From Silicon Valley to London: How Lawyers Help Startups Scale Globally

Welcome to this episode of On the Case, the LSC Law Society podcast. I'm your host Anastasia Stratulat, and without further ado, sit back and enjoy the show. I'm joined here today by Mr. Daniel Glazer, the London office managing partner at the Silicon Valley Headquartered Law firm Wilson Sincini. Mr. Glazer advises UK and European tech and life sciences companies on raising capital in the US, UK and Europe, and on expanding businesses across the Atlantic. Mr. Glazer, thank you very much for joining us. Thanks for having me, great to be here. So in a past interview, you've mentioned that it was always at the back of your mind to find a way to live in London. So what was it about the UK that captured your interest and what ultimately led you to make the move? So I often answer that question by noting that without being tongue in cheek, it was the food and the weather. Two of the most often maligned aspects of coming to the UK, although actually I'm serious about that, I actually think the food of London is fantastic. Anything above 20 and I get a bit cranky. So food and weather are quite good, I find, in the UK. But sort of kidding aside, I first came to the UK just after graduating uni or college for my friends in America and came over on part of a backpacking trip with a few friends of mine where I think a lot of Americans go on that sort of trip, getting what used to be called a URL pass and expecting that they're going to have these great adventures. And all they end up doing is meeting other Americans, Canadians and Australians who have the same idea and staying at the same youth hostels. So you know, got to the UK and specifically got to London and stayed for a few weeks and really fell in love with the place, sort of the combination of the old and the new. And from an American standpoint, the sort of combination of being somewhat familiar, but somewhat not familiar was kind of compelling. So sort of was determined from an early on to find a way to get back and spent the early part of my career working with a lot of larger UK companies, Padbury in particular BT, a few others, you know, book before sort of focusing in particular on the high growth, tech and light life sciences space. Well, in terms of the temperature and the food, I think those are unique things to point out, but it's good that someone is appreciating it. And earlier in your career, you had an interest in sports law and you moved to the quite different space of tech and law students. I see are very concerned at this point about choosing the right field. So how did this shift happen in your case? Yeah. So I always had a particular focus in the law on, let's say the intersection of IP and technology on the one hand and corporate on the other. And so my initial interest in sports, you know, first of all, stemmed from a long time interest in sports and interest in sports business, but also I came at it in particular from an IP and technology and corporate angle as it were. So while it does seem maybe in some respects that going from the sports sector, let's say to the high growth tech sector, it feels like a bit of a jump substantively in terms of the nature of the legal issues arising. It actually wasn't that big of a jump right because my sort of core interest, core competency historically as a lawyer is in that sort of IP tech corporate space, it was just really more transferring it from a sports sector over to a high growth tech sector. That's very interesting and I think it really puts it into perspective for us students. And so Wilson Sincini opened its doors in London when technology companies were at a record high. So since then, how have you seen this ecosystem evolve? Yeah. I mean, I first started working in the UK tech sector remotely. I'm a New York expat based here in London now. And sort of the way I got here was in early 2011, took a meeting with the council general's office, the British council general's office in Manhattan. And essentially, they said, we've got this new tech city initiative which was launched by the Cameron government in 2010 to scale the UK digital economy. And to sort of summarize the discussion they said, historically, we had seen American tech companies come to the UK and now if this tech city initiative is successful and then, frankly, it has been wildly successful in terms of the growth of the UK digital economy. They said, if this is successful, we expect we're going to see a lot more UK tech companies looking to access the US commercial markets, the US capital markets. How do we look at helping them and you know, if you can do it on the ground here in London, that would be brilliant, right? So challenge accepted. And as I said, it's first started working remotely with UK companies and then moved over full time in 2018 to open the office and scale the office here. And you know, it really is a strong growth story, the London and the broader UK tech sector since that tech city launch in 2010. I mean, give you an idea of what's happened over the past 15 years. In 2010, the year of the tech city launch, there was $100 million total invested into London tech companies, right? It's not uncommon to see $100 million round into a single UK tech company these days. In 2021, which was the high water mark, so far of investment into London tech companies, there was a 25 billion invested into London tech companies. So that's in 11 years going from $100 million to $25 billion, which is quite the growth. Now 2021 was the peak, and certainly I think that was the peak globally in the tech sector in terms of overall investment. But still, the amount of money coming into the London into the UK generally is still substantial. In fact, I was reading this morning that in the first half of the year, there's something like 8 billion invested into UK tech companies, which again, I'm just looking at what I read this morning in an article and it suggested that that was larger than both France and Germany combined. So I do think that London in particular has emerged as essentially the Silicon Valley of Europe. In the way that the valley, the Bay Area, is sort of the largest, arguably the strongest of many high-quality strong tech hubs in the US, including places like New