Setting up a lawtech start-up

Choosing the right business structure can have huge implications on a business’ future. It can affect:

• growth
• the amount of tax paid
• the extent of liability owed
• legal requirements

The most common business structure used by start-ups is a private limited company.

This section outlines the main types of business structures and how to set them up.

Sole trader

This is the simplest organisational structure available for businesses, and usually involves one individual who owns and operates the business.

Sole traders keep all of the profits after tax has been paid, but they’re also personally responsible for any losses incurred by the business.

How to set up

Tell HM Revenue and Customs (HMRC) that you pay tax through self-assessment each year. You’ll need to:

• file a self-assessment tax return every year
• keep records of your business sales and expenses
• pay income tax on your profits
• register for VAT if your turnover is over £85,000 (you can also register voluntarily if it suits your business)

Name your business

• You can trade under your own name or choose another name
• You do not need to register your business name
• You must include your name and business name (if you have one) on official paperwork (such as invoices)
• Your name must not include ‘limited’, ‘Ltd’, ‘Limited Liability Partnership’, ‘public limited company’, or ‘plc’ and it must not be the same as an existing trade mark 

General partnership

This is where two or more individuals share responsibility for the business.

In a standard partnership, all partners are fully responsible for all debts and losses incurred by the business. Partners also share the profits made and each pays tax on their share.

In a general partnership, you must choose a ‘nominated partner’ responsible for keeping records and managing the partnership’s tax returns.

How to set up

• The nominated partner must register your partnership and submit the partnership’s tax return with HMRC
• Each partner will need to register and submit their self-assessment separately – this can be done online or by using the SA400 form
• All partners need to send their own tax returns as individuals by filing a self-assessment with HMRC
• You must register for VAT if your turnover is over £85,000 (you can also register voluntarily if it suits your business)

Naming your partnership

• You can trade under your own names or choose another name
• You do not need to register your business name
• You must include all the partners’ names and business name (if you have one) on official paperwork (such as invoices)
• Your name must not include ‘limited’, ‘Ltd’, ‘Limited Liability Partnership’, ‘public limited company’, or ‘plc’ and it must not be the same as an existing trade mark

Private limited company

This type of business structure is the one of the most commonly used by start-ups. It’s a privately held business entity which has a separate legal identity to its directors and shareholders.

This type of business limits shareholders’ liability to the investment they have made in the company, rather than them being personally liable for any debts or losses incurred.

The company can keep profits after paying taxes, which allows the business to re-invest the profits. We would recommend speaking to an accountant about whether this would be the most suitable structure for your business.

It’s simpler to set up and run a private company than a public company as there are fewer legal obligations that have to be fulfilled. Private companies can have a sole director. They do not need to have a company secretary.

Both private and public limited companies must have articles of association. These govern how the company will be governed.

The articles will often set out how directors are appointed and how shareholder meetings are held. They should also be clear as to the rights attached to shares, including any details of different share classes.

How to set up

• You’ll need to register your company with Companies House. You’ll also be registered for corporation tax at the same time
• You’ll need at least three pieces of personal information about you and your shareholders, for example:
  • town of birth
  • mother’s maiden name
  • father’s first name
  • telephone number
  • national insurance number
  • passport number
• It costs around £12 and your company is usually registered within 24 hours
• You’ll get a ‘Certificate of Incorporation’. This confirms the company legally exists and shows the company number and date of formation

Naming your company

• You must choose a name for your business
• Your name cannot be the same as another registered company’s name
• If your name is too similar to another company’s name or trade mark, you may have to change it. You can check the Companies House Register
• Your name must usually end in either ‘Limited’ or ‘Ltd’

Private limited companies are subject to trading disclosure and filing obligations and are required to maintain a register of people who have control over the company.

Disclosure obligations relate to displaying your company name at the registered office, on business documents and on websites. These regulations show the legal identity of your company to anyone who wishes to deal with your business.

Guidance on what companies are required to disclose can be found on the GOV.UK website.

Limited liability partnership (LLP)

This allows each partner to restrict their liability to the amount they invest in the business, rather than being personally liable for debts or losses incurred by the business.

Unlike a limited company, there are no shareholders. There must be a minimum of two partners and only named partners will share in the profits. These profits flow directly to partners who will need to declare it as personal income with HMRC.

