Democratizing Fundraising: How SeedLegals is Revolutionizing Startup Fundraising
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Hello, everyone. I'm speaking to you, your podcast host, Charlie Uniman, from a sunny South Orange, New Jersey, wintry one, but sunny nonetheless. Good to have the winter sun. But more importantly, I'm very happy to have as a guest today, Anthony Rose of Seed Legals. That's S-E-E-D-L-E-G-A-L-S. We're going to talk a lot about Seed Legals.

I'll let Anthony do that mostly. But I did meet Anthony most recently at the Legal Tech Summit in Miami in December last year. We had a chance to spend some time chatting, although we met briefly the year before at the same time, spent more time together, and Anthony very graciously agreed to be a guest on the podcast. So welcome, Anthony. Thank you.

Thank you, Charlie, and thank you so much for the opportunity to be on the podcast. Well, the pleasure is mine, and I'm sure our listeners. Anthony is in London right now, but he'll be talking about the U.S. and Anthony and the U.S. and seed legals in a little bit. So enough of me, at least. Let's have Anthony give us an idea of what seed legals is, what its functionality, but

better described as its benefits for its users are, its activities in the US and what it offers that makes this very special offering for startups in particular. Anthony, tell us about SeedLegals. All right. So thank you very much. Just before, I'll tell you very briefly about me. So I'm a lawyer. Yes.

I'm a tech product guy. We employ lots of lawyers, but I'm a tech product guy. And years ago, I used to head up BBC iPlayer. That's the UK's version of Hulu. Built a whole streaming media service and so on. And then I left the BBC. I built a startup, sold it. Built a startup, sold it. Invested in a few. Got tired of paying lawyers. Met my co-founder, Laurent, a genius ex-VC and serial angel investor. And then I got a job at a company called

and created SeedLegals to make fundraising much easier for everyone else. So SeedLegals were a team of 160 people based in London.

About half of all UK startups are on SeedLegals, like 50,000 startups. About a third of all early stage investment in the UK is done through SeedLegals. So what is SeedLegals? It's a team and platform to help you get investment ready and do all the legals principally for a funding round, but also for safes, cap table, option schemes, and more.

So what happens is early stage founders discover Seed Legals, hit web chat, talk to one of our team. There's no meter running like a law firm. You can ask us all sorts of things about anything from pitch deck to fundraising. But the paid part of the platform is really about fundraising.

I'd like to do a funding round, whether it be a price round or raising the safes, help me do everything. And principally the key value that we're now launching in the US is to change the way companies do price rounds. So let me take a step back because one of the interesting things with starting with the UK perspective is it lets you see the world through a different lens. And in the UK,

People do priced rounds online.

pretty early on in their company. So why? Because it's very inexpensive, thanks to seed legals, to do a priced round. Whereas in the U.S., what seems to happen is the legal bills for a priced funding round with a law firm range from $25,000 to $100,000 or even more. It's insane. So what's happened is a few years ago, YC came out with the YC safe that basically says,

The cost of those funding rounds is so crazy. We're going to kick the can down the road and we're going to throw all the legals two years later. And instead, we're going to sign these simple agreements that say, I'm going to give you money now and you promise to give me shares later.

And it's called a safe. It sounds safe, but it's not really safe because for investors, they're not getting shares. The jury's still out whether the QSBS tax clock starts at the time they enter into the safe or only when shares are issued later. So it's still unknown from the IRS whether...

you have to keep your stock for five years before you can get no capital gains tax. And that's unknown. And for the founders, safes are distinctly unsafe because the YC post-money cap safe, and we're getting a bit technical here, the way it converts is founders think that it converts at the valuation of the cap.

that it converts at the valuation of the cap less the value of all outstanding safes. So let me give you an example.