York and Austin and Boston, Seattle, LA, Chicago, etc., London has emerged as playing the same role with respect to Europe. In that, London is, I think unquestionably at this point, the largest, certainly in terms of investment, tech hub around Europe, but there's several strong tech hubs, Berlin, Paris, Stockholm, Amsterdam, Dublin, you know, a few others. And you see that in the statistics that the organization's startup genome has published an ongoing report each year of what the top startup cities are, startup ecosystem cities are globally and London, but the past several years has been tied with New York as joint number two, but behind Silicon Valley. So I certainly, London and the UK, to some extent, face some challenges in terms of headwinds in terms of tech sector growth, but I think it's important to step back and say that whatever headwinds and concerns we're facing, the UK and the broader, you know, the London and the broader UK tech ecosystem, London and the UK are probably better positioned to address it than almost anywhere else in the world and certainly anywhere outside the United States. That sounds very good, especially for someone who is looking to enter this domain. And it's curious to me that despite all this, the UK still receives a lot of criticism about not being as dynamic as the US in terms of building and investment investing in startups. So in your perspective, Is this criticism unfair? Are people who are criticizing the UK perhaps focusing to heavily on comparisons with the US rather than assessing the UK and its own merits? - Yes. (laughs) I actually think that that is a lot of it. Look, one of the dynamics that is only natural about the special relationship between the UK and the US which I frankly think of in the tech sector is the essential relationship between the UK and the US. Is that the UK is naturally always going to compare itself in the tech sector to the United States. And in particular, at least in my experience, sort of directly to the Bay Area Silicon Valley and maybe to somewhat of a lesser extent in New York. And in some respects, that's not necessarily a fair comparison, right? Let's take the Silicon Valley where the valley has been going since the early '60s since the first venture funds were formed to invest in high-growth startups. And over that time, there's been generation after generation of the so-called flywheel effect, right? Where founding team starts a company, raises capital, if successful, ends up having a great M&A or IPO exit. And the various stakeholders get a high-quality return, right? The investors, the management team, the employees who are incentivized by employee options. And those stakeholders end up becoming future investors or building their own companies. Or if they're the employees, building new companies or if they're the management teams, either becoming investors or going again, right? As cereal entrepreneurs and the VCs are able to raise larger funds. That's what I mean by the flywheel effect, right? You do that at over time, over 60 years in the case of Silicon Valley. That's like compounding interest that 60 years later, the results are massive. I think comparing the London tech ecosystem to that, where if you go back to what I said earlier, there was $100 million total invested into London tech companies in 2010, that's essentially a standing start, right? And the time to exit, right? The time to IPO these days, for example, is like over 10 years. I think it's reaching like 12 years. We haven't really had not only just in the UK, but I think in Europe more broadly. We haven't really had the flywheel effect kick in yet in full gear the same way that the valley has had it going for 60 years. And that flywheel effect is crucial. It's imperative to creating a long-term sustainable massive tech ecosystem. So saying that an ecosystem that's basically been around for all attempts and purposes for 15 years, right? And comparing that with one that's been around for 60, obviously it can't be an apples to apples comparison. But again, I understand why, I think, culturally, the natural thing to do is to compare London and the UK more broadly with Silicon Valley and the US more broadly. But if you step back, right, and you look at London and the UK relative to the rest of the world, I think the comparison becomes a little bit different. And there's a lot of advantages that London and the UK continue to enjoy that create a little bit of-- what we in the business refer to as a mode, a bit of a competitive mode relative to other places or other worlds. Yeah, I completely agree. So despite all this, do you think that the UK's more cautious approach is cultural or is it regulatory, in essence? I want to talk about this a little more from the American perspective, which is that culturally, the United States was built on a risk culture. If you think about the way that the US was created, right, it was people leaving Europe, leaving the UK and elsewhere around Europe and going to a place that hadn't been even really settled other than the Native Americans who were there. And just picking up and starting over again, with from whole cloth. And that's the history of the country is that people keep coming there and have for hundreds of years now to take a risk to create something better. They could have stayed where they were, but they didn't. And they came across to a new place, and that's been going on for hundreds of years. And if you look back at the culture, even after the people got to the United States, they kept pushing. Is that you go back to the 1800s, and after the revolution, after the initial 13 colonies, we, and I'm going to say we as the Americans kept pushing toward the West, the so-called Doctrine of Manifest Estity, that Americans were not just going to stay on the East Coast, they're going to push all the way to the Pacific. And that was super risky. Everyone could have just stayed where they were, but no, we kept pushing. And you look at things like the gold rush in California. 