LLPs are also required to disclose their finances and accounts. We would recommend speaking to an accountant to discuss the most suitable options for your business.

How to set up

• Incorporate the partnership with Companies House by filing Companies House Form LL IN01 electronically or by paper. You’ll need:
  • the name of the LLP
  • a registered address, such as an office – this address will be public information
  • details of the partners – some of this detail may also be public
• You can incorporate your LLP yourself or use a solicitor, who can advise on all your obligations. You can use our Find a Solicitor service.

Name your LLP

• You must choose a name for your business
• Your name cannot be the same as, or too similar to, another registered company. You can check the Companies House Register
• Your name must not include ‘limited’, ‘Ltd’, ‘public limited company’, or ‘plc’ and it must not be the same as an existing trade mark
• Your name must end in ‘Limited Liability Partnership’ or ‘LLP’

How an LLP is governed should be set out in an agreement between the members of the partnership.

It’s best to create this agreement when forming the LLP, so everyone is aware how the business will operate.

In the absence of such an agreement, default provisions set out in the Limited Liability Partnership Act 2000 apply.

An LLP is subject to similar requirements in relation to the trading disclosures and filing obligations of private limited companies.

Public limited company

A public limited company differs from a private limited company by the fact that shares are available for sale to the public.

There are a number of requirements that need to be satisfied when registering, and there are further requirements after registration.

This is not a common structure for start-ups due to the number of requirements and the costs associated with setting up.

Unlike a private company, before it can operate, a public company must have:

• at least two directors
• a company secretary
• shares held by the subscribers that are paid up in cash as to at least a quarter of their nominal value and the whole of any premium
• a trading certificate from Companies House

Intellectual property (IP) refers to creations of the mind, such as inventions, literary and artistic works, designs, symbols, names and images that can be used in business.

There are a number of different frameworks that allow official recognition of a person or organisation’s right to claim ownership of particular creations or inventions.

These frameworks allow the owners of those rights to financially benefit from their usage and to protect their creations from being stolen or used by others without their consent. 

Some IP rights require official registration in order to be recognised by law, and others are automatically applicable.

This section summarises the different types of protections available and how you can use them to protect different aspects of your business.

Types of IP protection available

Copyright

Copyright is automatically applicable to a wide range of original works and creations. It’s usually associated with artistic creations such as:

• literary works
• drawings
• logos
• photographs
• computer programmes
• sculptures
• recorded music
• recorded video

A person's copyright becomes valid from the moment that a work which falls into a relevant category is created, without the need for registration or other legal processes.

Trade marks

A trade mark is a distinctive sign that’s used to identify particular goods or services provided by a person or company.

The kinds of things that can become registered trade marks include:

• words
• phrases
• numbers
• logos
• designs
• 3D shapes (such as brand-specific packaging)

A person or company can express the quality, history and individuality of their work under a legally registered mark, which sets their work apart from competitors and prevents others from ‘piggy-backing’ on or misusing their success.

You can check if your brand qualifies as a trade mark and apply through the GOV.UK website.

Patents

Patents are a way of ringfencing a process or product that introduces a new or innovative way of doing something.

Patents encourage innovation by ensuring that innovators are given credit and can reap financial reward for the work they do.

A patent gives full control over who can and cannot use their patented invention, product or process.

Patent owners can sell licenses which permit the usage of their patented work or they can sell the patent to another person or organisation, transferring all ownership, rights and control.

You can check if a patent is right for your business by talking to an IP lawyer. If it is, they’ll be able to help you to apply for one. You can use our Find a Solicitor service.

Industrial designs

Through an industrial design, you can protect the aesthetic aspects of a product or work that are unique or distinctive to your creations.

The protection covers aesthetic aspects only and takes no account of functionality or features associated with the items.

Trade secrets

A trade secret is any formula, pattern, compound, device, process, tool, or mechanism that:

• is not generally known or discoverable by others
• is maintained in secret by its owner
• gives the owner a competitive advantage because it’s kept in secret

A trade secret can in theory last forever, as long as its owner uses reasonable efforts to keep it secret and someone does not independently create or discover it.

IP for apps

Discussing your idea

Creating an app usually involves more than one person, especially if you’re hiring an app developer to help with the technical side of developing the app.

