At SeedLegals, they make it super-easy for startups to do the legal they need to raise investment and distribute equity to their team —all at a fraction of the cost of traditional service providers. No paper. No law firms. No accountants. Everything’s done digitally on their platform. Isn’t it just great?
Very happy to have the chance to talk to Anthony because I’ve always enjoyed our conversations first of all. Secondly, I think he has one of the unique perspectives on this situation because he is working with other startups, but he is also a tenured founder himself who has seen crises and lived through them. So I’m really curious about his perspective on this. Finally, for those who have not had the chance to meet Antony Rose, he is the founder of SeedLegals. He previously led the growth of BBC iPlayer, and he’s a very well-known and respected figure in the London startup ecosystem.
As we all know, Covid-19 affected London’s startups in direct and indirect ways, and it has permanently changed the landscape for London’s technology businesses like the rest of the world. We are interviewing key people of the startup ecosystem to ask them about their challenges and survival strategies in this hard time.
We hope that this interview series will be helpful and insightful for other startups in London out there. Because we believe that the most important thing is to learn from each other and be helpful to others, within this direction, you are welcomed to the fourth episode of our “How to Survive Covid-19 as a Startup?” interview series. You can reach all of them from our Covid-19 Interviews YouTube playlist. Let’s begin, fellas!
Watch the interview:
Work from home situation
First of all, we ask Anthony about his observations about how startups are handling work from home situations.
He says that: “In our case, it happens that we were perfectly placed, we have a range of things that companies are looking for raising money, documents to grow also everything’s online, we have always chat with our customers through web chat like Zoom, Hangouts, and so on. At SeedLegals, we are now 55 people. Everyone is like a duck to water, took to working from home in a day. We have tried super hard to keep up the sort of camaraderie and the team feeling. For me, I have always thought that the hardest thing for working from home would not be so much talking to our customers, that developing new products. I have always been a big fan of everyone being in the team, in the office together.”
About the remote working culture at SeedLegals
He says that he is not a big fan of remote working about the remote working culture and its effects on being productive. He does not know if that will change now, but he has found that they can continue to talk to their customers and talk to each other very efficiently.
When it comes to sitting in a room with the whiteboard making a new product: “How will this you use a journey flow work?” and “Will people click here or there?”. That is much harder to do remotely. So, they have been trying, firstly, a weekly Zoom team catch-up with our 55 people. That is quite a big deal. Secondly, they have virtual running with Strava and so on. They also have the best fridge of the week prize. People send a photo of their fridge, and we have to guess who it is. Then they have a Zoom lunch on Friday. So, they are trying really hard to do the team piece, and the feedback from the team is particularly the weekly catch-ups where you can set Zoom to have a grid view, and everyone can see everyone else.
How SeedLegals is handling the Covid-19 situation?
He reportedly said about their team: “One feels like they are part of something, and secondly maybe they think there is just no work to do. So, cutting to the no work to do, the good news is we are in the opposite zone. This has been a record month for us revenue-wise. In addition, it has been a record in terms of SeedLegals site usage. In fact, our site usage has tripled over the last few days.
Our competitors are law firms. I have no idea how they used to work from home. Usually, they handle things unsigned on a piece of paper, make phone calls, and red line word changes send your docs. This is all replaced on SeedLegals. Even if your team do not have a computer, you can assign it at home. It is all super easy. SeedLegals is your 24/7 place to go. We like to see what companies need.
I think one of the things we have always looked to do in our funding rounds is to build into the documents the things that people do not think about. So, for example, my business partner Laura Duffy thinks about it a few moves out. What if you do these steps this or next round? What if the business is acquired or sold late? And so on.
What we have done is, built into our documents things that people do not even think about. In fact, I did not even think about it. So now, we feel a responsibility to put those protections in not for the things just that people want but the things people did not yet know they want.
Survival strategies at SeedLegals
He says that: “Where I see founders reinvent what they do to take advantage of the times. I think that is super important, and sometimes it is done opportunistically, and sometimes there is a social conscience around this. SeedLegals offering furlough leaves, furlough notices. It is completely free on the platform. That is led to a huge amount more site traffic.
On the one hand, we have put capex, and we have put in work to provide something for people at no cost. On the other hand, obviously, our hope is those companies will find SeedLegals, and when business picks up again, they will want something from us. They will say it’s a great solution compared to others. So how might you as a founder look to see is how people change their behaviours and what can we offer in this new way?”
How others are handling the Covid-19 situation?
“In a time of drastic change, it is the learners who inherit the future.”
Anthony gave us a great reason to bounce back, and good startup examples, which transformed so fast and successfully got with the coronavirus times.
In Australia, there’s a general mentality that comes from the first settlers, which is: “If you don’t find food, you’re going to die.” It is because you have at least 3 months for the next ship to arrive from England, and you better work it out. So, Australians knew that no one’s going to sort it out. So, they had to sort it out. In the old world, there is much more of an attitude of the government, society, or someone who will sort us it for us, but there is only a limited amount.
It is the government’s leveraging 300 billion on things. That is going to happen, plus you are just going to get the base rate. You are going to get the drip feed to keep you alive. You want to do better than that. My advice is not just to sit and think like: “I’ll just wait for things to play out.” This leaves you at the mercy of everything. Think like: “How can I take advantage of the situation?” In some cases, it is limited, but I think there are some great examples.