Let's say you're a founder raising a million dollars on a $5 million YC post-money cap safe. So you think that those safes you're raising, you know, if your next funding round is at a valuation greater than $5 million, you think they'll all convert it, you know, $5 million and you're going to give away $5

you know, 1 million out of 5 million in equity. But in fact, they're all going to convert at a 5 million, less 1 million, as in a $4 million valuation, and you're going to be giving away a lot more equity than you thought. So when we

When I moved to New York and began talking to US founders, I was surprised how many mistakes early stage founders make. They incorporate as an LLC instead of a C corporation. They don't know about the QSBS tax benefits. They enter into these YC safes without understanding how they're going to convert later.

And they make other mistakes that basically companies in the UK don't make because there's a platform like Seedlegals. So there are, of course, platforms like Carter, Clerky, and many others that do safes and cap tables and so on. But there doesn't seem to be a service that really is an end-to-end platform and people that helps founders. And I think that's the missing piece, together with revolutionizing the way that you can now do a priced round of

at dramatically less cost. So what is a priced round? Well, a priced round is a whole set of legal documents. There's a stockholder agreement, there's an updated certificate of incorporation and other legal documents and warranties and so on that are designed to provide

provide principally the investors, but also the founders with a sort of checks and balance protections later on for when disputes come up or when you want to sell your company or when you want to issue more stock or whatever it might be. And there is a standard in the U.S. called the NVCA, the North American Venture Capital Association. So over decades,

A bunch of law firms got together and they created a standard. And these documents are basically, I mean, they're lengthy, but they're pretty standard. And there are a set of deal terms. They're probably like 12 key deal terms that get negotiated in a funding round. Obviously things like the valuation and, you know, who are the investors and how much are they investing and who's going to be on the board and how many directors will there be and so on.

But actually, the key part of a funding round is this negotiation. And particularly in early stage rounds, the answer is always remarkably the same. So what we've learned over doing thousands of funding rounds in the UK is

We've created something called Termometer, which analyzes what choices people make, the negotiations in funding rounds, and then suggests with data, by the way, you know, you're probably going to pick this term because, you know, the problem for founders is,

is there's an information asymmetry with investors, particularly funds. Funds have done this many times and exactly what they want. Some of them are like very smart. Some of them are a bit on the sharp side. As a founder, you're thinking, oh my God, the investor wants a preferred share, right?

Am I an idiot for agreeing to it? Or am I the idiot for pushing back on it? Because it's crazy. They're obviously going to get it. So founders don't know what the answer is. And our goal at Seed Legals is to empower and educate the founders by showing them what's market standard, when they should push back and when not. But also importantly,

to change the way that legal documents are negotiated from this insane practice of I call my lawyer and they create a word document and then they send it to the other party's lawyer. And for, you know, $600 an hour or more, they send these redlined word documents back and forth between each other where I have no idea what they mean. There's hundreds of pages of gobbledygook.

But this is what computers are for. So what we do is we take the founders through the key deal terms in a funding round. There are probably, as I said, about a dozen, a few more key things. So you understand how your business is going to be governed and can investors kick you out later like Sam Altman or not, and hopefully not put yourself in that position.

And then we build the same NVCA standard documents that a law firm would build, that instead of charging $50,000, you know, it starts at $4,000. And importantly, because the machine generates them in like two seconds, everything goes much faster. And every time you want to negotiate and change something, everything gets updated in like a second. So we found this formula works hugely successfully in the U.K.,

And now we want to bring the same to the U S so, you know, I've moved to New York and, and, and now looking to do the same in the U S and what's really interesting is for me as a founder journey, it's like going back seven years in time because in the U K,

When we go to a startup event, most founders in the room are on our platform. They're our customers and most people know me. When I go to New York, hardly anyone knows me and hardly anyone is on Seedlegals. And my goal is like, what's the fewest number of weeks to change that? And also, of course, to learn what are the pain points that founders have so we can make sure that our platform addresses exactly those.

So as you can tell, I'm quite passionate about, you know, democratizing the ability of founders to not just fundraise faster and less expensively, but to be empowered so that they are in control of their business in a way that potentially they would have had more difficulty doing before. Well, I do think that, and I'm sure you'll agree, the men and women who were founders of startups are pretty amazing.

