Fledgling legal startups take flight in Singapore
By Benjamin Cher July 10, 2015
- Just a handful of legal startup services in Asia
- DragonLaw looks to instigate change in the sector
IN a dimly lit room bustling with noise and bodies, yet another startup was gearing up to launch in Singapore.
However, instead of a typical launch party, with pumping music and free-flowing booze, this was a seminar on legal terms, with a workshop on how to use them.
That was how Legalese.io, one of Singapore’s first legal services startup, was officially launched – no pomp or pretence, just a room full of angel investors, venture capitalists, and entrepreneurs, over at the Joyful Frog Digital Incubator (JFDI.Asia) office.
The room fell into a hush as Legalese.io founder Wong Meng Weng made his presentation, pulling out the various resources available online, culminating with a demo of the software involved. Wong is also cofounder of JFDI.Asia.
A surprise guest – Daniel Walker, cofounder and chief executive officer of DragonLaw, a Hong Kong-based legal services startup – also gave a short presentation.
Next to Wong sat Michael Chong, a lawyer with RHTLaw Taylor Wessing, who gave an earlier seminar on legal terms investors and startups need to use.
The realm of legal eagles
Legal services still remain relatively untouched by the startup boom in Asia. Obfuscated terms and legal jargon provide high barriers of entry, giving lawyers a monopoly.
While lawyers are definitely needed for counsel, the consultation fees for day-to-day legal documents for small and medium enterprises (SMEs) are beyond the reach of many startups.
There have been a few legal services startups, helping companies draft the legal documents from templates like Singapore’s LawCanvas, to legal directories like Malaysia’s Answers-in-Law.
But generally, the space in Asia is quite bare. In the United States, companies like RocketLaw and LegalZoom have caused a stir.
When contacted for comment, a spokesperson from the Law Society of Singapore noted that there are many websites which claim to provide legal services, but advised members of the public to be careful, especially if using services provided by overseas providers.
This is because the Legal Profession Act makes it a criminal offence for unqualified persons to practise as an advocate and solicitor, or to provide legal services to Singapore consumers.
“Information given to by clients to these startups that purport to provide legal services, if they are not advocates and solicitors with valid practising certificates, are discoverable and not subject to privilege.
“Also, if the advice given is wrong, no enforcement action can be taken against entities that are located outside Singapore. If the startup is based in Singapore but is not staffed by advocates and solicitors with valid Practising Certificates, they do not have professional indemnity insurance to protect against the risks of lawsuits.
“The advice or drafts prepared by these startups may not be suitable or compliant with Singapore law. Services provided by these websites may not necessarily be cheaper as well. Sometimes, they may seek local lawyers to review for compliance but are not transparent about the costs,” said the spokesperson.
However, as Marc Andreessen – cofounder of Netscape and founder of Silicon Valley-based venture capital firm Andreessen Horowitz, put it, “Software is eating the world.”
With advancements in automation, new tools in the marketplace look set to give lawyers a run for the money – at least when it comes to drafting smart legal documents.
Filling in the blanks
Templates for legal documents have always been available, with LexisNexis providing such services since the 1800s.
Today, a simple Google search will summon hundreds of legal templates, available for anyone to download – you just need to fill in the blanks and update the clauses.
Grabbing a template and filling in the blanks might be great if you’re in the United States, where most of these templates come from and where most such users reside.
However, if you come from anywhere else, you would also need to update the terms and change the clauses to comply with the law of the land.
Even after doing all the above, unless you’re a trained lawyer, the document you prepared might not be legally appropriate or even comply with the legal requirements of the jurisdiction you’re in.
What is needed is a better way of drafting these documents, using algorithms and automation to draft and ensure documents are up to scratch and compliant with the law of the land.
Based on this premise, two new entrants to Singapore are approaching it from two different perspectives: One from an ex-legal eagle angle, and the other, a problem for a computer scientist to solve.
Law and tech mashup
Hong Kong’s DragonLaw made landfall in Singapore less than a month ago. Founded by three lawyers over two years ago, and led by chief executive officer Walker (pic), it embodies the lawyer’s approach.
Walker’s previous venture, Lawyers Without Ties, was set up to help SMEs get access to affordable legal counsel.
“I quickly found out there was way more work actually in the market than just acting for borrowers,” he told Digital News Asia (DNA).
SMEs were either going online and grabbing the first available template to redraft and hope for the best, or going to lawyers when they shouldn’t be seeing any.
“They were getting employment agreements drafted by a lawyer, paying HK$20,000 (US$2,579) a month for an employment agreement,” Walker said.
“Their experience was horrible – they were spending too much money, or not spending any money, and hoping for the best,” he added.
Faced with this situation, Walker wanted to solve the problem in a scalable manner. “We want do something useful while keeping the pricing affordable,” he said.
Cross-examining the Dragon
While startups like RocketLawyer and LegalZoom have found some measure of success in the United States, Walker saw that replicating them in Asia would not be practical.
Businesses in Asia operate differently than elsewhere in the world. And the Chinese market looms large.
A typical business in Hong Kong might want to do a bit of work in Hong Kong, but mostly it’s there because it wants to get into China, according to Walker.
Their needs vary, from setting up a company in China under a Hong Kong holding company, to needing a joint venture agreement. Legal documents for such situations can quickly grow in size and volume, driving legal costs up.
“Online legal businesses in the United States focus on templates. Clearly, one-page documents are not going to work in Asia,” Walker said.
Building the case
DragonLaw had to scale up quickly on three fronts: Developing an app, building the required legal knowledge, and preparing the Software-as-a-Service (SaaS) model.
Giving customers a template and wrapping a wizard around it to populate the blanks would be a viable solution, but DragonLaw saw an immediate problem.
