Before now, coding was a skill used almost solely by programmers and persons with a degree in computer science. But given the intersection of law and technology, this is no longer the case. The rapid growth of technology has introduced a new range of legal issues and problems which demands lawyers to acquire relevant skills and competencies. The dual set of law and technology skills are becoming increasingly valuable in a digital-driven environment. Embracing innovation is a critical skill to remaining relevant in one’s field of knowledge. It is important to note that when lawyers decide to learn to code, it does not mean that they should become full-blown programmers, but they should at least be coding literates and have an understanding of how it works. Now the question begs, of whether it is necessary for lawyers to learn to code.
Given the buzz of LegalTech, lawyers with coding skills would have a competitive edge over their counterparts. They are better equipped to serve as project managers for legal software and provide tailored advisory to digital businesses. As Law firms are becoming more client-centric, understanding their ‘digital clients’ is vital.
Lawyers are researchers. They research past cases, laws, statutes, exemptions etc. The best lawyers are those who know how to make proper research, they dig around and find answers to back up their claim. As a lawyer with the ability to code, you become better at research as coding is basically knowing what to ask, how to ask it and where to find the answers
But even as lawyers with no interest in learning to code it is believed that the more lawyers can engage with technology, the better for them and the better for their clients. This means, whether you can code or not, there are definitely advantages to being able to engage with technology and to speak on a somewhat technical plane. As future focused lawyers, an understanding of terms such as Blockchain, AI, Cybersecurity, Internet of Things etc, would drastically increase your value to potential clients/employers. Also, tech-savvy lawyers are in great demand. You’d be hard-pressed to find a company today which doesn’t have technology at its core. Finally, tech savvy lawyers provide value by connecting both lawyers and developers. They can speak law to lawyers and speak tech to developers, which enables them identify and solve a need.
An understanding of these technologies and its concepts can help lawyers understand why certain policies and procedures exist e.g, cloud policies, data privacy and sharing, AI ethics etc. Coding can be beneficial to lawyers in multiple ways.
Lawyers must continue to develop themselves, and ideally immerse themselves in acquiring requisite skills if they want to remain relevant in their field.
Every business, organization, and startup requires funding to transform its ideas into reality or to scale its business. Companies typically rely on some form of external funding to sustain its growth. Equity financing, debt financing, and mezzanine financing are the three major financing models for businesses and corporations. Equity financing involves the allotment of shares to investors willing to inject capital into a company. Debt financing involves raising money in the form of loans from banks and other financial institutions. This model is made on the terms that security (collateral) will be provided by the entity seeking funds and that such funds raised will be repaid (together with accrued interests) over an agreed period of time, irrespective of whether or not the business makes a fortune. Mezzanine financing is a hybrid of both debt and equity financing. Mezzanine funding could refer to the injection of part cash in exchange for equity and part debt in exchange for interest payments.
A convertible note combines debt and equity financing. It is used by early-stage startup investors and is a short-term debt that converts into equity. Convertible notes are structured as loans with the intention of converting them to equity. The investor would be loaning money to a startup and instead of getting a return in the form of principal plus interest, as is the case with typical loans; the investor would instead receive equity in the company. These investors assume the role of a traditional bondholder. Different types of equity are available to various stakeholders within a startup; common shares and preferred shares. More often than not, the investor gets preferred stock in the startup. Early-stage startups sometimes will raise money via convertible securities if they’re not ready to firmly establish their valuation, or are between rounds of funding, and need to raise money relatively quickly. Therefore, the investors use convertible securities/notes to essentially buy time until a priced equity round occurs, which will inform how the investment amount translates into shares in the company.