And there's a little magic to it all. It's nuanced in certain respects doing a price drought, but it's not magic. And if the informational asymmetry is reduced significantly, empowering the founders to understand what's really going on and not watch red line documents whiz back and forth with often impatient people

uh lawyer junior or senior uh taking time to explain them to the founder client is is uh is a wonderful thing i've said this to several founders and having heard you describe at some length what seed legals is doing you're doing god's work anthony you truly are so blessed that's very very kind i uh and that's from a former lawyer because uh

Even from my standpoint, it was often a lot of wasted back and forth. And I am myself, and there are a number in the legal tech community. A company called Bond Terms is leading the charge in certain respects, as are other companies, much in favor of standardized documentation.

where it's called for. In many instances, it's called for more greatly than some lawyers and some professional counterparties would care to admit. Let me ask, Anthony, you're coming here to the U.S.,

and explaining to people what Seed Legals is all about. Do you have to sort of massage the VC side of the equation, let alone the lawyers? Let's talk about the VC side to be more open-minded about working with a founder that wants to himself or herself rely on Seed Legals.

That is a fantastic, the billion dollar question. When we started Seed Legals in the UK, of course, there was no such platform. And 100% of the time, everyone went to lawyers. So of course-

In any startup, the founders always have one or more key problems to solve. Can I build it? Can I raise investment? Will customers want it? Can I create a team? And, you know, I've been around a while as my co-founders. We're pretty confident that we could raise investment, build a team and build the product. And we'd spoken to enough founders that we were

pretty sure founders would love what we built, but we had no idea if the lawyers or investor would go, no, no, no, no, no. You just can't use this platform. We insist on using a lawyer. And in fact, we were pleasantly surprised. And of course, importantly and critically surprised that it was the opposite. Investors went, this is brilliant. And the reason they said it was brilliant was slightly surprising. One,

Because when founders came to them, instead of making all the mistakes, the cap table was a mess and they didn't have founder agreements and all this stuff that had to then get sorted because they were already on the platform. They didn't make those elementary mistakes. They were sort of cleaned up.

I like to think of it like in Pulp Fiction, you know, they've shot somebody, there's a body, there's blood all over the windshield. The cops are coming in an hour and Mr. Wolf cleans it up. And so that's not really, I don't see seed legals as Mr. Wolf, but yeah.

Everything is nicely set up. Number two, the founders know what they're talking about and they can react quickly in any negotiation because they understand the deal terms and so on. And number three, the investor gets all their deals on one platform and they get everything

standardized documents. The other really important thing is, you know, if you have to read a 200-page document each time, it's crazy. So what we do is we show both parties all the key deal terms, and people know that the documents are created on our platform. So instead of having to read, and of course, at least once, you should always read the full set of documents, but thereafter,

You can just look at a deal and go, drag along is 50%, tag along is this, board rights are this, six investors, I get two, board seats, whatever, I get two. And so you can in five minutes see the deal terms. And so investors really like that because it takes the friction out of the funding round. So, of course, I now need to validate that the same applies in the US. I think one of the important things is,

The, the way funding rounds go is that in early stages, it's the founders leading with the term sheet and sending that to angel investors. But once you get VCs, the VC will lead with a term sheet. And then, but in all cases, they assume that the startup is going to produce what's called the long form documents. So,

they will get on seed legals and do that. Now, one of the key differences between the UK and the US is in the UK, we can not call ourselves a law firm, but we can freely offer legal advice. The legal system in the UK allows, you know, non-law firms to offer legal advice. So we're really a one-stop shop. In the US, it's a little bit

because we can offer the whole platform, but we can't offer legal advice. So we've partnered with law firms. And so we've now got a nice seamless experience where the platform does all the document generation. Our team's there to answer all products and commercial questions. And when you need lawyer advice, we've tag teamed in a seamless process. So yeah,

It's obviously early days for us. We've launched recently, but everything I've seen from founders indicates that's...

