What is it like to raise capital as a legal tech startup in the current climate?
UK-based CLM startup Summize has just raised £5m ($5.65m) in a Series A funding round, one of the few legal tech companies that has announced substantial funding in today’s tough environment for VC investment.
Artificial Lawyer asked CEO, Tom Dunlop (pictured), about the investment round that was led by YFM Equity Partners and Maven Capital Partners. What was it like to raise the money, how long did it take, and what do investors think about legal tech now?
– Was it hard to raise the cash in the current climate?
There is no denying that it is a tough market to raise capital, but in my view, it really focuses everyone’s mind on the value proposition, market potential and product differentiation. I’ve always felt extremely confident about Summize in these areas combined with our company growth, so if you have a compelling story then there is definitely still a lot of capital available to be deployed in the market.
– How much have you raised in total now?
In total, this will now take us to ~£8 million raised.
– How many potential investors did you contact and how long did it take to complete this funding round?
The reality is that we have spoken to investors throughout the whole company journey, so for this round, we already had a good idea of the investors that we would want to work with.
We probably had progressed discussions with around 10 investors who have shown an interest in our journey and this space over a period of 4-5 months. We started discussions only a few weeks prior to the market decline, but because we had already built good relationships, it didn’t feel that that had a big impact on our process or timescales.
– Did the current conditions change the valuation?
It didn’t really change the valuation as we didn’t set out with an expectation that we would perhaps raise at some of the levels seen in 2021 in particular, but the current conditions did make us focus a lot more on the next phase of growth and our plan for using the funds.
– From speaking to the investors, how are they looking at the legal tech market now?
Investors are still looking to deploy cash to markets that have huge growth potential and are perhaps quite early in their technology disruption / adoption.
I also feel that the legal tech market is very resilient in a market downturn, particularly those products that can help with efficiency across the P&L, rather than just a focus on growth enablement. This combination of the market and product focus / adaptability is still seen as attractive by investors, but emphasises the importance around having a compelling story on both fronts.
– The US is a big market for CLM – but what about the UK, how is adoption here and is it different to the US?
It certainly feels that the US is slightly more ahead on tech adoption than the UK but we have seen a big change in the acceptance that CLM can provide real benefits to an in-house legal team, and more importantly for the whole business. So the UK feels a lot more interested in exploring CLM solutions now than ever before.
There are a lot of active projects in this space, but it’s very typical that we are in discussions to be the first CLM solution rather than replacing something existing – which feels a lot more common in the US.
– What does this raise mean for you?
It’s great validation of the hard work that the whole Summize team has put in over the last few years and a real milestone in the company’s story. This funding gives us the fuel to expand and continue to grow to achieve our company goals, in addition to exploring more in the US market in particular. It’s also great validation of the legal tech market as a whole and highlights the continued innovation that we see in this space.
Thanks Tom, and congratulations!