Signing a non-disclosure agreement (NDA) before work starts enables you to speak freely about your ideas without fears of that idea being stolen.

An NDA is a contract between two people, or entities, that states what information will be shared between them and what information will not be shared with other people.

Building your app

If you’re hiring another party to build your app, they’ll be the first owners of the copyright as they’re the ones who are ‘creating’ the app.

You’ll need to make sure that they sign over any copyright to you once they have finished, so that they cannot claim ownership further down the line.

If third-party software has been used as a part of that build, you’ll need to make sure that you have the necessary licences in place in both the building and future use of your app. 

Name and logo

Protecting your brand name and image is important as it can stop other traders from using the same or similar name and image as your app.

Registering a trade mark for your app’s name and logo enables you to protect your app.

Ways to protect your app

In general, computer software is not patentable. However, there are a few examples where software has been protected in this way.

It may be the case that your app, or part of it, may fulfil the requirements to get a patent or they could be protected in other ways.

The best way to find out how you can protect your app is to contact an IP lawyer. You can use our Find a Solicitor service.

IP for software

Copyrights

Copyright protection extends to the particular form in which an idea is expressed.

In the case of software, copyright law would protect the source and object code as well as certain unique original elements of the user interface.

The owner of copyrighted software has certain exclusive rights, including the rights to:

• copy the software
• create derivative or modified versions of it
• distribute by license, sale or otherwise

The right to control duplication protects the owner of copyrighted software against the competition that would result from verbatim copying of the programme’s code.

Copyright law also protects against indirect copying, such as unauthorised translation of the code into a different programming language.

Anyone exercising any of these rights without the permission of the copyright owner would be infringing rights and could be subject to liability for damages or fines.

Patents

Patents can be useful to protect features that cannot be protected under copyright or trade secret law.

Patents can be obtained for ideas, systems, methods, algorithms and functions embodied in a software product, such as:

• editing functions
• user interface
• programme algorithms
• menu arrangements

Patent rights are exclusive. Anyone making, using or selling the patented invention without the patent owner’s authority would be guilty of infringement.

Trade secrets

Many features such as code and the ideas and concepts reflected in software can be protected as trade secrets.

This protection lasts as long as the protected element retains its trade secret status.

Unlike patents, trade secret protection does not extend to elements of the software that are readily ascertainable by lawful means, such as reverse engineering or independent development.

Trade secrets are not subject to being infringed, as with other IP rights, but they are subject to theft.

Their status can be protected as an IP right if the owner can prove that the secret was not generally known, and reasonable steps were taken to preserve its secrecy.

Trade marks

Whilst trade marks cannot protect the technology, they can protect the names and symbols used to distinguish the product in the marketplace. This includes any logos or slogans that are used to sell the product.

Hiring employees

One of the most important decisions you’ll make is building a team to deliver your vision. You should carefully design each job description and person specification.

When designing any role, you should understand its key tasks and responsibilities. These should be written in a job description that will communicate to others the main purpose, tasks and expectations of the jobs.

For the person specification, you’ll need to decide which skills, knowledge, experience, aptitudes and personal qualities are needed to do a good job, as described in the job description.

You need to think about how best to advertise the vacancy, so that the widest pool of potential candidates knows about the job opportunity.

Ideally, you want to place the advert somewhere it’s likely to be seen by people with the relevant skills and experiences.

You can place adverts in places like job centres or on job websites. However, if you’re looking for specific roles or skills, it may be useful to have a more targeted approach.

When planning the interview, it can be a good idea to prepare questions in advance and make sure they are based on the job description and person specification.

You should also consider whether selection tests are appropriate. This is particularly important if the job involves practical, technical or specialist skills.

It’s also important to ensure your staff buy into your ethos, culture and vision.

The hiring process can be time consuming and costly, and it’s easy to think that even though a candidate is not great, they can at least do the job. This can have a negative impact on your business further down the road, so it’s important to take the time to hire an individual who’s right for you and your business.

The employment contract

The contract of employment is a document that sets out the rights and obligations of both parties. Its contents are important as they determine the obligations each party has to the other, along with some additional requirements imposed by legislation.

