making a deal bible, who understand the terminology, and also the pain points that lawyers feel.
‘To get a lawyer to change how they have done deals for 20 years you need to understand how they work and so you need a lawyer with deal experience,’ Seale explains
The problem is that if you do really understand all of that, then you are probably in a large commercial law firm and making a very large salary – and may not want to join a startup. Being the founder of a cool new business that is set to grow is one thing, leaving a career in the law to be an employee in a startup is something else.
Another challenge is whether the law firms they sell to have the internal resources to handle a new tech platform integration. The very large global firms can take on such projects with relative ease. But many other firms are quite dependent on Legatics to help out. Again, that puts pressure on Legatics to have the staff available to do this.
And then there is day to day customer service or ‘customer success’ as it’s now called. Again, that needs more staff – and ones that understand your problems as a transactional lawyer. You can’t just say: ‘Have you tried turning it off and back on again?’
It’s all a bit of an eye-opener. When we think of legal tech startups we tend to see them as whizzy businesses, zooming around transforming the sector, but the reality is that once the product is off the ground it’s all about customer engagement at a variety of levels.
They are also businesses that need to bring together a lot of people with legal skills, even if they only worked in a law firm as a paralegal. One of the ironies of starting a legal tech startup is that you spend most of your life working closely with lawyers and former lawyers, focused on the day to day issues lawyers have. The tech is just one part of it.
And then there is the money. Half a million pounds may sound a lot, but you can burn through that very quickly, especially when you start hiring. And, as Seale says: ‘Cost of the staff….? Yes, it’s expensive to have people with this knowledge.’
However, they do have an advantage. ‘The people who join really want to do something new – and we seek them out. They are passionate about changing how lawyers work,’ Seale explains.
Given that most law firms are pyramids (for now) that means there is a steady supply of junior lawyers who may not become cemented into the ‘conveyor belt’ of traditional legal careers. Those looking to change the world via legal technology can find in Legatics an avenue for doing so.
Seale also notes that one challenge now is that such skilled employees are in such short supply that ‘people try to poach them ‘. This suggests that even at this early stage, startups face a talent war, possibly with other startups trying to take their best people, or perhaps law firms that now want such people to join their innovation teams.
Finally, where next for the company in terms of its product focus? Seale says that they want to make the product more flexible so that it can apply to a wider range of deal and transaction types. You can see this in the way they do their marketing now already.
‘We want to try to abstract the software to make it more flexible. So we’ll maintain specialisation, but allow more flexibility,’ he explains.
That will allow the company to grow and provide the product to a broader range of practice groups inside their clients, or to attract new clients.
But, Seale is in no rush to create a ‘Big Bang’, sell up and retire. He says that Legatics has found that the sales cycle can be very slow, sometimes more than a year to see revenue from a client. And, that despite the need for new staff, they are not seeking to raise huge amounts of investment very quickly.
‘Funding? It’s mostly off customer revenue. We will not go ‘funding to funding’. We believe in building customer revenue and our customers want us to be stable,’ he concludes.
All in all, Legatics are doing very well and have got their feet firmly on the ground, despite now working with more than a dozen global law firms. Their slow and steady approach certainly seems to have worked.