In another move toward standardisation, this time in relation to startup companies and how their share ownership data is maintained, a group of law firms, plus LTSE Software, Carta, and Morgan Stanley (Shareworks), have launched the Open Cap Table Coalition.
The founding law firm members of the new group are: Latham & Watkins, Cooley, Fenwick & West, Goodwin Procter, Gunderson Dettmer, Orrick; and Wilson Sonsini Goodrich & Rosati.
In a statement about the project, Latham said: ‘The Open Cap Table Coalition, [is] a cross-industry collaboration to improve the interoperability, transparency, and portability of startup capitalisation data.
‘The Coalition aims to help build standards and develop best practices that serve early-stage and fast-growth companies.’
Sounds good. But why is this important? The answer, Latham explains, is that every startup needs to maintain a capitalisation table, an often complex record of securities issued by the company that can include common and preferred stock, options, warrants, other convertible equity, and more. But, everyone maintains this key data in different ways.
The answer: standardisation.
Chris Martin, Supervisor of Emerging Technology Solutions at Latham & Watkins, explained: ‘To date there has been no agreed-upon standard for how to maintain a cap table, so emerging companies and their advisers have had to rely on an ad hoc combination of spreadsheets and other tools to keep track of it all.
‘We saw an exciting opportunity to create an industry group of forward-thinking law firms and software vendors to drive interoperability and more easily manage the complexities of startup capitalisation.’
As a foundational step, the Coalition members have produced a first iteration of the Open Cap Table Format, an open source format to enable a new, more collaborative era in capitalisation data management that aims to prioritise companies’ changing needs and help the ecosystem become more efficient.
Ben Potter, a Bay Area partner who serves as Global Chair of Latham’s Technology Industry Group and as Global Vice Chair of the firm’s Emerging Companies Practice, added: ‘Our familiarity with the issues our startup clients must navigate helped us recognise the importance of this collaborative effort to break down data silos and make it easier to share cap table data across legal tech tools and platforms.’
And, John Chory, a Boston partner and Global Chair of the firm’s Emerging Companies Practice, concluded: ‘Our clients are among the most innovative companies in the world, and they expect their counsel to be innovative as well. As more law firms and technology providers adopt the OCF standard, we’ll be able to deliver a more seamless experience to clients while enabling our attorneys to focus on what they do best – providing industry-leading advice and outcomes.’
Is this a big deal? Well, it’s another step toward standardisation, in this case one that connects with firms that deal with venture capital and high growth companies. While not a contract-focused project, it’s a core area that law firms in this field advise on and have to work with. Having a common approach for record keeping can only help, not just the lawyers, but the tech companies and investors as well.
(Earlier today Artificial Lawyer reported on how Reynen Court is developing model contracts to improve the procurement process of software for law firms.)
The Founding Members of the Open Cap Table Coalition
- Tiho Bajic, CEO at LTSE Software
- Joe Green, Counsel and Director of Client Experience and John Scrudato, Legal Engineering and Data Strategy Manager at Gunderson Dettmer
- Chris Martin, Supervisor of Emerging Technology Solutions at Latham & Watkins
- Reed McBride, Head of Business Development at Carta
- Kathryn Montalvo, Technology Companies Group (TCG) Operations Manager and Analyst at Orrick, Herrington & Sutcliffe LLP
- Brad Newman, Senior Practice Innovation Manager at Cooley LLP
- Morgan Sawchuk, Corporate Partner, Fenwick & West
- Anne M. Stemlar, Managing Director, Knowledge Management at Goodwin Procter LLP
- Kevin Swan, Co-Head, Global Private Markets at Morgan Stanley | Shareworks
- David Wang, Chief Innovation Officer at Wilson Sonsini Goodrich & Rosati
[ P.S. the group, which has taken shape over the last couple of months, doesn’t yet seem to have a dedicated website, but if there is one AL will add it to the article. Until then, if you’d like to make contact, AL would suggest reaching out to any of those named as founding members. ]