exactly the same. And I was absolutely delighted that our very first funding round on seed legals closed so seamlessly and so quickly that we barely noticed that it was done. And I was just breathtaking to see the founder did everything with about an hour's worth of lawyer help to create an entire funding round, cap table, stock certificates, the works,

And the whole thing closed in like three days. So I think that was a really delightful first validation. Well, congratulations on hearing that and the timing involved. That is extraordinary in my experience. And to emphasize a point that Anthony has made, I can't overemphasize the importance from the standpoint of getting a deal done

quickly and with as little muss and fuss as possible when you're dealing with professional investors to have had the opportunity to do that cleanup or if you're early enough in the process and go to seed legals never having had to do the cleanup to begin with and that is to say having all the documents in place that the VCs want to look at having the right structure that

That is, as Anthony has described, very important. So I'm not offering a legal advice. I don't do that anymore, thank goodness. But if someone is not running a lifestyle company but instead wants to grow as a startup would into getting professional money invested, starting with an outfit like Seed Legal early on,

is going to keep your hair darker, less gray, and save you so much time and expense later on. And as to the VC point here in the U.S., the VCs, and I don't think very many of them, perhaps a few, really want to take advantage of

of the information asymmetry. They want to get the deal done. They want to be able to deploy their capital and have satisfactory terms. So if they know they're working with a startup leader who is well-versed in what's going on and can reduce the friction and negotiation, I think they're happy. I mean, they're not, as much as they like playing golf with lawyers, they're not overly invested in paying lawyers. They know the deal.

Very, very sticky points in super large transactions, I suppose they are happily relying on their lawyers. But I think to Anthony's point here in the U.S., they want to get their money running on the clock, invested, and they should look with favor, a great favor on seed legals, making the process less friction bound.

I think if I can hop in, I think what's interesting is that my goal, by the way, isn't to favor any party. My goal is to take the checks and balances that wise people have developed over decades and get both parties to the point that they would have gotten to anyway, but more efficiently. And, you know, in the same way,

you know, for founders to be empowered, founders also need to understand why the investor is going to have a veto right and why they've got certain protections because the founders are often, you know, really naive and they would go, hang on a second, I want to have all the voting rights. I want to have super voting shares. And then we have to explain, you know, if you're Mark Zuckerberg and you've built a many hundred billion dollar company, you can have whatever you like.

Until then, if you come up with super voting shares and you're telling the investors they're getting common stock, it's going to be a very short conversation and you're going to be hunting for investors for a long time. And this is why it's going to land at this place.

And you can dial the terms in the zone, but if you go out of the zone, you're going to be putting so much friction with most investors that it's not going to be worthwhile. And I should add one other thing, which is one of the things I really love when I get up in the morning is seeing how founders who are nonexistent

sort of financial people are now able to raise investments. And my favorite example is Sophia from Sourdough Sophia Bakery. It's a bakery in London. She wants to raise investment to make more bakeries. And she's a baker, not a fintech or legal person. And I noticed her on the Seedlegals platform creating safes, the UK version. And she made quite a few of them. Like when she got to 50...

I decided to call her and say, Hey, you know, this sounds interesting. Can you tell me more? And I'm convinced that everyone who comes into a bakery, she says, you know, would you like a baguette? Would you like a sourdough? And would you like a safe? And so, so in the past, she would never have been able to, you know, find lead investors and do a funding round and so on. But now thanks to a platform, she's able to raise money.

and has been tremendously successful. And then it's done a price round off to its converted all the safes and so on. And it's now doing it again. And I'm really delighted that people can grow their businesses thanks to tech platforms, really democratizing things.

