Why LawPath’s $1.8 million capital raise is more about the contact than the cash
Friday, July 13, 2018/
Legal startup LawPath has raised $1.8 million in an investment round led by US online legal service provider LegalZoom, and while chief executive Dom Woolrych accepts its not the biggest funding round Australia has seen lately, he says it’s “not about how much, it’s about who is investing”.
The round also included some of LawPath’s previous investors, but about $1.1 million of the round came from LegalZoom. Woolrych did not disclose any more terms of the investment.
The two companies run on similar models, providing templates for legal documents and a marketplace for lawyers and legal advice.
According to Woolrych, LawPath based its model partly on that of LegalZoom, and an investment has been on the cards for some time.
“We’ve been speaking to them for a long time — almost since inception,” Woolrych says.
“We knew they would be a really good partner, and a potential exit opportunity.”
Because it’s a similar business in the same space, LegalZoom has a strong understanding of the startup. So when LawPath was embarking on this latest capital raise, it “felt like it was the right time”, Woolrych says.
And, as the two companies had already spent two or three years cultivating a relationship, the due diligence process was quick and easy, too.
LawPath was launched in 2013 through innovation platform Pollenizer, with the intention of addressing inefficiencies in legal processes, and to provide more affordable legal services for startups and small businesses.
In 2015, the startup raised $1.3 million in a ‘bridging’ round, with investors including Macdoch Ventures, and a syndicate formed by Fort Street Advisors principal Ben Keeble.
That round also included Brook Adcock from Adcock Group, who also contributed $600,000 in May 2014.
According to Crunchbase, the startup received another $1 million in November 2016, however the investor was not revealed.
Today, LawPath has 60,000 users, and has seen 10% growth in revenue month-on-month over the past 15 months.
Funds from the latest raise will be invested into marketing and advertising, in a bid to bring the product to more people — initially in Australia, and eventually overseas.
Previously, the majority of the startup’s marketing has been through online word-of-mouth and Google Adwords, but now it’s going “above the line”, Woolrych says,
“It’s about getting [LawPath] out into the hands of startups, new businesses, and everyday Australians,” he adds.
Equally, while the startup does have active users throughout all of Australia, Woolrych says about 70% of those are based on the eastern seaboard, and “there’s a lot of room to grow down here”.
There’s also room to grow LawPath into Asia, he adds.
While it can be difficult to move traditional legal businesses into new jurisdictions, the startup’s platform means new legal documents and practitioners can be added fairly easily, in any new market, says Woolrych.
The technology remains the same, he says.
“Fintech has overshadowed the growth of legal tech … There has been a huge rise in legal tech over the last couple of years,” he says.
A solution like LawPath would do well in the Asian market, Woolrych predicts, and a move into that market “will be fantastic for us,” he says.
“That’s part of the strategy LegalZoom sees,” he adds.
For new founders, “it’s so important that you get the basic legal under control”, Woolrych says. In the past, too many businesses have ended up “getting ripped off and spending too much”.
While legal issues around a business may be complex, it’s important to be able to distinguish between those that are simple tasks that can be automated, or that can use a template, and those that should be completed with the help of a legal expert.
For startups especially, there are always cost-versus-risk decisions founders need to make, says Woolrych. For high-risk activities, they might hire a lawyer. When drafting an employment agreement, they won’t want to spend their limited resources on that.
“I don’t think the legal industry really understood that,” Woolrych says.
For other startups considering a capital raise, Woolrych advises them to establish the connection with potential investors early on.
He accepts that LawPath is unusual in having had such a long relationship in the build-up to its latest investment, but he says this is because “the business model we chose had already been created in the US”.
But, having a relationship established makes things “so much easier when you come to raise money”, he says.