100 years before Silicon Valley, they were looking for gold in the valley, as opposed to VC money in the valley. I'm not being a little bit facetious there, but it's all in the same principle. Is that the American culture, the American psyche, has always been high risk, high reward. And I think one of the fundamental aspects of American culture is that people in general-- this is a bit of a stereotype, but I mean, we're going to talk about high-level cultural differences. I think one of the things about America is that people on average are more willing to take risks, to change their current situation, and to take active measures to even incrementally improve their situation, whether it be monetarily or otherwise. I think that's, for example, why UK and other European companies find selling to the American commercial market so enticing. Is because American buyers, culturally, on average, will tend to buy quicker, and they will tend to pay more on average if they see that there is an opportunity to create some incremental return on investment. And I think all of that is built into a fundamental aspect of American culture. So I'm not sure that I would necessarily focus on UK or even broader European risk version, as much as I would highlight the fact that the American journey has been so focused on high-risk, high-reward, that I think it makes the United States as a nation, and as a culture somewhat unique in the world. And for better or for worse, I'm not saying I'm not characterizing this as a good thing or a bad thing, but I am highlighting that it's a thing. And I don't want to get into the controversial concept of American exceptionalism, other than to point out that I think that that origin story of America, and that scaling story of America, is very, very similar to the origin and scaling story of a start-up. And just to finish that off, we have 13 colonies flag in our office and in London. And I always joke, sort of tongue and cheek, when people ask, well, what is that? What's that flag for people who aren't familiar with it? And I say, well, it's the first British start-up in North America. Yeah, that's very interesting to hear, especially if, for someone, again, interested in working across the Atlantic, and it is a very close type, the UK and the US either way. So now I would like to ask something from the perspective of a law student, because we have our courses, of course, but it's very difficult for us to see exactly how it plays out in an actual office. Wilson Sincini is known for working closely with start-ups throughout their entire journey, from early structuring, fundraising, scaling, and even exits. For students and listeners unfamiliar with this area of practice, what does a lawyer typically help a start-up with across these different stages? Sure thing. So at that very early stage, when the company is being formed, let's say, through the sort of seed and spheres a stage, a lot of what a lawyer is doing with start-ups is certainly for acting as a proper business advisor, not just a legal support provider, but a business advisor, which I think is typical with the classic American Silicon Valley Style. model of loiring startups. A lot of it is making sure that the company is set up properly for success and that it doesn't fall into some of the common traps or run into some of the common pitfalls of early-stage startups that end up hurting it later on. Things like making sure that the company is set up appropriately and that it's issued options and shares appropriately, that all of the intellectual property that's being created for the company is properly assigned, that the company has got solid template terms and conditions, a solid privacy policy, appropriate employment documents to put in place. The whole foundation that is needed to get a startup for success and at this point, after generations of startup building, whether it's in the UK or in the US, there's sort of a well-travel path of how to put these things together and one of the benefits of working with companies working with experienced counsel in the space is that they can help you make sure that the company is going on that well-travel path. That's the initial stage. Then there's the mid-stage, let's say post-series A to series C series D and that is all about helping the company scale. Now, still you want to make sure that they've got the right foundation, but then it's also things like how does the company optimize making money, helping with negotiating contracts, helping optimize for their different fundraisers. Maybe they start buying companies and advising them on acquiring companies but also making sure that they don't get sidetracked by potential issues. Let's say employment disputes or contract disputes. In other words, how does the company continue to scale, continue to be successful, how does it continue to make money while managing and not eliminating risk, helping the company balance ongoing scaling with risk mitigation, not elimination but mitigation. Then you've got the latest stage and then you're looking at helping the company with optimizing its exit. When a company takes venture capital, there are essentially three true outcomes, bankruptcy, which no one wants to think about, sale or IPO. That is ultimately for a venture backed company, that's the journey. At the latest stage is how do we optimize for the sale or the IPO and get the best possible returns to all the different stakeholders, whether it be the investors, whether it be the management, founding team, whether it be the employees and send device through options, etc. That's a combination of whether it's an IPO or whether it's a sale, making sure that the company looks great from a hygiene standpoint, that it's ready to withstand diligence, whether from IPO underwriters or from acquires, and that the ultimate exit transaction is structured and executed in the optimal way from the company's standpoint. That's typically what I would break it down as the three primary stages. To review that, there's the initial sort of formation set up stage. Let's call it seed series A. There's the mid stage as the company scales, let's say from post series A through late stage funding and then there's the exit. That whole journey, if you can work with advisors that are familiar with each end of the spectrum, the benefit to the company is that you can get advice from individuals and organizations that can help you see around corners a little bit, because if you know what happens at the next stage, you can help the company make optimal decisions at the