No, it's a wonderful world in which we live, so different from even 10 years ago, where a lot of standardization had come to VC investing, but certainly a platform such as SeedLegals. And I've had the pleasure in speaking to Anthony where he could demonstrate what the platform looks like. And someday I'll get around to doing a video version of the podcast because

is the user experience, the user interface is so well designed. And I'll say this, it should go without saying, I have no interest in the company, of course, only in being interested in what the company is doing. Having seen it in operation, I'll be it briefly, it is well designed and easy on the eyes, an important aspect of being easy on the brain is

So it's not a difficult platform for a founder to parse. And just one point that Anthony had addressed. Then we're going to turn to some sort of words of wisdom for startups based on Anthony's experience in dealing with people on the road to a funding, be it safe or not.

a priced round. There are advantages to say, certainly. One of them, the most, well, one of the most important ones is the less expensive aspects of

doing a safe, the quickness with which it can be done relative to the way the U.S. has had its price rounds done to date before seed legals. But there are costs. There are tradeoffs. And Anthony mentioned some of them. And they can come back and bite you. And it's often when you kick the can down the road that you're just incurring what programmers call technical debt and what I'll call legal debt. Things will become more complicated later.

And when you finally pick up the can to do a priced round, you've got some more cleanup to do. And lo and behold, you might be shocked to find that mistakes have been made. So I think doing a safe round with a platform such as Anthony's is probably going to pose less of a problem. But being able to confront the issue of valuation and get to a priced round and begin sometimes the pain point

filled, but often the more helpful VC investment is the way to go. And if you can do it more quickly and with less expense, probably behooves you not to kick the can down the road. So I'm looking forward to seeing seed legal's journey here in the US. I don't live too far from New York City and

welcome the opportunity to get together with Anthony, uh, over drinks as we have the pleasure of doing in Miami in December. Let let's, uh, let's round out the podcast a bit by, uh,

asking in addition to what you've described so far, any pointers, certainly the cleanup one is an important one that you care to impart to our startup leader listenership when it comes to either the legals, and you know by legals of course Anthony means all the documentation and involvement with the law and contracts that startups have to deal with. Any pointers you care to offer, Anthony?

Absolutely. So, you know, one of the, my goal actually, even though my company does the legals, my goal is to make the legal part of your business, the least amount of time and money you, you know, we, and focus that you need to spend time on. Why? Because a hundred percent on your focus should be on building a product that customers love. And so the key problems that I see that founders have is number one,

You fall in love with an idea and you begin building it. And as a founder, often founders are technical founders. So they love building stuff and you define success as building and shipping something, but actually success is people wanting what you've built.

So the first thing I see when I see founders, and they often send us their pitch decks and ask me to review a pitch deck and so on, is that two things. One, they've assumed that people want it and haven't really tested that idea.

and validated it. And number two, when you talk to founders, they are eloquent in describing this amazing solution they've got to a problem. And then they send you the pitch deck, and the pitch deck is indecipherable. It's a blockchain this and distributed ledger that and AI this, and we solve these things. And you're looking at it going, the eloquence of founders

Your verbal pitch is lost in a sea of slides and tam and sam and song and projections. So it's the art of storytelling and the pitch to win over firstly team members to join you and then customers and then investors.

by eloquently describing both verbally and in a pitch deck the problem you're solving, validating it, and then showing how your app, you know, your pitch deck with lifestyle images, showing people using your app and so on. So actually the key, I do a lot of startup workshops and mentoring and so on,

and although my business is there to solve the legals, the biggest problem founders really have is

validating that people want something and then constructing a story that has investors, in this case, excited to invest. And actually, that's where I spend a lot of my time doing, you know, mentoring and so on on that. Because if you can't sort that, you're never going to get to, you know, needing to close your round because you're not going to have any investors. Yes. And as a corollary to that, I might add that

Even before you put together your first slide, you should have, and I'm being prescriptive here, I know, but I think with good reason, you as the founder should have had ample time to test the market, whether it's with interviews, whether it's with Zoom calls, whether it's face-to-face, whether it's surveys, because...