What are the key components of a convertible note?
a. Conversion/Discount Rate: Investors are generally given an additional discount on the price of the shares, compensating them for the risk they took by investing during the early phase of the startup. The conversion discount essentially allows the investor to buy more shares with their investment fund than later investors.
b. Interest Rate: Rather than compensating the investor in cash for the interest that accrued on the investment, the interest of a convertible note would increase the number of shares that are issued when the note converts into equity. Interest rates for convertible notes are usually low.
c. Type of Equity Interest: Different types of equity are available to various stakeholders within a startup; common shares and preferred shares. The debt typically converts into shares of preferred stock based on the terms of the note.
d. Maturity Date : As with other forms of debt, convertible notes have a maturity date at which the investor can request a full payment back from the company. This is the date at which the debt or fund advanced by the investor becomes due and payable (with interest), if the note is not yet converted to equity. If the startup has not converted the note into equity by the maturity date, the investor can extend the date that the note will mature or call for an actual repayment. The maturity date is also a time limit on the company to achieve the growth or potential necessitating the next round of financing while protecting the investor from an endless possibility of not seeing a return on investment.
e. Valuation Cap: The valuation cap is the most important term in a convertible note. It is a way to reward seed stage investors for taking on additional risk. A key consideration for any startup is what any amount raised under a convertible note will convert into at the next round. The valuation cap sets the maximum price that your convertible security will convert into equity. A very low valuation cap could result in a toxic cap situation, and may even deter the next round investors.
When should convertible notes be used?
Convertible notes are preferable to startups because they are quicker, easier, and cheaper to issue than equity. Speed, simplicity and cost are factors that influence a startup’s use of convertible notes. Although, the issuance of preferred stock is complex and could take weeks for negotiation of terms and documentation. The reason most investors would want a convertible note is if such startup has a strong growth trajectory. Convertible notes are ideal for early-stage startups that are in high-growth phases. Convertible notes are also used to give founders more time to determine a valuation for their company. The valuation determines what percent of the company is being offered. Sometimes, it could be difficult to know exactly how much a startup will be worth, especially in its early stages and as such, Convertible notes allow issuers to defer valuation negotiations until a subsequent round of financing. This affords the company time to develop metrics that can be used to determine a fair price in subsequent rounds of funding
Convertibles notes are a great way for founders to raise funds easily, no doubt. They must however take into consideration the key features of a convertible note to avoid falling into pitfalls.
The legal industry is evolving from a system that dwelt heavily on traditionalism and conservative ways to one that is being propelled by technological advancement and innovation. Innovation in law firms takes many forms, both internally and externally. A good number of lawyers are tired of hearing the phrase : Innovate or die and yet clients keep calling for innovative ways to solve their problems. A 21st century client in taking up legal services, requests for pitch proposals (RFPs), in trying to identify which law firms demonstrate how they have innovated, are innovative and will innovate. To foster an innovation-centric culture in a law firm that fuels valuable change, there is a need to create a role that is responsible for managing the process to improve client service, and to provide a better client service experience, and that is the role of the Chief Innovation Officer.
A Chief Innovation Officer is best described as an individual who is responsible for managing and driving the innovation process in an organisation. He is the designated person in an organisation that identifies strategies, business opportunities and new technologies and develops business models and structures to serve those opportunities. Innovation is a mindset that behoves on everyone in an organisation to think critically of new and efficient ways of getting things done and solving problems. A chief innovation officer does not take on the whole ‘job’ of innovating, but he is responsible for streamlining and managing innovation processes and efforts in an organisation. Typically, this role is held by a person with a broad technical expertise in the industry.
The roles of a chief innovation officer in a law firm include, but are not limited to:
Addressing Client Expectations – Improve Client Experience -Bring/drive value for clients
Developing and overseeing transformative initiatives and strategy that helps organisations respond to evolving changes
Ensuring that innovative strategies are tailored to reflect and align with the firm’s organisational culture
Identifying innovation trends and business opportunities for the firm
Driving New Market Share, Aiding in new business pitches, responses to RFPs, and panel reviews
Using innovation to provide client-centric result and value resulting in a long-term relationship
Not responsible for developing ideas themselves; but establish a process that enables other people to contribute.
Lawyers will always find ways to help their clients and to be able to keep up with modern trends, enhance service delivery in line with technological disruptions and thrive efficiently, law firms need a chief innovation officer. There is always going to be a need for great legal service, which will only become more prominent and important.Having a Chief innovation officer is not the gateway to immediate change management. As much as the designated individual would drive design thinking, manage and coordinate innovation strategies in a firm, the change process could take a bit longer than is expected with a lot of iterated processes, however, the end in this case, justifies the means.