“We said this is not going to work for our customers … it doesn’t allow enough variation in the first place,” said Walker.
Instead, automation coupled with old-fashioned people power was the solution.
“Humans see documents as something linear with a beginning and an end. Our computers see them as a number of clauses that come together after you answer specific questions along a decision tree,” he explained.
“This is a much more efficient way to build a document and, for example, allows users to apply structured searches or analytics to their documents,” he added.
Such a system means that all documents generated will be unique. However, there has to be a balance between making a document more ‘niche’ through more clauses, while making sure the questions customer have to answer don’t get too complicated.
“The real trade-off for us is working out how complicated to make this process while still making it consumable,” Walker said.
The documents that DragonLaw provides range from simple non-disclosure agreements to complicated multi-party founders agreements overflowing with clauses, milestones, options and so on.
This document builder is supported by an ecosystem of law firms DragonLaw has built around it. The rationale for doing that is that this provides an assurance for customers.
“We are going to build really complicated tools, which replaces lawyers at a certain level. People are going to get it wrong,” Walker admitted.
Within the document building process are ‘breakers’ which assess the user’s final document. DragonLaw utilises two layers of protection – first, with their law firm network to ensure the documents produced are well protected.
Customers who want further tailoring or double-checking to ensure legal appropriateness can also engage a law firm from the network at a fixed fee. A lawyer could then check the document, provide legal advice, and rubber-stamp the document for use.
“So breaking down the parts and building it back together like Lego pieces is still five times cheaper than the usual process of engaging a law firm,” Walker said.
The second layer is called double-checking, where a combination of algorithms and people power is harnessed to check if all the questions have been answered, and the necessary blanks filled in.
This layer will highlight the blanks, or unchanged clause options, which is important because as Walker quipped, “People don’t look at their agreements.”
Unfortunately, people power is still necessary for double-checking documents. While algorithms can scrub through documents and highlight blanks and possible errors, ultimately, there is still a need to eyeball the document before it’s finished.
"Right now, our algorithms do 70% of the work and our service team 30%. Over time, we are learning and standardising and automating more and more – perhaps [we will be] 95% automated in a few years.
“This would be faster and cheaper for the customer, and more profitable for us as a business,” Walker said.
DragonLaw stresses it’s not a law firm, but provides avenues for customers to be linked up to one for legal opinions for a fixed fee.
“What we’re trying to do is turn a law firm into a burger joint essentially, turning something previously unapproachable to something more consumer-friendly,” Walker said.
“The message is that we do it five to 10 times cheaper, and 10 times faster,” he declared.
Sealing the documents
Giving customers peace of mind to save and manage their documents at DragonLaw is paramount. The company operates on a multi-tier user system, where users are only given access to what they are allowed to change.
For example, admins might have full access to the entire range of documents and the ability to edit all the clauses, while sales people have limited access to only sales agreements, and limited ability to edit delivery clauses.
“You’ve got different levels of what you can do, and you protect both the data within the document as well as the document itself,” Walker said.
Checking the retainers
DragonLaw’s main business model is a subscription service for its SaaS offering, with prices ranging from free to HK$16,000 (US$2,063) a year.
Over 700 SMEs and startups currently use their services in Hong Kong. In the two weeks DragonLaw has been in Singapore, it has secured clients already, among them condiment giant Lee Kum Kee.
Hedge funds, VCs and family offices are a core of its customer base. The high volume of legal work in their day-to-day operations lends itself well to DragonLaw’s services.
“We are about nine months in for our first batch of annual subscribers,” Walker claimed.
The no-frills approach to legal documents is what DragonLaw is going for, where customers can pick and choose what they want, and still pay significantly less – even when they decide to hire a law firm to rubber-stamp their documents.
“That’s why I quit my job [as a lawyer] – to help businesses which weren’t really represented, with a product that does this,” Walker said.
The delicate juggling act between people power and technology is still being played out at DragonLaw. Squeezing the maximum benefits out of technology while shoring up its shortcomings with people power is still key to helping customers.
“I think we’re at the point where we would like to understand how we can get all the benefits we can get in terms of cost and time savings.
“We’re relatively nascent, but we got a good understanding from the last 18 months of how we can make this complex process relatively easy,” Walker said.
The major challenges faced by DragonLaw were minimal, with major support coming from the Government in Hong Kong, as well as the VC and legal community, according to Walker.
“It was fortuitous for me that I decided to do this in Hong Kong,” Walker said, adding that DragonLaw became the biggest player because of this support.
In coming to Singapore, the company hopes to encounter the same support and minimal challenges. The smaller scale and centralisation of services may lend itself to DragonLaw’s favour.
“All these things are so much better centralised in Singapore than even Hong Kong,” Walker said.
Building this platform has placed DragonLaw in a unique position in Hong Kong, which it is looking to replicate in Singapore.
Forming a ‘positive feedback loop’ with big industry players, from accountants to lawyers, has helped in growing its customer base, according to Walker.
“Law and accounting firms are a great feeder and we’re a great feeder to law firms, helping to manage small clients and incubate them until they’re ready to use these their services in the future,” he said.
DragonLaw is also looking at the big picture. By standardising the approach and documents for investments in startups, it built a following among the VC and startup community in Hong Kong.
Walker hopes to do the same here in Singapore.
“This will help VCs and startups raise money safely, and a safe business growing is in our interest,” he said.
DragonLaw is looking to expand into South-East Asia from Singapore in the next six to 12 months. Documents can now be adapted and localised for a country within four to six weeks, he said.
While automation will primarily be offered in new markets like Singapore, Walker hopes to grow and build the same double-checking process as well. Growing the legal network to offer the same services for each local market will also be key to DragonLaw’s growth.
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