earlier stage knowing what's possibly going to happen next. That's really helpful. One other aspect that I find specifically difficult to navigate, especially as a first-time lawyer or student, are term sheets. Especially in some situations, they include provisions that draw attention away from terms that really matter. How can lawyers help founders see through this and maintain focus on core economic and control terms? With respect to terms sheets, keep in mind that a lot of it, let's say, to the delay person might not seem to be "legal." A lot of it speaks in terms of the commercial and economic terms of the investment. I actually had one company once say to me that why would I have my lawyer look at my financing term sheet? I might as well have my office manager look at my financing term sheet. I think not necessarily the way that certainly historically in the big tech ecosystems in the US that I think lawyers are brought in to look at terms sheets. The real value that a lawyer can bring to the financing term sheet process is twofold. First, the law firms that work extensively in the venture space see lots and lots of transactions. We ourselves put out a quarterly report that's publicly available, called the Entrepreneurs Report, putting this out for many years. It's an overview of what market standard terms sheets are. I'm not saying that we're the only ones that have that kind of perspective, but just as an example, like law firms in this space have a perspective that's a little bit unique in terms of the number of deals that we see. We can say with a level of certainty based on data, reading the lawyers broadly in this space, not just Wilson, that these provisions are market norm. These provisions are not market norm and create a certain efficiency in the negotiation process. The management team can understand quickly the term sheet that I'm looking at is or is not normal as it were. These are the things that maybe I should be pushing back on because this is not what other similarly situated companies usually would agree to. The second way that I think law firms experience law firms in the venture space can really be helpful at the term sheet stage. This goes back to what I was alluding to a little bit earlier, is helping the company see around corners a little bit. What I mean is that you really don't want to think about a term sheet in a vacuum. If you're agreeing to a series a term sheet, you don't want to just be thinking about how is this going to impact me now once I sign this, what you really want to be thinking about as well is how do these terms, if I agree to them now, play out on later stage financing in the series B and the series C and perhaps most importantly, how do they play out on the IPO or M&A exit. The more that you can get advice from advisors that have seen the whole life cycle, who can tell you, yes, this is how this plays out at the A, but listen, think about how this plays out later on. That's really valuable to the management team because very often, they won't have gone on that journey before. Even if they have, they've probably only done it once or twice, whereas the law firms that are experiencing the space do this on a regular basis and can really provide input as to what the company should be thinking about to optimize the long-term prospects and the long-term exit prospects in particular of the business based on the current terms. Thank you very much for explaining that. You've also described the importance of aligning the interest of the startup with that of the investor. In your words, getting the right fuel for the engine. How can a lawyer make sure that this alignment is built into the deal from the start? What are some signs that in your experience suggest that the investor is not right? I think what the lawyer can do here is make sure that the company, the management team, the family team, and the investor are having appropriate discussions as two expectations. It's really more of kind of brokering those discussions or encouraging, maybe the better word, encouraging those discussions as opposed to necessarily leaving those discussions. You know, the relationship between especially a lead investor and a company, management team, I mean, it really is, to some extent, like a marriage, right, is that once they decide to go forward together, you know, they are, you know, kind of locked arm in arm to building this business together with, you know, arguably aligned incentives for the most part, but there are some points at which their incentives may, may, may end up diverging, right? And before you enter into any long-term partnership like that, each side really wants to do its diligence on the other. And I think it's sort of self-evident the way that a VC or an investor comes in does diligence on the company. But I do see that it's not always as common for the, for the management team to do as much diligence on the investor. And that's crucially important, right, because not all money is created equal and not all investment, not all funds have the same investment thesis, especially I find in the UK relative to the United States. I think in the, especially at the early stages, I think in seed and series A investors in the US, or seed or series ABCs in, in the US, I think all in general have a relatively similar approaches to investment. You know, clearly there's massive sector differences, but in, but in terms of the types of outcomes that they're looking for, I think it's a little bit more common in the US that the seed and series A investors kind of, for the most part are looking for, for big outcomes, right? That as, as one, one Silicon Valley VC, one said is that we're, look, we're running science experiments. And we realize that a number of, we're going to fail, but we're, you know, the ones that succeed are really going to, to sort of make up for everything. And look, I'm not saying that that's a good approach or a bad approach, but it's certainly an approach, right, that a lot of early stage investors take in, in the United States. And it's a little bit more in the US at the series A, the seed series A stage, a little bit more homogenous, I think, in that thinking. In the, the UK, it's not always so homogenous, right? Is that there's a, there's a range of different investment