All new joiners have a statutory right to be given, from day one of employment, a written statement containing the most important terms and conditions of their employment. This includes:

• overall hours and days they are expected to work
• details of any probationary period
• details of benefits, including holiday entitlement
• where the employee will work and whether they might have to relocate
• any notice periods

Employees and employers are free to agree any hours of work, as long as the hours do not transgress the Working Time Regulations 1998.

Interns, apprentices and volunteers

There’s no legal definition of an internship, but it’s generally understood to be someone who is given a work opportunity to gain relevant professional experience.

Another option is to hire apprentices. Apprenticeships can be a useful way of addressing specific roles or skills your business needs, whilst also providing on the job training.

Apprentices could assist in anything from social media and marketing to the tech and computer science side of your business.

There are several step to hiring an apprentice and you can find more information on the GOV.UK website.

A volunteer is generally understood to be someone who is not obliged to work but will occasionally perform some tasks which they are not paid for.

Interns may be legally classified as employees, making them eligible to be paid the National Minimum Wage and benefit from other employment rights. This is likely to be true if they’re required to work, as opposed to shadow work.

Any work done by interns and volunteers in building your product could be subject to the same issues around copyright ownership mentioned above, particularly if they’re involved in coding or building any part of your app.

Make sure that you clarify the position on copyright ownership and the need to have requisite licences in any third-party software in the paperwork (contracts and documents) at the start of any work interns or volunteers undertake and before any work begins.

Seeking appropriate legal advice at the very beginning will save you valuable time and money further down the line, as these issues can be costly to fix at a later stage.

Diversity and inclusion – anti-discrimination and harassment compliance

When recruiting and managing staff, it’s important that you do not discriminate against people. Equalities legislation sets out different types of discrimination. We’ve explained some of these below.

Direct discrimination is when a person is treated worse than another person because of a protected characteristic (such as age, sex, race, disability, sexual orientation, gender identity and religion).

For example, if you do not employ a woman because you assume that she would not be able to do her job as well as a man because she is a parent, this is likely to amount to direct sex discrimination.

Indirect discrimination happens when there is a policy that applies in the same way for everybody but disadvantages a group of people who share a protected characteristic.

For example, if you selected people on a ‘last in, first out’ criteria you run the risk of age discriminating because it would unfairly disadvantage young people.

Harassment is unwanted behaviour connected to a protected characteristic that someone finds offensive or which makes them feel intimidated or humiliated.

You should take steps to prevent harassment, for example, through a policy stating what behaviour you expect from staff and how you will deal with harassment or bullying.

You should take positive steps to make work more inclusive for disabled people working for you and applying to work for you.

What is data protection?

Data protection relates to the fair and proper use of information about people.

Recent changes to legislation governing how personal data is used in Europe means data protection has a high profile.

Getting data protection right will be essential for your data-driven tech start-up, particularly in view of the high standards the legal profession requires of its members in handling personal data lawfully.

On a practical level, it’s about building trust between people and organisations, and treating people fairly and openly.

The UK data protection laws are set out in the Data Protection Act 2018 and the General Data Protection Regulation (GDPR).

Data protection legislation applies to you when your start-up is processing personal data for other than purely personal or household purposes.

Personal data means information about a particular living individual. This might be anyone, including a:

• customer
• client
• employee
• partner
• member
• supporter
• business contact
• public official
• member of the public

Data protection law is an evolving area. You may want to bookmark our resources on GDPR compliance to ensure you have access to the latest information and regular updates.

Here are some of the things to think about when you’re putting in place the data protection framework for your start-up.

The data protection principles

Fundamentally, you need to make sure that you’re familiar with the principles set out in the GDPR, as they set the standards by which the processing of personal data may occur lawfully.

The principles are:

• lawfulness, fairness and transparency
• purpose limitation
• data minimisation
• accuracy
• storage limitation
• integrity and confidentiality

You’ll also need to decide whether you’re a data controller or a data processor in terms of your processing activity.

Data controller

A data controller is the person that decides the purposes for which personal data are processed.

Typically, this will be organisations, but it can be an individual (such as a sole trader).

If you're a data controller, you'll need to register your business with the Information Commissioner's Office.

Data processor

A data processor is a separate individual or organisation (but not an employee) who processes the data on behalf of the controller.

