Hot topics roundtables: how to have a successful start-up law firm

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4th Annual IBA European Startup Conference
London, 20 November 2019, Wednesday 20 November

Hot topics roundtables - Topic two: How to have a successful start-up law firm

Co-Chairs:

Nigel Clark  Peregrine Law, London

Phil Robinson  Ignition Law, London
 

Guest speaker:

Victoria Kopylov  General Counsel, KRY, Stockholm 
 

Table Leads:

David Strong  Marriott Harrison, London 

DovileBurgiene  Walless, Vilnius 

Maire Cunningham  Beauchamps, Dublin 

Nathan Guest  Veale Wasbrough Vizards, Bristol 

NoreenWeiss  MacDonald Weiss, New York 

Patricia Gannon  Karanovic & Partners, Belgrade 

Simone Bernard de la Gatinais  Chiomenti, Milan 

Taras Kyslyy  Arzinger, Kyiv 

Wim Van Berendoncks  Cresco, Antwerp 

Yannick Verrycke  Cresco, Antwerp 

The aim of the session was to analyse startups as clients and to challenge delegates’ thinking on whether the traditional private practice model of delivering legal advice was appropriate for this rapidly-expanding client sector. Session Co-Chairs, Nigel Clark and Phil Robinson, both lead new model startup legal businesses and spend much of their time advising fast growing startup companies.

Throughout the startup process, the range of opportunities and threats posed by, and to, startups was discussed by delegates, alongside the types of advice required by startups, how best to deliver legal advice to rapidly growing companies and the ability of a lawyer to really add value to a startup.

In the spirit of the Conference, the session took the form of an interactive, lively and energetic workshop. It was divided into five core themes discussed at roundtables of ten to maximise opportunities for participants to share their opinions.

Victoria Kopylov, General Counsel of leading Swedish health digital start up, Kry, spoke during the middle of the session, sharing her thoughts on the themes from the entrepreneur’s angle, given her unique experiences of both being part of, and advising, startups. As guest speaker and challenger to the session, Kopylov also regularly visited each table to question participants on their opinions in the hope of inspiring external lawyers to increase their support for, and understanding of, Europe’s startup ecosystem.

Discussion focused on the five key themes:

• delivery;
• culture and empathy;
• legal services;
• collaboration; and
• the future.

These topics were considered in small groups in two different sessions with each table lead sharing a summary of their findings and key messages from the session.

Delivery

David Strong and Marie Cunningham explored how the delivery of legal services to startup clients varies depending on the type of firm giving the advice, the key aspects of delivery and the role of technology. Overall it was thought that:

• large traditional model law firms face the most challenges when advising startups as the clients are perhaps treated more as a commodity, whereas smaller practices can take advantage of their greater ability to provide quicker and bespoke commercial advice. However, larger firms are more able to invest and give ‘free advice’;

• cost is the main challenge for firms advising startup companies as they generally seek more flexible and cheaper legal advice, yet the vast majority of the delegates’ respective firms still used an hourly rate as the basis for their fees, with none moving to commission or fixed fees exclusively;

• to make the work profitable, firms need to be selective on which clients they take on and assess opportunity costs prior to advising startup companies;

• all firms must be able to offer startup companies basic technology, but the main priority should be providing fast, efficient advice and understanding their client’s business; and

• quality of service will be the main driver and most clients will agree to pay and remain loyal to their lawyer once they feel they have been provided a good service which is value for money.

