Generation start-up: How Clara helps tech companies cut legal costs

Founding a tech start-up and getting it off the ground is an overwhelming undertaking by any stretch of the imagination. It doesn’t matter how brilliant and disruptive the idea is.

It is an especially daunting prospect for young and inexperienced entrepreneurs who have bootstrapped their ventures, pinning hopes on venture finance to keep them afloat until they attain the success they dream of.

The legal hoops the entrepreneurs have to go through to get their permissions, licences and documentation in order is probably the most difficult challenges of all. The thought of understanding the legal twist and dealing with lawyers charging hefty fees per hour could be the worst nightmare for a founder.

However, it is absolutely necessary in their evolution as start-ups not only to have all the documentation in order, but also to have the right company structure in place before they can even start thinking about securing funding.

“Every single start-up that you know in the Middle East restructures very early on. They restructure because they can't raise money through their operating company,” Patrick Rogers, chief executive and co-founder of LegalTech venture Clara, says.

“So any start-up that you know in the Media City or the DMCC [Dubai Multi Commodities Centre], no VC has ever given them a single dollar … they force them to put a proper holding company on top.”

Legal costs are certainly a major chunk of expenses for a founder looking to set-up or get financing to scale.

But Clara can help founders do all that for 80 per cent, and in some case 90 per cent, less than what law firms and other agencies would charge them, Mr Rogers says.

Clara is a legal operating system that empowers tech company founders to digitally form, manage and scale their start-ups.

The venture is a brainchild of three former lawyers and a tech entrepreneur.

In 2018, Canadian expatriate Mr Rogers, who is a former corporate lawyer at Jones Day and DLA Piper, teamed up with Lee McMahon and Ahmed Arif to explore the idea of building a platform to address the legal pain points for tech start-ups.

While the trio, with extensive experience of working on venture capital deals, explored the shape of the venture, Mr Roger ran the idea past his college friend Arthur Guest, who ended up moving to Dubai a couple of months later to “help us think through what we wanted to do”, Mr Rogers says.

“We didn't really know what we wanted to do, but we knew we wanted to do something digitally to try to solve the issue," he says. “I would say it was kind of a communal effort to come up with the [final] idea.”

Clara, he says, was born out of the necessity to create a one-stop shop for different digital tools in the legal space to help founders.

There were various digital solutions available in the market that helped with company incorporation or online document generation but some of them were market-centric and quite geographically isolated, Mr Rogers says.

“One of our unique selling point is the fact that we bring all these things together in an integrated platform where they [different features] talk to each other,” he adds.

Clara, as a single operating platform, allows founders to perform a number of tasks that were previously done by lawyers, including incorporating companies, generating documents and structuring data rooms.

In April, Clara launched a free capitalisation table calculator for start-ups.

A cap table, as it is known, outlines a company’s ownership structure, the percentage of ownership held by each shareholder, initial investment, funding rounds and equity grants. It's a key tool that helps in determining the value of a company, in raising capital and in making strategic decisions.

Clara also acts as a collaboration and information sharing tool for founders, investors and lawyers, allowing them to work together more efficiently.

It was launched in 2019 amid rapid expansion of the online legal services sector. LegalTech revenue totalled $27.6 billion in 2021, according to a report by market research firm Future Market Insights.

The size of the market is expected to reach $69.7 billion by 2032, growing at a compound annual rate of 8.9 per cent by 2032, the report says.

Clara's launch also coincided with a sharp rise in start-ups in the Gulf and the broader Middle East and North Africa region as governments invest heavily in developing entrepreneurship to diversify their economies.

Funding for start-ups is also on the rise, with total financing from venture capital funds in the Middle East surging 132 per cent to almost $2 billion last year. The total number of deals rose 5 per cent to 410, according to data platform Magnitt.

The UAE is at the forefront of the tech start-up scene in the region as it is pushing to become a regional centre for innovation and entrepreneurship. The Arab world’s second-largest economy aims to become home to 20 unicorns – ventures valued at more than $1 billion – by 2031.

Since the launch, the company has experienced about “triple digit growth” year on year in terms of both the number of customers and revenue, says Mr Rogers.

“What I can tell you is that we have, I think, a very clear pathway to profitability next year. Revenues are obviously continuing to rise,” he says.

It currently counts companies such as Baraka, Sarwa, Ekar, Eyewa, Techstars, Zid, Wamda, Taqadam and Hub71 among its rapidly growing list of customers.

Clara has the bulk of its operations within the UAE but most of its product development work is done outside the UAE.

“We have got a number of teammates in London, we have a UK office, [one] in South America and a lot of our engineers are in Argentina,” he says. “Our CTO [chief technology officer] sits in New York and then you've got marketing folks elsewhere in the world.”

Clara has raised $4 million so far from investors including the Dubai International Financial Centre, which invested an undisclosed amount in the venture in 2021.

The financial free zone invested in Clara through its $100 million DIFC FinTech Fund that was formed in 2017 to help establish, grow and upscale start-up and growth-stage companies.

Clara plans to raise more funds next year, Mr Rogers says, most of which it plans to spend on product development and building the team in different geographies.

The company, which started with six people including the four co-founders, now employs 50 people as Clara continues to evolve.

In the next phase of expansion, it plans to take on more staff in all areas.

“Engineering design, quality assurance, engineers, marketing, sales and finance. We have a little bit of everything. Now we need to elevate that,” Mr Rogers says.

Q&A with Patrick Rogers, chief executive and co-founder of Clara

Who is your role model and what is your mantra for success?

In your working life, find the intersection where your passion meets your expertise and you’ll always enjoy what you do.

Are you a risk-taker or a cautious entrepreneur?

I’ve yet to meet such a thing as a “cautious entrepreneur”. Let’s go with risk-taker.

What successful start-ups do you wish you had started and why?

To pick one, I’d say Slack. Moving communications away from email and allowing for more efficient discussions has really improved the work experience for those companies who use it, particularly for start-ups with distributed teams. Plus, the founder is a fellow Canadian, so that doesn’t hurt either.

Where do you see the company five years from now?

In five years, founders across the globe will recognise Clara as an intrinsic part of the start-up software stack. Clara will be the default launch pad for founders everywhere and our customer base will be fiercely loyal advocates of our mission.

What would you change if you have to do it all over again and what mistakes you would like to correct?

When we got started our dreams were too big for our capacity to build and we tried to do everything at once instead of starting with a more narrow focus before expanding into adjacent features.

What new skills have you learnt in launching the company?

Two of my co-founders and I are ex-lawyers with little experience of building software products. The learning curve has been steep on the product side, but incredibly fascinating and rewarding.

What is one quality entrepreneurs should have and what is your advice for struggling entrepreneurs?

Grit. The relentless pursuit of your goals probably counts more than anything else and will get you through the dark times you will have to navigate.

Company profile

Company name: Clara

Started: 2019

Founders: Patrick Rogers, Lee McMahon, Arthur Guest, Ahmed Arif

Based: Dubai (HQ)

Industry: LegalTech

Funding size: $4 million of seed financing

Investors: Wamda Capital, Shorooq Partners, Techstars, 500 Global, OTF, Venture Souq, Knuru Capital, Plug and Play and The LegalTech Fund