The GDPR requires a written contract between controllers and processors they appoint. The terms that must be stipulated in the contract include those relating to:

• only processing on the documented instructions of the controller
• confidentiality obligations on the part of persons authorised to process the data
• security of processing
• conditions for engaging sub-processors
• assisting controllers to comply with data subject rights
• assisting controllers in relation to other obligations including data protection impact assessments
• disposal of data at the end of processing
• contributing as necessary to demonstrating compliance with the GDPR and to audits

Data processors:

• may have record keeping obligations
• may be obliged to appoint a data protection officer
• must cooperate with their supervisory authority (the Information Commissioner in the UK)
• can be subject to fines and other enforcement measures

Grounds for processing personal data

You must establish a legal basis for processing personal data. These are set out in article 6 of the GDPR.

For requirements relating to the processing of special categories of personal data, see article 9.

Although consent is the most commonly recognised legal ground for processing, you’ll want to consider whether your processing is compatible with other options available including ‘performance of a contract’ and ‘the legitimate interests of the data controller’.

In considering the legal basis, bear in mind that the GDPR has introduced more stringent conditions for establishing consent, including the requirement that consent be as easy to revoke as to establish.

Data protection by design and default

Data protection by design and default is the requirement in the GDPR that data controllers must implement appropriate measures to ensure that the data protection principles are integrated into your processing.

The approach controllers should adopt in establishing appropriate technical and organisational measures for their processing activities is set out in article 25 of the GDPR.

Data protection impact assessment (DPIA)

A data protection impact assessment (DPIA) is a type of risk assessment that helps you identify and minimise the risks relating to personal data processing activities.

Both the GDPR and DPA 2018 require you to carry out a DPIA before certain types of processing. Your DPIA must:

• describe the nature, scope, context and purpose of processing data
• assess the necessity, proportionality and compliance measures
• identify and assess risks to individuals
• identify any additional measures to mitigate those risks

The Information Commissioner’s Office (ICO) has guidance and checklists on how to complete a DPIA.

Data protection officer (DPO)

You may need to appoint a DPO if you carry out certain types of processing activities.

A DPO assists you to monitor internal compliance, provide advice regarding DPIAs and act as a contact point within your business.

Visit the Information Commissioner's website for more information about appointing a DPO.

Cybersecurity

Law firms and solicitors are required to maintain high professional standards and owe duties towards their clients. These require law firms to ensure they have effective policies and procedures in place to maintain cybersecurity.

You should expect to be asked about the security standards of your products.

Additionally, you may find resistance to cloud-based products and services.

Be prepared to satisfy firms that your cloud supplier complies with all relevant regulatory obligations and international standards for information security management.

The coronavirus lockdown has exposed particular vulnerabilities in the legal sector.

Home working has helped business to continue working during coronavirus, but it's also highlighted the issues of cybersecurity when working from home. It's important to increase cyber vigilance and ensure everyone in your business is aware of the risks and how to mitigate them.

See our coronavirus: cybersecurity, fraud prevention and lawtech hub – a resource for solicitors and law firms to safely deliver their services online and engage with technology providers.

Understanding the business cycle

Understanding where your business is in the cycle is essential if you’re going to raise the finance you need and attract investors. The typical start-up cycle is:

• concept stage
• pre-seed
• seed
• early stage
• later stage
• initial public offering (IPO)

The concept, pre-seed and seed stages typically represent the initial capital required for product or service development, applying for patents, researching the market and preparing to commence operations.

Funding at these early stages can be difficult to source because the risks are high.

As your company moves through the cycle, targeting the relevant investors is key.

Your financial needs, progress to date and relevant business milestones will determine what type of investors you can attract.

When researching potential investors, it’s important to consider the risk appetite of each investor as well as the type of companies they invest in and the stage at which they invest. This will help you narrow down potential investors.

Funding sources

There are many different ways you can source funding for your business, and it can be difficult to know where to look for funding as well as which type of funding will suit you.

