How Venture Attorneys Can Harness the Power of Data Automation Technology
Historically, the legal sector has been risk-averse and resistant to automation; however, that’s changing. The pandemic has expedited the adoption of automation technology within many industries, and that includes the legal sphere. In a recent report, Gartner asserts that “the effects of the pandemic forced many [legal departments] to shift gears in 2020 and pursue — or at least actively consider — more extensive automation of certain legal activities, especially those around major corporate transactions. The challenge now is deciding which technologies to embrace to drive real business outcomes.”
There are many scenarios where automation can drive significant value for attorneys. Below are a few examples that highlight the benefits of automation that we've observed from our work with in-house venture attorneys.
Empowering the entire office to answer deal term questions on their own.
Attorneys working at venture firms are often peppered with questions by the investment team about the specific terms of individual deals. Having to instantly recall the intimate details of all of these deals is unfeasible: “You have to contact different companies or speak with people who may not understand the documents. When finally located, these documents may be missing signatures or have other issues or inaccuracies requiring more back and forth over email,” points out Aumni’s VP Customer Success and Strategy, Katrin Robb, a practicing attorney for more than 15 years.
A centralized, data-driven approach, such as Aumni’s, enables venture attorneys and their teams to be more nimble when providing answers that are time sensitive. For example, an investment professional may request detailed legal terms on a specific financing round. Aumni’s Legal Terms tab displays over 40 legal data points, allowing the attorney (or a member of the team) to quickly peruse the information, knowing that it has been thoroughly verified and audited by a team of experienced venture attorneys.
Another indispensable resource for searching through a sea of deal data points is Aumni’s Filter feature. It offers users fast access to key information about any given investment, such as fully-diluted ownership, voting rights, investment stage, valuation information, information rights, pay-to-play, board seats, and more. The efficiency of this type of automation delivers unparalleled time savings for counsel and the firm as a whole.
Speed up deal negotiations with instant access to reliable legal insights across the portfolio.
When reviewing a closing set volume, in-house counsel may notice many discrepancies at the worst possible time, such as an exit, M&A or follow- on round. Automation technology using artificial intelligence (A.I.), can help rapidly identify numerical inconsistencies in legal agreements. Human experts, however, are still needed to identify more nuanced differences related to the legal framework of the deal. Since humans and machines tend to find different types of mistakes, working in tandem can be a very powerful combination. The hybrid method is the approach that Aumni has been taking in verifying information for clients. Consistency can be accomplished without opening any PDFs (though Aumni's platform does store all files in a highly secure Legal Document Archive, if access to the actual document is needed.)
Standardize deal terms and identify outliers across your portfolio.
There can be immense value in enabling a venture firm’s in-house counsel or legal representative to better understand and benchmark their specific firm's past deals. Counsel can use these insights to ask questions, give advice, and inform negotiations for new deals.
For example, upon reviewing a new term sheet, an attorney may notice that the deal is not in line with what’s typical for this type of company. Say the firm is looking to follow on in a Series A round for a startup in the fintechmanufacturing industry. The founders are pushing back on the liquidation preference multiple set forth in the term sheet you sent them. The venture attorney can utilize Aumni's dashboard to filter the firm’s existing portfolio to identify the historical liq prefs for this type of deal in the past. This information can empower the business with the knowledge that this deal is outside of the norm for that individual firm. Aumni’s platform can easily pull data to benchmark new deals as compared to the specific firm's deals over time.
Overall, Aumni has analyzed financing transactions of private capital investors who represent over $1 trillion in assets under management. Having this unique perspective on the industry can become very useful in tracking trends in private capital markets. In a recent Aumni webinar and blog post, legal experts addressed the merits of tracking deal term data. Mike Brown, Corporate Law Partner at DLA Piper, shared that the data behind deal terms would go a long way towards boosting efficiency. The more we can understand what the market terms are, acknowledging any market inconsistencies, the better we can pinpoint the baseline and isolate differences in particular companies or investor deals that drive efficiencies to getting deals done.
Legal teams can make the most of their data by leveraging automated technology, including A.I.-led platforms. Having the information in a central and easily accessible repository gives the firm a reliable data source that significantly improves access to timely information. This is precisely why Aumni has been passionate about the role of automation in producing results for legal teams in the venture community as they build success with informed decision making.