In 2019, Lawtrades were burning through money and struggling to raise their Series A. All the while, their competitors had raised tens of millions of dollars. Co-founder and CEO of Lawtrades, Raad Ahmed, feared the worst for his company - yet with some smart pivots and the right funding strategy they managed to not only stay in the game, but course-correct into a growth trajectory most founders would envy.
Lawtrades is a marketplace for legal services: connecting clients to a network of freelance lawyers, paralegals, compliance workers, and using a custom software to help businesses manage that relationship online. In other words, their vision of a remote, distributed, tech-enabled workforce was ahead of the curve.
Problem #1: Audience fit
But things weren’t always easy. Lawtrades started out serving startups, and raised their seed round based on this audience profile. But 90% of startups go out of business in the first few years - plus, budgets tend to be tight.
In Raad’s own words, when Lawtrades first started out, they’d fallen into the “Uberization” trend of marketplace startups at the time - selling to the widest possible audience segment. They didn’t realize the true market fit was selling to larger businesses.
Problem #2: Cash flow crunch
Seeing the struggles other players in their industry were facing, Lawtrades made a decision to pivot out of the startups segment, and once they did, their growth trajectory changed entirely.
Scrapping their old product and starting anew, they went from sporadic customer spend – startups using them once or twice a year spending a couple of thousand dollars – to large companies like Angelist spending $100Ks per month. Pressure makes diamonds, as they say.
2020 was the year where their business really exploded: changes to working life brought about by Covid-19 accelerated their growth as the demand for remote networks of professionals grew.
But with this new influx of customers came cash flow issues. The problem was the bigger the companies they took on, the longer it took them to pay their invoices. Lawtrades were paying their supply network on a much more regular cadence - customers to whom they wanted to deliver a good experience.
‘As we kept growing and adding customers, our bank balance kept going down. We were going broke and it made no sense.’
Lawtrades hadn’t raised money, we were operating purely off profit. But they had to keep paying out their supply side network faster than they were getting paid.
In 2020, Raad decided Lawtrades couldn’t continue down the path where they were spending more money than they were bringing in, and sought financial help.
Solution: Flexible capital for “fearless growth”
Lawtrades began their journey by looking to banks for help, but experienced a common challenge: traditional banks don’t know how to underwrite internet companies. They needed a financial partner who understood they weren’t a law firm nor a human resources company - they were a startup with specific cash flow needs.
Having a marketplace model meant they were especially in need of a bridge solution like Capchase because margins tend to be thinner, especially in comparison to SaaS companies.
Lawtrades had also previously raised from VCs, but they were looking for a growth partner that was complementary: where funding was scaleable, flexible, and easy to access.
Lawtrades began working with Capchase in September 2020 and have scaled the relationship, and use of our core revenue financing product - Capchase Grow - ever since, using the funds to cover their supply-side payments, reinvest in research, product development, and more.
‘Capchase has given us the confidence that we don’t have to fear growing because we’ve got a solution. If it wasn’t for Capchase, I don’t know how we would have funded the business’
When does flexible finance make sense?
As a business owner, some months you will burn more than others due to seasonality, specific campaigns, preparing for a fund raise, or holiday season. As opposed to venture capital or traditional debt, with Capchase you don't have to take more capital than you need upfront and pay for money that sits, unused, in your bank account. Capchase’s revolving credit line structure gives you the flexibility to only pay for the capital that you use at any given time.
Learn more about Capchase Grow.
Scaleable credit for limitless potential
As Lawtrades’ business gained momentum, their CreditCap - funding available through Capchase Grow - increased accordingly.
In other words, their growth capital scaled as they did.
Most importantly, they avoided any arbitrary caps on funding. Lawtrades started by drawing at a rate of around $100K. Fast-forward a few months later and they were able to draw millions to continue fueling their hyper growth.
This automated, streamlined system meant they could avoid lengthy credit applications - or other time-consuming means of fundraising - and spend time focusing on growth.
Results, Series A, and beyond
At the beginning of 2022, Lawtrades announced a $6 million Series A round, putting them at an $80M valuation - something unthinkable just a few years ago. Not only that, but leveraging a mix of VC and growth capital funds from Capchase meant that Raad and his co-founders saved equity dilution in the process. Since working with Capchase, Lawtrades have more than tripled their revenue in just one year.
”With Capchase it’s like we’re working with smarter people who know more about funding than us - that’s an added value” Raad said, on the topic of ROI and shifting away from “growth at all costs”. Knowing that sales and marketing were going to be expenses that scaled as they did, it didn’t make sense to sell equity every year to cover that.
"When you’re not taking a salary, it really forces you to take a hard look at your spend and think “is this worth it” - that’s why we advocate for a mix of debt and venture. I think this will be the future of fundraising - it just hasn’t existed before."
To learn more about Lawtrades, visit: Lawtrades.com