pieces that we see at the, to see in the series A stage, everything from, you know, the same attitude is Silicon Valley, which is, you know, for every 10 investments, we figure seven are going to fail, two are going to watch their face and one is going to return the funder more, all the way toward more private equity style of, of, of investment. You know, even at seed and series A stage where, you know, they're, they're not looking, they're not expecting necessarily to have a lot of failures, but they're willing to sacrifice, let's say, some massive upside potential in order to limit the downside risk. Again, none of these approaches are right or wrong, but I think it's, what's imperative is that the, the management teams, the founding teams have those discussions up front, and the lawyers can encourage those discussions up front. So, so that there isn't tension later on. In other words, if the management team is thinking, we want to put a ton of, we want to raise a ton of money, spend a ton of money, keep the, the, the business, you know, not, let's say, you know, not close to break even, right? We're going to keep the, we're going to keep the business lost making because we are trying to win the market when we need to spend money to win the market, and we'll flip to profitability at scale, and that's going to result in possibly, you know, a massive unicorn story. It could also result in the company flaming out, but that's the risk, that's the nature of entry capital, right? That's why it's not a savings account, and where to, where to put your money. If that's the thinking of the management team, you probably don't want to raise money from a private equity style, Cedar Series, I investor, who's, who's thinking, listen, we, we want to get this company to break even in the long-term profitability, or ongoing profitability as sort of as soon as reasonably possible. But on the other hand, right? It goes, it goes both ways. If, if the company is thinking, you know, I don't want to just throw money at this and, and burn, burn cash. I want to build a long-term, sustainable, profitable business. I don't need to become, you know, the massive multi-unicorn. I want to build, you know, an ongoing, sustainable, solid business, you know, going, that's probably not going to resonate with Silicon Valley style investors who want to see the, the, the, the company moves quickly as possible and, and try to win the market, even though, even though there may be a higher risk of failure. And, you know, while that, while all of those are business discussions to be had, what a good lawyer can do is make sure that the, the company and the investor are having those discussions, because the, the downside risk of not having those discussions is that you have some very, very tense and ugly board discussions later on when you find that there's friction between the expectations of the investors and the expectations of the people running, running the company at a day to day basis. Yeah. It's very interesting to learn about. And just for the final question, the last piece of advice to a law student. So if you think of a lawyer, a law, law student figuratively as an early stage startup ambitious and looking for the right path forwards, what's one final piece of advice that you'd offer in terms of building something meaningful? It can be anything. The courses, what student chooses or anything. So my advice would, would be to think of your career as, as building a startup. Right. And here's what I mean by that. You know, I've always thought of it in, in sort of, in sort of three, three, three, three stages of how you want to think about building a career as a, as a law student. And then, and then as a, as a young lawyer, the first, the first stage is, is what is the problem that you're looking to solve? Right. In other words, what is the area of the law where you think you could make the greatest contribution? Which hopefully is an area of the law that you're interested at. But, but what is it that you really want to do in the law that could differentiate you from others? Right. You know, for, for me, it was initially, you know, building a practice within the sports sector and then eventually it was, you know, working with UK and other European tech companies through their US life cycle. Right. The, once you've decided what it is that you want to do that's differentiated. And by the way, this doesn't, this isn't necessarily, you know, a, a, a, a single point in time that you, that you, you determine this and that it always stays the same. I mean, it may be an iterative process throughout your career. Right. But, you know, at any point in time, you, you want to, you want to think through what is it that you that you want to do and that you can do that is differentiated. Okay. The second stage is, okay, so now you've identified the problem you, you want to solve. Right. You know, what is the solution to the problem? How do you, what, what are you going to, to develop that is going to help your clients in, in the area that, that you're in? I mean, so again, so for, for me, it was thinking through, okay, how can we, create an offering that is optimized to helping UK and European tech and life sciences companies succeed on that, on that US journey? And then the third stage, and this is the one that, you know, you may end up spending a good portion of your career on is that how do you make sure that everybody, whether it be internal at the firm, if you're at a firm or the company, right, if you're at a company or otherwise, and externally, right, internally and externally, how do you make sure that everybody knows that you have developed the solution to the problem, right, that you are the solution to the problem, the gateway to the solution to the problem, right, and that's pretty much how you, you build a startup, right, what, what's the problem you're looking to solve, solve the problem, and then make, make sure that, you know, your, your customers know where to find you, same thing. That's a very interesting comparison, and thank you very much. I think everything we discussed was very useful, both for someone looking to enter this tech domain and generally. So thank you very much and thank you again for joining us. My pleasure. Thanks a lot for having me today.