Sources of funding you could explore include:

• friends and family – although it’s important for you and the person you borrow money from to understand the risks involved. It is important to seek advice from an accountant as there may be tax benefits or restrictions that you need to be aware of
• government start-up loans – you could be eligible to apply for a government start-up loan of between £500 and £25,000 to start or grow your business. Unlike a business loan, these loans are unsecured and accompanied by free support and guidance
• crowdfunding – one of the most popular ways to attract start-up funding, a range of different platforms offer different types of investment. Crowdfunding gives start-ups the opportunity to raise funds, generate publicity and gauge interest in their business as it develops. There are two different types of crowdfunding:
  • consumer-focused crowdfunding – if your business is product based, these platforms offer a way to ensure a healthy number of generated sales before you begin manufacturing. It provides the capital you need to get started without having to give up shares in your business
  • investor-focused crowdfunding – these platforms allow you to raise funds by turning supporters into shareholders. This is a good way for businesses that are not product-based, or for small businesses looking for larger amounts of funding to expand. Investors from these platforms are given equity in your company, and so are more likely to invest
• angel investors – wealthy individuals looking to invest in start-ups at their earliest stages. Many angel investors have launched a successful business of their own. While you can approach an investor one-on-one, it’s usually a better idea to pitch your start-up to an angel-investment network. Each network specialises in different areas, business types, and industries

Tax regimes for lawtech start-ups

The UK tax system has various special tax regimes that seek to support smaller businesses where relevant conditions are met.

Lawtech start-ups may wish to consider the conditions and potential benefits of relevant regimes and plan accordingly, including the following:

• the Seed Enterprise Investment Scheme (SEIS) can help attract investors by offering them significant income tax and capital gains tax reliefs for investments in certain early-stage, higher risk trading companies, as the acronym implies, mostly at the seed stage
• the Enterprise Investment Scheme (EIS) offers income tax and capital gains tax reliefs to investors in a broader range of investees than SEIS, but still subject to conditions and focused on small, higher risk trading companies
• venture capital trusts (VCT) offer individual investors in them tax benefits and then use the funds they raise to invest themselves in certain small, unquoted companies
• entrepreneurs’ relief can reduce capital gains tax payable by business owners when they ultimately sell their business
• the Enterprise Management Incentives (EMI) regime enables certain small companies to incentivise their employees by granting them tax-efficient share options

Note that some of these regimes restrict the application of relief in relation to investments in legal services providers.

If you’re interested in these regimes, check the conditions carefully. We recommend you take independent advice.

Effective purchasing can help you control your costs and improve your margins, which can be important when starting your business.

Having a co-ordinated approach to buying goods or services is essential.

Knowing your objectives and what exactly you will need to purchase will help you prioritise your needs and manage your cashflow.

Choosing the right suppliers and building working relationships with them can be important for your start-up.

Suppliers can often give you early warnings of price fluctuations which can help you save by planning ahead. Often, business can end up paying too much because of small orders placed with many different suppliers.

By keeping in mind your short, medium and long-terms goals, you can plan what you will need and when.

By consolidating your purchasing, you could reduce the number of suppliers you have and help you to negotiate better discounts.

Planning ahead enables you to manage your cost. If you’re in the early stages of starting your business, you might want to consider alternatives (such as leasing equipment), rather than committing yourself to spending a lot on purchases.

Outsourcing services or using contractors rather than employing permanent staff may help in keeping your costs down.

Keep an inventory of what you have. In terms of goods, it’s important to know what you have so you do not over or under order. In terms of services, it’s important to know when products will need to be renewed, maintained or replaced.

You may also want to check whether your business would benefit from being VAT registered. This could be an effective way for your business to manage costs when purchasing goods and services.

However, becoming VAT registered has a number of requirements, so it’s important to seek advice from an accountant to see if this would be suitable for your business.

Entering into contracts

When making a purchase, ask around and research exactly what it is you need. When deciding on individual products, consider:

• compatibility with existing systems
• the technical skills or training needed to implement or use the product
• how quickly the product might be obsolete, or what expansions or upgrades will be needed
• what the running or maintenance costs are likely to be
• what happens if something goes wrong and it needs to be fixed or replaced

When identifying suppliers, it’s important to research a number for comparison.

Looking at reviews and other customer feedback is useful, but you might also wish to consider:

• the product suitability
• quality and flexibility of service – especially the speed and frequency of deliveries
• location and ease of communication
• their capacity to deal with your order
• what happens if something goes wrong – for example, if delivery is late or products are faulty
• their financial stability

In terms of ordering services, it’s also important to consider:

• what is and is not included in the service
• what support is available if things go wrong

Whether you’re buying goods or services, it’s important to agree everything in writing. Business relationships can often break down due to misunderstandings and miscommunication.

