Axiom Interview – ‘There Were Superior Options’ To An IPO

Last night, pioneering on-demand lawyer service and ALSP, Axiom, announced that it had taken a significant investment from private equity (PE) fund, Permira. Artificial Lawyer spoke to San Francisco-based Senior Vice President & Head of Commercial for North America, David Pierce (pictured), about why there was no IPO as announced back in February, and what’s next following the new funding.

So, first things first: back in February this year, Axiom split its business into three parts, with the remaining on-demand group filing a registration with the SEC for a potential IPO. Now, the company has instead accepted a large – but undisclosed – investment from a PE fund. Why?

Pierce told Artificial Lawyer: ‘Doing an IPO was a big opportunity to raise capital, but during this time we also looked at alternative paths [to raise capital]. As part of this we met Permira. There were conversations and we decided that there were superior options for what we wanted to do.

‘[The investment from Permira] gives us access to capital from a partner that knows our space and that specialises in high growth companies. So, we decided that this was the best path.’

Pierce added that Permira, aside from having invested in companies such as LegalZoom, also has a track record of backing businesses with a strong tech element.

All in all, it would appear that it just made sense to work with Permira, an experienced PE fund that would really help guide their desired growth, rather than go to the open market and sell equity to anyone.

“we decided that there were superior options for what we wanted to do”

Why haven’t they disclosed the sum invested? On this point Pierce said they really cannot comment at all. So, Artificial Lawyer spoke to an investor at another fund and asked why do mature companies like Axiom not want investment values made public?

The investor at another fund said: ‘Sometimes the concern is customer sensitivity around change in control [of the business].’

At the other end of the scale, VC industry lore states that startups that won’t reveal investment values often do so because the sum is lower than market expectations. But, Axiom is a very long way from being a startup, so that may not be relevant in this case.

Either way, the investor added: ‘Often these investment value announcements are just delayed for a few months while they figure out the right messaging.’

Also, it’s worth noting that back in 2013 Axiom received $23m in funding. Generally – but not always – companies gain sequentially larger funding amounts at each stage of their growth. So, it’s not unreasonable to assume the total is very far north of the 2013 level, especially given that a PE fund on the scale of Permira, which has $47.4 billion in committed capital, tends to make very substantial investments. This funding also comes six years after the last one.

What will the money be used for?

Pierce added that following the split with the tech-supported review group (now called Knowable and which has linked up with LexisNexis – see story) and the Axiom Managed Solutions part, the company has around 2,000 lawyers working with the on-demand business, plus a number of staff who keep it all running.

Money will naturally be spent on marketing and business development. But, also on tech. Pierce said that the tech they want to develop via their own R&D will be focused on helping its on-demand lawyers better market their expertise to the clients, as well as help clients better see and find the talent and skill sets they need from the stable of lawyers at Axiom. In short, this will be talent matching software.

‘We are very excited about tech. We are working on how to make it easier and more seamless for the clients to tap our platform,’ he added.

And, what next?

The simple answer is – growth, lots of growth.

They already have operations around the world. So, we can likely expect a big recruitment push to bring in more Axiom on-demand lawyers in many major legal markets. And, with that a greater drive to get corporates to engage with their offering. In short: there will be a drive to scale up even further than they have already. And, given that a major PE fund is now working with the business and has invested multiple millions of dollars, we can expect this focus to remain a top priority.

Artificial Lawyer concluded with the question: will some of the investment lead to acquisitions of other ALSPs and on-demand services around the world? Pierce understandably didn’t want to comment directly on this one, but added: ‘Permira is focused on growth.’

…..Permira is focused on growth: that may sound like an innocent enough statement, but therein is the potential for much more change to come in the world of ALSPs and legal tech. Watch this space.