A lot of startups are known as disruptors because they’re based on innovation, solving problems in new ways or addressing the disadvantages of existing products or creating entirely new categories of goods and services. A startup focuses on rapidly growing market in its niche, and solving user’s problem with its product. More often than not, one of the reasons why ideas are not executed or startups fail among other reasons is lack of funding.
What are the available funding mechanisms to startup companies?
Some of the funding mechanisms stated to be available to startup companies are, but not limited to: Bootstrapping, Venture Capital Financing, Angel Investors, Crowdfunding, Loans/Grants, and many others.
Bootstrapping is the term used to describe a method of funding or starting up a business using nothing but personal financial resources. It is a popular approach for startups who are trying to reduce risk, conserve capital, or gain control of their brand. Energy is expended on the developed product or service itself rather than pitching to investors and other potential sources of capital funding. It can however be a time-consuming and sometimes difficult process, but typically results in greater control of the company and minimized amount of outside debt.
Venture capital (also called “venture funding”) is money given to startups by private equity firms as the capital they need to grow or expand into new markets. If your startup has potential for long-term growth, you can go to venture capital firms. Venture capital financing is provided not just in financing but also in the form of managerial and/or technical expertise. The goal of venture capital investors is usually to get high return on investment (ROI). Venture capital funding is a great option for startups that are keen on scaling quickly. . Venture capital funding provides valuable information, resources, strategic guidance and technical expertise/assistance to make a business successful.
Crowdfunding is an adaption of technological disruptions that has come to the forefront in the 21st century. This is when a “crowd” funds a project or business with small donations from many people, rather than one or two major investors. This type of funding mechanism cuts out having to access only professional investors and allows the public to invest in an idea or startup. Crowdfunding also helps to drive engagement to and awareness of the startup. The types of crowdfunding are; donations, debt, rewards and equity.
Angel investors are individuals with a high net worth that helps startups and small businesses gain financial backing in exchange for equity in the company. These investors can sometimes mean the difference between an idea becoming an empire or never getting off the ground. Because of their entrepreneurial background, they know a good investment opportunity when they see one. They more often than not, have an investor network and can get multiple people to invest. However, an angel investor’s higher risk tolerance may come with the expectation of a high return.
Picking a funding mechanism for startups basically depends on the size of the startup, its envisaged growth and purpose, as well as weighing the pros and cons of each mechanism. Startup founders should take all this into consideration before opting for a funding mechanism.
Websites, among other reasons are created to inform new and existing clients about the products and services that a company offers as well as create an online presence for a company or organisation. Just like startups, websites are also subject to country-specific laws & regulations. Not adhering to these stipulations could result in legal battles and liabilities.
Protecting a website from liability could happen pre-launch and post-launch of the website. On the pre-launch, it is imperative that you put certain measures in place such as confidentiality or non-disclosure agreements to protect any idea or business secrets that you may have.
To protect your website from liability, there should be a disclaimer on the website; as where a person reasonably takes action(s) based on the information provided on a website, the website owner could be held liable. Disclaimers typically relates to refusal to accept responsibility and limit the legal liability of an individual, company or organisation. Disclaimers should be drafted properly to avoid an overkill that would end up destroying the legal liability they were designed to prevent.
Another way to protect one’s website from liability is by having a terms of service. A terms of service should be an essential part of a website as it spells out what users must do and not do while using the website. After determining the scope of business for the site, a term of service serves as a form of contract between the owner of the site and the users of the site. Where users defy the terms for use of the website, there should be penalties/remedies reserved for such violations, including and leading to the loss of such user’s account. To have users accept these conditions, a clickwrap should be inserted into the design of the website. This allows the site owner to obtain undoubted acceptance from users when they actively click on something that signifies their acceptance.
Having a website is a great way to reach a large amount of users, and to avoid liability or legal battles, site owners should ensure that they take the aforementioned protections into consideration.