Simmons & Simmons LLP - Simmons & Simmons FinTech Fund
Partner and Head of FinTech
n May 2016, to demonstrate our commitment to support the fast-growing UK FinTech sector, Simmons & Simmons launched a dedicated Fund to help promising FinTech start-ups with the legal challenges that they face and may not otherwise be able to afford to tackle. The Fund provides £100,000 of free of charge legal advice a year to four FinTech businesses. This was the first programme of its kind offered by any law firm in the UK and the initiative is now in its second year with another four FinTech startups already receiving our support.
The firm does not take equity in return for providing its advice. To qualify for support via the Fund, FinTech businesses have to meet eligibility criteria including a requirement that they have received no more than £1 million of external equity investment, and that they have been accepted onto one of the leading UK FinTech accelerator programmes or have been referred to Simmons & Simmons by a leading FinTech focused VC investor.
What was the in-market status quo before the proposition was created?
Over the last few years a host of exciting FinTech start-ups have emerged in the UK (and beyond) with new technologies and business models that are disrupting existing financial services businesses to create better customer experiences and greater efficiencies through their innovative solutions. Because of the disruptive and novel nature of their businesses and technologies, one of the biggest barriers to entry that all of these businesses suffer is understanding the legal and regulatory landscape in which they intend to operate. Indeed, the difficulties start-ups face in solving these legal or regulatory challenges can sometimes prevent them from getting off the ground altogether. Our FinTech Fund helps solve this problem.
As many of the legal and regulatory issues that FinTech businesses face are novel, they often require legal advice that is only available from specialist subject matter experts. These experts tend to work for the bigger (more expensive) law firms which means that startups with limited working capital can struggle to obtain the advice they really need. This is one of the main reasons that a number of financial services regulators around the world have introduced FinTech specific support services like the FCA’s Innovation Hub in the UK. Although several law firms have attempted to address this issue in the past for technology start-ups by offering support with discounted or free standard documents, FinTech start-ups often require significant levels of bespoke advice that wasn’t available via these initiatives. The feedback we received from the FinTech businesses we spoke to when developing the concept for our Fund was that the existing initiatives that were available in the market were not fit for purpose for FinTech businesses. To solve the unmet market need we, therefore, had to come up with a more radical solution.
What challenges were you facing as a business?
One of the main catalysts for us coming up with the concept for the Fund was the problems we were seeing in the market with early stage FinTech businesses getting up to scale. At the time, we were already working for one of the biggest names in the UK FinTech sector which in a short space of time had become a significant client of the firm (even though it was only 4 years old at the time) and we were concerned that the pipeline of similar clients might be affected. We saw the FinTech sector as a huge opportunity for the UK economy and (as a result) our business as we are head-quartered in the UK. We therefore wanted to do something to ensure that there was a strong pipeline of significant FinTech businesses coming to the market in the future.
Before launching the Fund we spent approx. 12 months meeting early stage FinTech businesses to understand their needs. Once we had developed the concept for the Fund we then interviewed the founders of some of the UK’s most established FinTech businesses to test our proposals for the Fund with them to verify what impact it would have had when they were starting their businesses. All of those founders were extremely supportive of the concept.
What impact has the proposition had?
The feedback we have had about the Fund has been fantastic. Most importantly, the eight businesses we have selected to support via the Fund so far have been incredibly positive about the impact it has on the development of their businesses.
Kush Patel, Co-Founder of Tallysticks, and one of our Fund recipients, says, “We, like many FinTech peers, face multiple regulatory hurdles to deliver our innovative solutions. The FinTech Fund provides the counsel and resources necessary to navigate the regulatory landscape. As a first of its kind, the FinTech Fund is not only innovative in providing something not offered by others, but also in fostering innovation by assisting FinTech companies in delivering their products to market. The Fund drives innovation to promote a more efficient and flexible financial system that offers better and more affordable financial products and services to us all.”
We were also approached by Nesta (the government backed innovation think tank) to help them develop a similar concept which has now been incorporated into the support programme that is being offered to the 20 businesses participating in their Open Up Challenge.Since we launched our Fund a number of other law firms have also launched equivalent initiatives. This means that there is now over £900,000 of free legal advice available to UK FinTech businesses. We are delighted that our innovative approach in this area has provided the catalyst for the UK legal industry to make a very meaningful contribution to the future prospects of this important part of the UK economy.
What approach did you take when creating the new proposition?
We carried out extensive market research over the course of 12 months (as described above).
What challenges did you overcome?
Because the FinTech sector was still at a relatively early stage in its development when we first sought internal approval for the initiative, we had to educate internal stakeholders about the industry and persuade them of the benefits to our business of making a sizable investment of this kind for the first time. This was made harder because this was the first initiative of its kind launched by any UK law firm so there was no precedent for it in the market so the benefits and risks were untested.
Other than that the biggest challenge we have had is choosing which businesses to support. We have received applications for support from so many impressive businesses that our Investment Committee has found it very difficult to choose which businesses to select. However, in all cases we have tried to offer alternative support to the businesses who have missed out
What advice would you give to other corporate entrepreneurs?
Make sure you spend enough time analyzing what the problem is that needs to be solved (and whether it really is a problem) before trying to find the solution.
When seeking internal approval for a new initiative of this nature, make sure you have done as much research as you can to evidence the need for, and benefits of, the proposal to your business, but also don’t be scared of pointing out the unknowns (you get credit for acknowledging that you can’t guarantee the success of the initiative).
Most importantly, be bold and persistent – if you don’t get the support or interest you think your idea demands initially, don’t give up. Go away and think about the feedback you have received and consider how you can address it or prove that it’s unfounded.
What was your project highlight?
Seeing the FinTech start-ups we have supported grow and develop their businesses has been very rewarding. Knowing that we have played an integral part in that growth gives us great satisfaction and the hope is that these companies continue to evolve into longstanding clients of the firm.
We are also pleased that other firms have followed our lead and launched similar initiatives. This means that the legal sector is now providing very significant levels of support to early stage FinTech businesses in the UK which is great news for the sector as a whole and the wider UK economy.
It was satisfying to see the initiative recognised by the market as the fund was commended for ‘Supporting Start-ups’ at the recent FT Innovative Lawyer awards 2017, and shortlisted for the ‘Best Client Service Innovation’ award at The Lawyer Awards 2017.
The initiative has also received significant press interest which was unexpected. This includes the following articles:
- Finextra: London law firm sets up fintech fund to provide free legal advice to startups
- Financial News/WSJ City: City Law Firm Launches Fintech Fund
- Legal Business: Skin in the game – Simmons launches 'fund' to back fintech stars with free advice
- Legal Week: Simmons & Simmons launches £100000 fintech fund
- Legal Business: Slaughters and Addleshaws follow Simmons in developing fintech funds
Who are your project heroes?
Angus McLean, a Partner in our London office and head of the firm’s FinTech practice, developed the concept for the FinTech Fund having recognised the mutual benefits that such an initiative could have for both early stage FinTech businesses as well as the firm. Angus, along with certain other partners, sits on the Investment Committee that decides which businesses are chosen for support via the Fund. He has also worked closely with the Fund recipients to provide advice himself and determine the other legal advice they most require at this stage in their lifecycle.
Some of the FinTech businesses we have supported have praised Angus for his ‘remarkable commitment to the FinTech scene’ and described him as having ‘a passion that can move mountains’.