You may wish to consider getting legal advice when entering into contracts, particularly ones that are long-term or are high in value.

Understanding law firms

Before approaching firms, it’s a good idea to understand a few things about how they’re set up, how they do business and who makes the decisions.

A part of this is understanding how law firms buy their products and services. Knowing this can help you to develop your marketing strategy and save you valuable time.

The first thing to be aware of is that law firms do not have the same procurement processes that other enterprises may have; and in-house legal teams may also differ from traditional law firms. As with other businesses, not all law firms are the same.

It’s also helpful to understand who the decision makers are. This can be difficult as job titles and responsibilities for procurement may differ from firm to firm.

The best place to start would be with a firm’s lawtech or legal innovation team or contacts with an incubator. Different firms may have different names for this type of team, but they will usually have a view of the firm as a whole; knowing what is currently being used and what may be needed.

Innovation teams will be the best starting point and will be best placed to link you with both the IT departments and the users in their firm.

Researching the individual firm to understand how it operates and tailoring your pitch accordingly will help to demonstrate that you understand their individual needs.

You should be aware of the ethical and regulatory obligations, found in the SRA’s Code of Conduct for Solicitors and the Code of Conduct for Firms, that solicitors and law firms have, and make sure that your product adheres to these. This will enable firms to have confidence that you understand how they work and the standards they must abide by.

Having early conversations with firms can be extremely beneficial for these reasons: it will allow you to fully understand what’s important to a firm and enable you to develop your product accordingly.

Who to talk to, and when to talk to them?

Often, start-ups do not wish to approach firms until they have a minimum viable product. However, the earlier you approach firms, the better your product will be.

Having informal conversations with firms at the early stages of your development enables firms to follow your journey and it allows you to build a relationship with them over time.

Having these early conversations and developing a rapport with firms helps to get your business talked about. This, in turn, can help to build your networks and promote your business.

When deciding which firms to approach, it’s a good idea to work out your ideal customer profile.

The first part of any business is understanding what problems you’re looking to solve and who has those problems.

Taking this further, you should identify the characteristics you’re looking for in a firm, then cross-reference that with the type of firms that need your product.

It’s essential to know as much about the firm as possible before approaching them. Understanding the type of work they do, the clients they work with and how tech helps them work will not only give you a good understanding of how your product can help them, but it will demonstrate to the firm that you understand who they are and what they need. 

Pitching to firms

When putting your presentation and demonstration together ready to pitch to a firm, it’s useful to tailor it to that specific firm.

Often product demos can be a catalogue of features, so it’s important to show how your product will benefit the firm you’re presenting to. This allows the firm to see exactly how your product would benefit them, as well as showing them that you understand their firm and their business needs.

It’s also useful to understand that firms have contract cycles and, although these cycles can be very long, it’s not something that should discourage you. Setting up and agreeing a timeline can help both sides to ‘buy in’ to the process.

Asking firms directly what they would like you to demonstrate can also help to set parameters when outlining a project plan.

Having a degree of polite persistence and an established timeline will help you through the processes. It’s important, however, to understand that things do take time.

Firm size and the adoption of tech

The adoption of some areas of technology is happening faster during the pandemic. Firms have had to change the ways in which they work and adopting technology has been a big part of facilitating these new ways of working.

The difference between larger firms and SMEs is predominantly around their approach to tech and their budgets rather than their appetite for it.

Larger firms may have a process that requires multiple people to sign off on the adoption of new technology, whereas smaller firms may have fewer people and therefore may be quicker at adopting new technology.

Social media

Social media undoubtedly plays a vital role in building your profile.

Understanding where your product audience ‘lives’ on social media and identifying where they look to for their information will help you to focus your efforts.

Utilising social media enables your targeted firms to follow your development and gives you a platform to start those soft conversations.

By identifying where your targets get their information, you can create content to engage with them.

Finding media sources and influencers that your targets trust, and then engaging with them, can help to get you and your business seen.

