Reynen Court, the legal tech onboarding platform, is seeking to raise $5m through a Rule 506C investment plan that will tap lawyers and the legal tech community for fresh capital. Artificial Lawyer reached out to CEO, Andrew Klein, to find out some more, who noted that this is happening ‘because we want to extend our cash runway’ at a turbulent time for the markets. The idea is that lawyers and those with an interest in legal tech will invest.
How is this different from an IPO?
Terminology sometimes gets abused in the capital raising biz. I would say an IPO is typically meant to mean that post-closing the shares trade on an exchange, and the general public, regardless of income level or wealth, is permitted to invest. This is not that.
Rather, we are making a public offering to accredited investors. Think of it as public venture capital. The company will remain private and continue to develop, as early stage companies must. However, under the US Jobs Act (relatively new securities laws in the US), companies that follow certain rules are now permitted to offer shares to the public, but provided only accredited investors ($200K per year income or $1m of net assets) are allowed to invest.
How much do you want to raise?
We aim to raise up to $5 million.
Why are you doing this?
We are doing this for two reasons:
Firstly, Reynen Court from day one has been all about aligning with the lawyers and legal tech enthusiasts. The law firms in our consortium and those who invested have taught us so much about their needs; they have helped us set standards, and they have helped us meet and influence legal tech application vendors.
We simply want to extend the community of Reynen Court supporters and look forward to collaborating with ex-partners, partners and associates who understand the problem-set we address, and share our passion for the capacity of technology to transform the industry.
Secondly, we want to extend out our cash runway. As I am sure you know, the stock markets are under some relatively dark clouds. At the same time, our business is growing steadily and our momentum is strong. We aim to give ourselves extra time before we pursue a larger growth capital round. And we believe the most exciting way to do that is by offering shares to the community in an extension of our most recently concluded financing.
Notably – the round we just completed was led by Ventech, a billion dollar venture fund with participation from Latham & Watkins and Clifford Chance. Of course, we took a hit on the valuation compared to the initial round. That is just the way the market works! The important point is that individual accredited investors can now invest at the same price and same terms as negotiated by our institutional shareholders. We think that makes this offering pretty attractive.
In total, since inception, we have raised $19m.
Are you doing this because funding is hard to get now?
Like all early stage companies, smart development requires you to balance between having too much cash (very dilutive rounds from raising too much too early) or too little (big trouble if you wait too long to raise the next round.) I think we are managing that well, but in the current economic climate we are also not looking to be too clever. We have a healthy cash runway and the business (the important point) is growing steadily with increasing momentum. But given the current market conditions we greatly prefer pushing out the date at which we will raise a larger Series B.
So the question is, how best to do that. And if you follow the threads through my personal history, it should not surprise you that we are settled on a highly atypical path: raising some additional capital from the people who understand the problem-set we address, and share our passion for the future we envision.
Thanks Andrew and good luck!
[Note: this is a news story and not financial advice. Potential investors should always take professional advice. ]