We subscribed to delivery of food to the company before but since nobody is in the office, how will they survive? So then, I wanted to subscribe to one of them personally for home delivery. So I went to their site. They had essentially pivoted to home delivery, and they were so busy that they said: “Sorry, not taking orders right now.” and then I looked at their site traffic. It looked like Zoom.
How this crisis currently changing the London startups?
These are exceedingly difficult times for founders, and I think we see it in two ways. Firstly, there has been a huge rush to close rounds before the end of their tax year. Investors are looking for their SEIS/EIS. Angel investors have fueled the vast majority of early-stage rounds in the UK with SEIS/EIS, and now the end of taxi approaches April 5th, and everyone is looking to close their rounds right now. We are seeing is maybe 30% of investors, according to our data, are pulling out of rounds. It means people are still closing rounds but with fewer investors and with a smaller amount.
If your investor is a VC and they are taking 80% of the round, and they pull out, or they want a lower valuation, then you have got nowhere to go. The round falls apart, but if you had angel investors, a few pull out. Reduction in size of rounds but no reduction in the frequency of rounds and if people are using SeedLegals for their rounds, they can turn it into a rolling closed round to close, what if they can get now and top-up later. Our advice is, close fast, close now. Then add more when you can.
The second thing we are seeing is that now some of the companies are pretty much unaffected. MedTech company wrote to us saying: “We do detection of rare diseases and guess what finding investors is not hard.” but other ones anyone location-based is going to have real trouble raising right now. They are also going to have a problem with their actual business. They have a big question: “Should we lay off staff?”, “What should we do?” There is now an alternative which is furloughing.
Furloughing is where the government picks up 80% of the employee’s salary up to 37 thousand pounds a year. In other words, they have a cap of 25 hundred pounds a month that they will contribute. The condition is the person was an employee as of February the 28th. So Furloughing, which you have to do for a minimum of 3 weeks, means that the person can’t work for the company, but the government largely picks up their wages. This is nice, and I guess you could say a win-win if you were to lay off the person who presents a range of problems.
Firstly, for the company, when times pick up again, it will be hard to hire people, you will be competing with everyone else, and you can obtain lots of money from recruiters. For the person who is laid off, no one’s hiring right now. It will be really hard for them to get a job, and you are going to feel bad that they’re destitute and you are leaving them in the lurch and a bad time. With furlough firstly, they can come back again as soon as you decide.
Secondly, since they are still being paid, then that is not such a problem. You need a furloughed notice and a contractual variation to their employment agreement. You can’t just call them and say: “Dude, you’re furloughed. See you in a few weeks.” and you can do that on SeedLegals. When you do it on SeedLegals, we also give you the option. If you have got very little money to say, just take the government grant, or you can say, will top you up to your existing salary. So, we will pay the delta or somewhere in between. Those are the two trends we see in our enormously popular furlough notice. We have had several hundred companies create them over the last few days.
Ecosystems act and react differently than individual players like companies or people within them. So, our last question to Anthony is about the London startup ecosystem in general.
How do you think that landscape will evolve once the Covid-19 dust settles down?
Maybe it is a bit like going into hibernation rather than going out of business.
A decade ago, we saw the bubble of optimism of investments in companies with the potential future but no real immediate revenue stream. Then we saw a rationalization. The UK investors like to see that the company will, if not after this round, at least after the next round, the revenue-generating and very shortly profitable. Otherwise, they see that the company has to keep raising, and it just means dilution.
I think raising is going to be much harder over the next months. The UK investment landscape can probably be put into two parts: angel investors and funds. Angel investors are individuals like you and me. They have some spare money from a few hundred pounds for a crowd round to tens of thousands for an angel round. They’re looking for companies and founders that they believe in. Sometimes they’re looking for a tax deduction; sometimes it is a lifestyle, the feeling like: “I want to change the world”, or we want to return on investment, but to the extent that they are unsure about the future, maybe they have got trying circumstances themselves, they may be keeping the money in the bank, and not investing.
When it comes to funds, they have a fiduciary responsibility to their investors to invest wisely. So, they may pick a much narrower field of companies that will first be survivors as they see and take advantage of different times. They may also be looking for ones with a longer runway.
I suppose, if you are a founder and if you have 1 month of runway left and you have your burn rate, you have bought yourself an extra month. If you have 12 months of runway left and you have a burn rate, you have bought yourself an extra 12 months. If raising investment will be harder, you should be looking to reduce your burn rate as soon as possible. If you do not have at least 12 months worth of runway left, that means either you have got a big pot of money in the bank, which is great, or you have enough revenue. That your burn rate is modest, and without further investment for 12 months, you can still keep going.
There are three key questions: Number one, how rapidly can those companies reinvent themselves into a different space? Number two, how can they cut costs? For example, it could be an excellent use of the furlough scheme where they can resume when things come back to normal. So, it is a bit like going into hibernation rather than going out of business. Number three, if you hit the end of the runway, then the company is out of business whether it is literally bankrupt or merely essentially lays off people and cuts its burn rates to zero. Then the question is, does it ever pick up again? I do not know. Clearly, there is a macroeconomic issue. For a founder, you have got to solve your own problems before other people’s problems.
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