Allens law firm embraces start-ups

Gavin Smith is spearheading an audacious new strategy to align his firm with the next Google or Facebook.

Gavin Smith and Valeska Bloch of Allens

For start-ups, heavyweight law firm Allens has an “advice now, pay later” plan.

Gavin Smith grew up on the tiny Scottish isle of Arran that has a history dating back to the stone age. These days he has his eye very much on the future. The law-firm partner and confessed “tech geek” is spearheading an audacious new strategy to align his firm, Allens, with the next Google or Facebook.

For the first time, the 180-year-old firm has begun giving away valuable legal documents at no cost. It is also offering its most precious commodity — time — at vastly discounted rates to those in the start-up sector.

“If you believe the doom-­mongers that 40 per cent of the S&P/ASX 200 will not exist in five years because of digital disruption, then the question for us was … how do we build a relationship with the companies that may replace them?” Smith says.

In May, the firm launched ­Allens Accelerate, to provide an accessible service to technology start-ups that could not otherwise afford its hefty fees.

In the US, several law firms have built formidable empires by aligning themselves strategically to the start-up sector. Wilson Sonsini Goodrich & Rosati started in California’s Silicon Valley more than 50 years ago and has taken equity in some clients in return for a deferral of fees. Apple, Google, Pixar, Netflix, Twitter and LinkedIn are just some of the names that have brought in the big bucks since.

Its rival, Fenwick & West, which also hails from the valley, began offering standardised legal documents for free about five years ago to help entrepreneurs get off the ground without generating large bills. Its client list includes some of the biggest names on the internet, such as Facebook, home-rental site Airbnb and cloud-storage company Dropbox.

In contrast, Smith says, the Australian start-up community has not been as well served or supported by law firms. “Part of the thinking was that we wanted to do something in the space to actually help the sector,” he says.

The 40-year-old says his aim is to develop a portfolio of start-up clients and then “go on a journey” with them. “Some will fail and some will succeed but maybe some will be the next Atlassian or Freelancer,” he says, referring to two of the Australian tech scene’s poster boys. From humble beginnings, software developer Atlassian is now valued at up to $4 billion, while outsourcing site Freelancer has a market capitalisation of $560 million.

Smith says the “quid pro quo” for accepting reduced or deferred fees is that clients continue to use Allens as they grow — although there will be nothing to stop them shifting their business elsewhere down the track.

“We could put in an engagement letter that you must use us for a future exit event but the reality is we wouldn’t enforce that,” Smith says.

“It’s about building a relationship, it’s about us doing good work for them and then they like us enough to stay with us. There’s a trust that’s built.”

The firm has made available online a package of 14 “A-Suite” legal documents needed for start-ups to get up and running. Businesses can also purchase a fixed block of time to get help tailoring the documents or subscribe to a “hotline service” so they can talk to lawyers as issues arise. Alternatively, the firm may agree to defer fees for those embarking on a fundraising round. In the first six weeks after its launch, about 500 unique users downloaded the documents and about 20 new businesses were signed up.

Smith says his team is looking for start-ups established by people with a pedigree or track record or those already accepted into an incubator or hub program. But if they see an idea that takes their fancy, they will help out even ­before seed-funding stage. For fledgling companies, simply having a big-name firm like Allens in their corner can boost their prospects of success — strengthening their position during funding negotiations and ensuring they are structured properly.

Smith works closely with 30-year-old young-gun lawyer Valeska Bloch, who says when sophisticated investors come in during later stages it can be difficult to unwind structural problems created early on.

“That’s something we can do, and get right, and it gives credibility to the investors when they come in,” she says.

One of the firm’s new start-up clients is Sydney-based business Raincheck, which aims to solve the problem of online shopping-cart abandonment. Its app, set to be launched next month, uses beacon technology to alert shoppers when they are walking past a physical store that has products left languishing in their virtual shopping carts.

Just nine months after it was conceived, the company was invited by Unilever to Cannes as part of its global hunt for the top-50 marketing technology start-ups.

Co-founder Cameron Wall says, traditionally, “the big guys” have been too expensive for businesses like his own but the Accelerate program has brought Allens’ services in reach.

He says this beats the mix of online information and small-firm advice he had been relying on.

Smith, who became a partner at Allens four years ago after arriving from Britain in 2008, admits he had to convince some colleagues there was an upside to giving away the firm’s valuable intellectual property.

He hopes to be able to show them within two years that the strategy is bearing fruit, although some of those benefits might not be easily quantifiable.

He believes the start-up practice will help Allens attract and retain the nation’s best and brightest and create a chance for junior lawyers to get involved in business development.

Allens chief executive partner Michael Rose says the firm’s focus on the start-up sector has not been prompted by the extraordinary changes that have been occurring in the legal sector.

Rather, he says, the firm is aware how much its existing clients are paying attention to the start-up space and it wants to be in that space with them.

He is also keen to stay at the forefront of technological changes that will affect the firm’s own business and the way its lawyers work.

Smith is driven by a personal passion for technology and has been diagnosed by his wife with “nomophobia” — or a fear of being caught with no mobile phone.

He is enthusiastic about the health of Australia’s start-up community and says the decision of the NSW government and several big corporates, including ­Allens, to back new fintech hub Stone and Chalk is “fantastic”.

He points to the launch of venture capital funds such as AirTree, Square Peg, Blackbird, Tank Stream and the Westpac-backed Reinventure as cause for further optimism.

But Smith says start-ups looking to raise later-stage funding of more than $10m are still often forced to look offshore and he would “dearly love” for the government to do more to solve this problem.

He points to the success of co-investment funds in Israel, London and Singapore as an example of what could be done.

For Allens, it’s about looking to the future, rather than just selling fixed units of time as it has done for almost two centuries. “You look at your horizons and say there are short-term things we can do, and medium- and ­long-term growth initiatives as well.

If you don’t, then where will you be in 10 years?” Smith asks.