Law student Ved Nathwani has launched Cataclysm Ventures, a legal tech investment syndicate aimed at early stage startups, in another example of how sector-specific funding strategies are emerging.
Nathwani, who is studying law at Queen Mary University in London and finished his A-levels last year, has now formally launched the syndicate, which is aimed at bringing together Angels to invest via Special Purpose Vehicles (SPVs) in startups. People who join the syndicate get access to a flow of potential deal information and can then decide whether to go into a funding round with the other members of the group.
The main aim for now is to focus on UK-based legal tech companies, with funding ranging from £50,000 to £1m per startup, and with the aim of making between three and five investments per year.
The move comes at a time when several investment groups have taken a very sector specific focus. For example, Bryce Catalyst only invests in legal tech, reg tech and cyber; The Legal Tech Fund mostly invests in ….well, you guessed it; and larger funds such as Touchdown Ventures have now made multiple investments in the legal tech field with a very focused strategy, while the overall fund maintains a broader remit. And we also have seen industry experts such as Zach Abramowitz of Killer Whale Strategies, invest primarily in legal tech.
Add that to the IPOs, the surge in private equity investment and buy-outs of legal tech companies, then what we have now is a truly developed asset class that sees investment from the earliest stages all the way to going public. So, there is certainly room for a new group focused on pre-seed and very early stage investments in legal tech.
Artificial Lawyer caught up with Nathwani (pictured above) to find out some more:
Why are you doing this?
Legal tech is booming and although there has been an increase in investment in recent years into the sector, this is limited at the early stages. We believe that early-stage legal tech companies deserve greater access to capital and support.
This is why we aim to be the bridge between pre-seed and seed-stage funding for legal tech companies, bringing together a diverse group of investors, with a phenomenal network and a variety of experiences to support founders.
Are there fees to be part of the syndicate?
We don’t plan on having any fees to be part of the syndicate, and there is currently no management fee. Investors who do get involved in a deal will however be expected to contribute to the SPV setup and backend fees.
What kind of legal tech companies are you looking for?
We will consider any company which has a legal tech element to it. Anything from companies in the contracts and e-discovery space, to IP, cyber, risk, RegTech and access to justice. Our current focus is on UK-based startups, however, we will consider companies in EMEA and APAC.
How will the syndicate work? What kind of equity are you hoping to take in startups?
Equity will be negotiated on a deal-by-deal basis. Currently, we are exploring a number of options on how we want to invest and how the syndicate will initially operate.
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All well and good. But, some may understandably ask: are there enough new startups out there to feed the demand? And even if there are, can the market support any more point solutions in a sector that is already swimming with small companies?
The short answer is: yes. New startups are emerging still on a regular basis – not perhaps in the huge waves we saw back in 2015-2017, but enough to provide some interesting possibilities for those who want to get in early.
And can startups coming alive in 2022 really make an impact in a very saturated market? Again, yes. But, it will be harder and plenty of the market segments from doc automation to NLP doc analysis are already well-served, while areas like legal research that depend on access to plenty of caselaw content are hard to grow unless you have huge capital investment.
One could say that the main challenge the market faces now is not finding new products, but making use, or better use, of the products that are already out there. That said, there will be some truly original companies that emerge – as always happens in every sector – which can blaze their own trail and perhaps even become leaders in wholly new market segments. We will have to see.
One thing this site has seen over the years is that even when it seems like everything has plateaued out in legal tech, and that ‘everything has been done’, someone comes up with a new approach and starts to make headway.
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Naturally, this is a news story and Artificial Lawyer is not recommending that you invest, nor is this financial advice. Angels of all varieties should always take professional input before parting with their hard-earned money.