Start-up Society #103: Lawtrades
Keeping the American Dream Alive
Welcome to the 103rd edition of Start-up Society! This blog highlights some of the most exciting start-ups in the country striving to keep the American Dream alive.
Make sure you check out the previous issue, if you have not already, here!
Lawtrades
HQ: New York, New York
Founded: 2016
Employees: 39 (on LinkedIn)
What do Airbnb, DoorDash, and Pinterest have in common? They all use Lawtrades to instantly hire top legal talent! In Meet the Entrepreneur #26, we sync up with Raad Ahmed, Founder & CEO of Lawtrades — the legaltech start-up pioneering a new work model for the $100B legal market via a freelance marketplace that connects companies with top legal talent for on-demand support.
Need an extra incentive to tune into this one? More than half of professionals in the Lawtrades community identify as female (compared to the industry average of 37%), and 37% identify as a racial or ethnic minority — nearly 3x the industry standard.
This article provides a summary of the conversation. For the full details, tap into the podcast here!
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What is Lawtrades?
Lawtrades is a marketplace that connects pre-IPO and public companies with freelance lawyers/attorneys, paralegals, and other legal talent. The platform empowers law degree holders who don't want to go down the traditional law firm path. Instead, Lawtrades enables them to become entrepreneurs and practice on their own terms. Raad was inspired by the gig economy (Upwork, Fiverr, etc.) and felt that only partners at firms accrued all the value of the cases a firm handled. Due to the success of an internet company he founded while in school (known as MyFBCoverPhoto.com), Raad felt confident to launch Lawtrades.
Thoughts on law school?
Raad loved his first two years of law school, but he felt the process was unnecessarily long and boring. However, the reading and writing assignments in graduate programs are valuable and teach you things that go deeper than traditional undergraduate studies. If you do not love to read and write, it is hard to build an everlasting company. Reading what is changing in the market and writing up new plans and designs to keep pace is critical to company building. Raad loves writing and used this to help build his company.
Initially, the motivation for law school was based on prestige, but as this feeling faded, Raad was determined to take a bigger risk and wanted to create something new on the internet. The company was carefully built day-by-day and although there was a short-term lifestyle sacrifice, he knew where he was accruing value and personally felt like it was worth it.
Tell us about your recent Series A funding round!
Lawtrades series A round was unconventional. Raad wanted to work with a select group of people, specifically his users. Prior to Roll-up Vehicles (RUVs), there was no way for founders to raise from more than 99 accredited investors, but the RUV allows for up to 250 accredited investors with a single entry on the cap table. He leveraged AngelList to handle the back end of the raise.
Raad wanted to allow his users to invest in the company as it would be a great opportunity to boost commitment and increase stickiness. Now think what would Uber or Airbnb look like if the users of the marketplace were able to invest and take equity in the business that they were helping to build?
This massive RUV is a testament to the great community Lawtrades has built. Previously, interest in investing in legaltech was low. Atrium, their main competitor, had recently gone out of business and VCs were weary of investing in Lawtrades. As the company became cash flow positive, Raad leveraged the RUV and the crowdfunding platform Stonks to raise millions. Shortly after, a VC came in and helped to fill out the round.
How did you achieve product-market fit?
When Lawtrades publicly launched in 2016, the company was targeting small businesses and start-ups. They burned a lot of cash to build their top-line revenue. At some point the poor unit economics became evident and it was obvious that raising money without raising profit margins was not going to build a successful business. Targeting small businesses and start-ups is not a good user base to BUILD a marketplace company off of. The transaction sizes are small and a majority will go out of business. At some point, 85% of the Lawtrades team got fired and the team got together and realized something. There was a power user who had the title of General Counsel (GC) at EquityZen, he was spending 10x more than their best small business customer! They decided to dig into what value he accrued from Lawtrades.
This user revealed to them that start-ups were not the target, but internal legal departments at large tech companies were. These teams are often understaffed, looking for support, and have budgets to spend. Recurring affordable legal help was a clear value add to these teams.
Eventually, as the team focused on this use case, Lawtrades was able to build back their team and their product. Once you get Product-Market Fit, you know it. Lots of customers come to you and you feel like you cannot build the product fast enough.
What keeps you motivated during trying times?
Raad is obsessed with legal marketplaces. He knew that the first try wasn't necessarily the right approach, but the idea of working for someone else was not an option. Raad doesn't watch sports, but he watches the documentaries about the athletes and the teams (see The Last Dance and Legacy: The True Story of the LA Lakers). Just like winning the championship is the only thing that matters for sports teams, the idea was centered around how to get Lawtrades to its “Championship” and WIN.
Being lighthearted and self-deprecating with your team can help ease tensions allowing the team to focus on winning and piecing together the puzzle. The average start-up is 2–3 years, Lawtrades is still around and that is literally half of the battle. 90% of the growth came in just the past 2 years. Never give up!
Short-term and long-term goals for Lawtrades?
In the short term, the goal is growth. Lawtrades has paid out ~$20m to their users, but this number needs to get over a billion. Raad isn’t obsessed with revenue, but it is a scorecard and the numbers do matter. Getting to a $100m run rate in the next three years is another short-term goal. Long term, he wants to become the #1 law company and basically win at entrepreneurship. He wakes up obsessed and just wants to destroy in the most positive way possible!
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Authored by Arteen Zahiri, Rumeer Keshwani, Elham Chowdhury, & Julian Ramcharan