You're building that story that you want to tell in your pitch deck, either to prospective employees, fellow team members, or to investors. Your ability to tell that story will come from the hard work you've done before you even think of describing the story. Getting the data from the market to figure out whether what you're building is what people want to buy, and if not, iterating on that decision to build whatever you're building. And then figuring out, too,

how best to reach these people and what their price points are. So, once you've done that homework, even before you've talked to Anthony, do the homework, go out in the market, pound the pavement, figuratively or literally, and get an idea of what the market perception is likely to be. You have an idea in your head, you have a product you want to build, but you kind of make sure the market

is receptive and that doesn't just come from a priori thinking. You have to go out there empirically and get data by touching the market. And then from the data that you've gathered in doing so, you build that story and that story has to include what you've learned

And most importantly, if you can also pick that up, not only on customer preferences, but also on a go-to-market strategy, by the time Anthony sees your pitch deck or an investor, you're far further along. Because in addition to being technical, you've got to be business-driven. So Anthony will help you with the company-to-legal fit, but you've got to help develop the product-to-market fit.

and do so early on, come to Anthony or others for advice and mentoring, and then Anthony would see legals when you're ready to go raise money can smooth the way.

And I think nicely put. And by the way, you know, I call some of that customer driven development because what often happens is the tech team will sit in their office or at home behind their screen thinking about what people might want. And isn't this going to be awesome? But you really need to go out and talk to people. And so, you know, the first thing I did was as a CEO,

get my butt on a plane, go off to New York. New York has unbelievable number of startup events and then do at least two events a day. Talk to as many founders as I could, you know, describe what we're doing. And when people go, uh, it doesn't make sense. Then you refine it until people go, Oh no, I need one of those. That's awesome. Oh, right. No, I've made a mistake. I made an LLC or what's QSBS. And then you, uh,

And then you're radioing back to base like team, don't do, forget that. We thought we were building that. Nobody wants it. They want one of these. And then you refine the messaging and your loop time to do that is so much faster because you, as the CEO or CTO, sitting in front of customers and learning what they really want rather than imagining what they want.

Yeah, that 50 set of interviews, 50 in number, 150, 200 in number, believe me, there have been startups that have

before coding anything, perhaps except the barest bones of a product, that have done 200 interviews, literally. That is an investment of time and sweat, no doubt costly, that is going to pay so many dividends down the road in so many different directions of your, so many different aspects, I should say, of your journey.

uh, startup leaders in legal tech or otherwise. But, uh, you know, my, my, uh, beat is legal tech and, uh,

It does help to have been a lawyer, to know if you're selling to lawyers what your pain points were, but it's not enough. I think you're going to refine your insights immensely if you can do what Anthony so aptly described as customer-driven development. That's the label, and it's a good one. Anthony, thank you.

so much for being a part of the podcast. I think the signal to noise ratio was almost infinite here because you imparted so much valuable advice.

And I wish you, again, echoing my earlier sentiments, Godspeed when it comes to getting seed legals out there in the market and adopted. And I encourage people, again, with no financial or other interest other than my

view of what might be good for startups. And because I like Anthony, he's a good fellow. I do encourage startups to take a look. So Anthony, it's seedlegals.com. Is that right?

the legals.com you can reach me anthony at seedlegals.com or drop me a note on linkedin anthony rose i'm always delighted to help um and uh you know of and what i really love to help on both the things that you know we have as paid services but also on the things around it to help you uh grow your startup faster you heard it and i i would heed that uh eat that call

I'm delighted that Anthony has come to the city

That's a half an hour from here in New York to have that be the beachhead for Seed Legals. And speaking of New York, as I've said to Anthony before, I'll say it again, as I have with all my guests, when we can get together to hoist a pint in some of the saloons in New York, let's do that soon. And again, Godspeed and best of luck with Seed Legals. Look forward to seeing it grow and prosper. Thank you, Charlie.

And thank you for being a guest and look forward to seeing you face to face soon. Thanks so much. Thank you for listening to the Legal Tech Startup Focus podcast. If you're interested in legal tech startups and enjoyed this podcast, please consider joining the free Legal Tech Startup Focus community by going to www.legaltechstartupfocus.com and signing up. Again, thanks.