Insights in marketing tools on social media platforms can also give you crucial information. For example, recent use of social media platforms for businesses has highlighted the importance of cybersecurity.

Understanding these insights and addressing these concerns will give you an edge when approaching firms.

It’s also important to remember that the people following your journey may not necessarily be your end customer.

However, having people following your progress helps to get your business and your product talked about, which can be hugely beneficial, especially if people in your target firms have already heard of you.

Building your social media platform by posting testimonials and recommendations can help firms to understand who you are as a business.

It’s always important to be mindful of the terms of service social media platform have. Some platforms monitor activity so it’s important to make sure that you’re not sending out too many unsolicited connection requests or automated emails, as this can result in your account being blocked.

Engaging with others on social media might be your first point of contact, so it’s important for you to capitalise on it in the right way.

We sat down with the chief knowledge and innovation officer of a leading law firm to talk about their experiences and advice for start-ups approaching and working with firms: 

Understanding law firms

In our firm, we have a dedicated knowledge and innovation team, which is entirely separate from our traditional IT team. It’s worth noting that this team might be called different things at other law firms.

In effect, the team straddles the boundary between, and operates as both, a practice area or fee earning team and a business services team.

This team is responsible for the tools, technologies and alternative approaches that fall outside of our core IT systems and infrastructure and it’s increasingly being used by our teams to drive efficiency and to deliver new tech-enabled products and services to our clients.

When new legal technologies are being considered, the team will assess the technology, involve relevant stakeholders across the business as part of that process, manage any pilot, co-ordinate the ultimate purchasing decision and roll-out.

The team would also champion use of the technology, offer training and support, as well as actively explore internal and client-facing opportunities.

Budget decisions rest with me as the chief officer, referring back to our managing partner or finance committee where necessary. Importantly, this budget is entirely separate from our IT budget.

The team will also co-ordinate with our IT, information secretary, risk and other internal teams as part of the procurement process.

As is pretty typical in the legal industry, we do not have a separate procurement team, unlike many other large organisations and financial institutions.

Who to talk to, and when to talk to them?

Speaking to me or one of my team in the first instance is the best starting place. We usually have the best idea of where there is need and/or potential application across the business.

Approaching an individual partner may sometimes yield a lead, but they will likely have a narrow field of reference and may not be aware of wider opportunities in the firm.

Part of my team’s responsibility is to ‘join the dots’, as we have a wider view of the firm’s needs.

The workload of each partner fluctuates, so this could mean that an individual partner gets caught up on client work and the lead goes cold. If you can win over someone on the legal technology team with the potential, they will largely do the internal sales job for you.

Early conversations are key. Even at the point where you don’t yet have a product to sell.

Asking for input at development stage is incredibly helpful from the perspective of developing a product that meets real need, but also allows the firm to get to know the product, perhaps influence its development, and consider the potential before discussion moves to pilot and solid use case.

It’s incredibly important to make sure that any conversations are targeted to the firm you’re speaking to.

There is nothing worse than when a vendor or developer has no clue about the firm, the sort of work it does and the clients it works for.

I would recommend that start-ups invest the time in understanding different firms and what they do, and target those that are most relevant to the product.

Having the ability to specifically explain why you think your product is relevant to them is a huge advantage when approaching a firm.

Social media

My team typically does not use social media as a way of developing relationships with vendors.

We get hundreds of requests every week and so it’s not possible to use it as a way of meaningfully engaging with a vendor.

If used properly, social media can be a great way to build up profile; the more you can get customers to post testimonials and recommendations on social media, the better.

Building a profile, keeping it up to date and sharing relevant interviews and press articles can be useful in helping firms understand a bit about your start-up.

However, I would always advise making an actual approach directly by phone or email.

Below is a list of just some of the accelerators and incubators where start-ups can make applications to join.

Accelerators

Barclays Eagle Lab Flight

Wayra

Microsoft Accelerator

Entrepreneur First

Open Data Institute

Entrepreneurial Spark

NatWest Entrepreneur Accelerator

Incubators

Barclays Eagles Labs

Slaughter and May Collaborate

Mishcon De Reya Lab

Fuse by Allen & Overy

Deloitte Ventures

Code Base

PWC Scale-up

Other resources

SRA Legal Access Challenge

SRA Code of Conduct for Solicitors