An article written by Dan Roberts President, Co-Founder Savvi Legal
Traditionally, prior to a financing or M&A event, companies seek out law firms to complete their legal due diligence (see bottom paragraph for a summary of what this entails). This process requires a company to frantically track down its legal documentation and send it to a law firm. We like to refer to this as the “due diligence scramble” and it looks exactly how it sounds – companies scouring their messy cloud storage and inboxes to find the various documents they’re looking for.
Once you get your law firm all your documents, they turn their associates loose (all while billing you by the hour) to create a data room and organize the documents. The investor’s counsel then sends the company a “diligence checklist” and will, in turn, loose their horde of associates to comb through your data room. Lastly, the company goes through a “corporate clean-up” or audit to remedy any diligence deficiencies.
All in all, this process is stressful, time-consuming (due diligence alone can delay closing by 2-3 weeks), and expensive (remember, the company usually pays for both company and investor legal fees, often totaling at least $50K in legal fees for an average Series A financing).
Anywhere from 40-60% of these legal fees can be directly tied to due diligence-related services.
So…what is the solution? Meet the agile model of due diligence that saves companies an average of 40% on legal fees: Savvi Legal.
What is Savvi?
In essence, Savvi is a lifecycle legal and financing platform for startups with integrated services. Savvi significantly reduces the turnaround time for due diligence by marrying software with legal services. Savvi’s workflows create and upload company documentation that is automatically funneled into a custom data room controlled by the company, resulting in a clean, organized data room that is easily shareable with investors. Through this agile approach, the unpleasant “due diligence scramble” is avoided and companies can complete their due diligence with ease.
What is Legal Due Diligence?
Legal due diligence is a process that occurs prior to financing or M&A transactions where prospective investors or acquirers review company legal documentation. In a financing, this process is usually initiated by the lead investor of a financing round, and the level of documentation and detail reviewed tends to increase with the deal size. The type of documentation and information reviewed during due diligence includes your company’s corporate record (i.e., organizational, governance, and equity documents), HR record (i.e., employee, advisor, and contractor documents), and IP-related documents.
Special offer from Savvi Legal
Up to $5,000 in credit towards Savvi’s services (i.e., entity formation + conversion, data-room + cap table audit, financing admin + counsel, etc.). To access this credit, you just need to schedule a call with a member of Savvi’s onboarding team. If you have any questions, please reach out to Gavin Heap at firstname.lastname@example.org.