Culture/empathy

The second topic of culture and empathy within startup companies, and between startups and their legal advisers was led by Dovile Burgiene and Tarras Kyslyy. Discussions predominately focused on the cultural disparity between traditional law firms and startup companies. Other key findings included:

• startup clients are generally managed by young professionals with less business experience who require not only legal advice, but also corporate, financial and tech advice, mentoring and coaching that can often extend beyond the preliminary agreed scope;

• effectively advising startup clients requires lawyers to have a significant understanding of the pressures and key issues in the client’s respective marke;

• participants from full-service traditional law firms often had to act as a ‘disruptor’ within their firms to be able to work with young businesses. One participant, from a market that is not crowded with accelerators, business angels and venture capital community, described how he serves as a ‘matchmaker’ and acts for the investors, as well as participating in the startup community to spot opportunities, obtain pitches and deliver those opportunities to his clients who are interested in investing;

• full-service law firms are less fees flexible but have a wider breadth of expertise to cover startup needs, while boutique law firms could be more effective in terms of costs and can make their services more affordable to startups by developing certain standard solutions which are adapted to their needs; and

• traditional law firm marketing strategies must be adapted to specifically target startup clients as traditional means of communication do not typically reach those clients.

Legal services

Discussions concerning the ways in which law firms can respond to startup client demands were led by Patricia Gannon and Yannick Verrycke. While it was universally acknowledged that startups require basic corporate advice, participants also considered that:

• the key types of legal services required by startup and scale-up clients are regulatory advice, data protection, taxation, intellectual property and employment advice;

• startup and scale-up clients also require non-legal services whereby the lawyers must take on an advisory role and assist them with matters such as opening a bank account;

• traditional full-service law firms tend to lack a greater understanding of the practical daily issues faced by startups and should integrate a more holistic, common sense and problem solving approach to their advice;

• there is limited value in adding on other services to the delivery of legal advice and white labelling is not desired by clients; and

• much more needs to be done to educate startups about regulation and legal compliance in general and law firms should ultimately focus on what they do well and leave aside what will become a commoditised service.

Collaboration

The discussions on law firm collaboration were led by Noreen Weiss and Simone Bernard de la Gatinais. It was generally recognised that there were benefits for the client when small law firms, focusing only on certain practice areas, collaborated with larger law firms in the same jurisdiction.

Another important benefit of collaborating was cost efficiency: usually, in this discussion group’s experience, startups and scale-ups are serviced by small firms, partly to keep the fees as low as possible at an initial stage. But the bigger the transaction the more experienced the firm must be. A collaboration between small and large firms could be that it is agreed that ‘business as usual’ advice is carried out by smaller firm A but an exception event along the scale-up’s journey, eg, a listing, is carried out by larger firm B. This seemed to be a good solution.

There was also discussion on the adviser’s ‘mentorship’ role. In this area, collaboration is important between law firms and non-law firms, although the group had not seen this at the 'top end of town', for example between the Big Four.

It was widely agreed, unsurprisingly given the make-up of the group and the conference delegates generally, that there was strong collaboration between law firms in different jurisdictions and that this was seen as a great benefit to startups.

The future

The final topic concerning the future of legal advice to startup and scale-up clients was led by Nathan Guest and Wim Van Berendoncks. Although it was agreed that the future in this sector was very difficult to predict, it was concluded that legal startup practices are expected to develop both in terms of offering and function, and in particular:

• startups are increasingly expected to search for more specialised legal advice to meet their needs and law firms must respond to this either through further specialisation or by consciously choosing to exclusively offer generalist legal services;

• founders will become more informed and will have a better understanding of what legal support they want at the start of their journey;

• legal partners are expected to become more involved in the startup client to gain a greater insight and ultimately be able to identify startups’ legal needs more rapidly, providing a better quality of service;

• there will be more collaboration between legal service providers;

• it is expected that different fee structures will become ever more critical and must become more reasonable for generalist products and services;

• law firms providing ‘off the shelf’ products and services are expected to turn to automation tools to reduce costs;

• roles within law firms will change with fewer mid-level lawyers and more project managers and technologists, and there will be need a mind-set change with some more traditional lawyers if they want to service this sector; and

• legal technology ultimately holds the key to the future delivery of legal advice to startup clients, but lawyers are currently running up against the limits of such solutions as legal technology output is not 100 per cent reliable and software licences remain expensive.

Thank you to all table leads for volunteering to moderate their table discussions and to all participants for a lively and thought-provoking session.

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