Another legal tech company has chosen to go down the crowdfunding route rather than rely on VC funds. ScribeStar, a digital platform for producing and publishing regulated capital markets documentation, has launched a £500,000 ($680,000) funding round on Crowdcube. The move follows a similar step by case management startup, Legal Connection, which in September 2020 also went to Crowdcube to raise cash from mostly non-professional investors.
At the time, Legal Connection’s move was understood to have been driven by a lack of VC fund interest in relatively small and young legal tech startups. Although, since then VCs have opened their wallets to a large number of other legal tech companies.
One interesting aspect with ScribeStar, which is based in the UK and has been part of global law firm CMS’s equIP accelerator programme, is that it has already been through four rounds of funding, which Crunchbase classes as all Seed rounds. Crunchbase also states that the company has already received $19.5m in funding so far and is several years old. The company’s LinkedIn page lists 2010 as its start date, while some key staff members list 2008 as the start date.
It’s fairly unusual for a company at this mature age to go for crowdfunding, as those that do often tend to be startups that are at a very early point in their development.
The company said: ‘Having launched its first commercial product in 2016, ScribeStar’s offering to law firms has matured over the last 4 years and is now becoming increasingly used in the UK market where it has been used in over 50 different transactions.
‘Recent transactions include London Stock Exchange IPOs of Bytes Technology, Wheaton Precious Metals, and Conduit RE. Regular clients include technologically progressive law firms such as CMS and Taylor Wessing and Travers Smith, which are keen to use technology to give their clients a quicker, lower-cost and better service.’
As you can see there seems to be quite a time lag between the company’s launch and what they say is the first commercial product, which was four years ago.
The funds raised via Crowdcube will be used to continue ScribeStar’s growth in the UK, support expansion to selected international markets and complete trials with a range of stock exchanges.
Adam Shaw, Executive Chairman of ScribeStar, said: ‘We are using Crowdcube as a way of growing our shareholder base and raising awareness of what we believe is the leading technology in our capital markets space.’
Overall, an interesting move. Most tech companies prefer a VC funding pathway and last year’s move by Legal Connection was one of the few others to go down this route.
This may indicate some continued reluctance among VCs to bet on legal tech startups, although, as noted above, plenty have been funding very widely across the market, at least for companies with a strong growth trajectory. But, ScribeStar does not appear to fit the usual startup growth story, and perhaps that has been a barrier.
When Artificial Lawyer asked about the strategy, the company replied: ‘The business has been funded by a small group of angels over the last 10 years.
‘We can’t comment on the market as a whole for VC funding, however this raise is to allow us to establish ourselves more so that we can consider VC funding later in 2021 or early 2022.’
I.e. they hope to go to the VC market eventually at some point, just not yet.
Important Notice: as you’d expect, this news story is not investment advice. Artificial Lawyer is not recommending you join this crowdfunding project. All investments of whatever size should be taken very seriously and investors should always take advice from professionals and do proper due diligence before joining a crowdfunding scheme.