Big Four firm, PwC, and Microsoft, have launched a new legal tech and ‘tax tech’ accelerator for companies based in Europe. The project will run through PwC’s Spanish division and will favour products that are a good fit locally. After a period of mentoring and support the programme will culminate in a presentation to potential investors in October this year. PwC may also invest if it chooses to.
That said, the investment terms and licence rights demanded by PwC need some careful examination, (see below). Some of them seem quite onerous and difficult to justify. They will probably end up turning away some companies that otherwise would have joined. PwC will hopefully re-think those terms before the programme gets going.
This is the second incubator-type programme run by PwC for legal technology, as it already has the Scale project, which is based in London and normally takes place each year. Microsoft will support the accelerator with mentoring and ‘co-promote the project’ – which means having one of the world’s largest tech companies give some publicity to those startups that get into the project.
Springboard, as it has been branded, will focus on not just legal use cases, but also more broadly on compliance and tax. Interestingly, PwC said that a key reason for doing this is so that they can ‘offer our clients new innovative … solutions in their sector’ – which is also handy if you are looking to expand your business in Europe. Microsoft will also potentially introduce some of the startups to their own clients.
You need your company to have a base in the European Union. Because of Brexit that means that companies solely based in the UK cannot take part, and the same goes for US companies that may only have a European office in London.
Also, as this is going to be run through the Spanish arm of PwC, having a Spanish language capability will clearly be a benefit. That said, many legal tech tools are applicable in any language, and plenty of commercial lawyers in centres such as Madrid and Barcelona will be dealing with English-language documents on a daily basis.
More specificially, PwC said it is looking for:
- International Tax & Legal Tech startups whose tax or legal solution is at an advanced stage of development and that need to validate the integration and adaptation of their product or service to the Spanish legal or tax sector.
- Startups that do not yet offer Tax & Legal Tech solutions. but which have a working technological solution that is not yet adapted to the Spanish or international legal or tax sector, with which to establish at least one use case and co-create a solution that is applicable in the Spanish legal or tax sector, together with PwC Tax & Legal and in collaboration with Microsoft.
If you’d like to sign up, the assessment phase runs from 7th April – 7th May. See more here.
Those taking part will receive:
- Business mentoring from PwC, in collaboration with Microsoft.
- A priority channel to offer its solutions to PwC and/or Microsoft clients.
- PwC and/or Microsoft will facilitate or mediate in the presentation of Accelerated Startups to a certain number of investors.
- Accelerated Startups will be able to test their solutions through PoC (proofs of concept) under the mentoring of professionals from PwC Tax & Legal and Microsoft in order to identify vectors for improvement.
- PwC Tax & Legal (with the collaboration of Microsoft, if appropriate) and the Accelerated Startups will co-create jointly to achieve an MVP (minimum viable product) adapted to a use case within the Spanish legal or tax field.
- Technical, Commercial and Financial Mentoring.
- A credit to be used for a Microsoft product or service.
However….there is also one other very important area you need to think about before applying and that is in relation to PwC’s investment rights and also in terms of its preferential access to your startup. Have a look at the conditions here, which are as stated by PwC in its terms and conditions small print:
‘Right of first refusal or preferred subscription
PwC Tax & Legal may participate in the Accelerated Startup’s funding rounds that take place during the acceleration program and for two years following completion. PwC Tax & Legal will have preferred subscription rights, under the same conditions as the investors leading each round, up to a maximum of 10% of the Accelerated Startup’s share capital.
Right of first refusal and preferred acquisition of the business
PwC Tax & Legal will have the right of first refusal with respect to the acquisition of the specific business related to the solution developed by the Accelerated Startup, if it wishes to transfer or sell the business, for 2 years following the completion of the acceleration program.
During the acceleration program and for the following two years, PwC Tax & Legal has the right to a free trial of the complete solutions developed by each of the Accelerated Startups. The trial will be for a maximum of 12 months and a maximum of 2% of the total licences that could be necessary for PwC Tax & Legal will be granted so that it may test and validate the solution and decide whether to acquire licenses.
Right to a price reduction on the acquisition of licenses
During the acceleration program and for two years following its completion, PwC Tax & Legal may acquire rights to use the Accelerated Startup’s solutions at a market price, with a 20% discount.
Right to a fee for any sale mediation
When the sale of a solution by any of the Accelerated Startups is achieved by the direct management of PwC Tax & Legal or through the presentation of a buyer by PwC Tax & Legal, and when legally possible, a 5% fee will accrue to PwC Tax & Legal applied to the sale price of the solution (base price, excluding VAT) for that party, for the following 24 months.
Right to Investment fees
When an investment in an Accelerated Startup is achieved through the direct management of PwC Tax & Legal, a 5% fee will be applied to the amount of the investment obtained by the Accelerated Startup.’
All in all it looks useful for those companies that want to grow in the European market. Moreover, client introductions from PwC and Microsoft could have a very positive impact, not to mention the mentoring and support you will receive.
There is then also the important caveat with regard to PwC’s investment and preferred status conditions. Think about those carefully before you sign up.
This site has to say that although it’s great to see another legal tech incubator/accelerator project, especially in Europe, loading it up with financial obligations, as noted above, seems to just make it harder for people to join and could sour the whole experience.