- UpCounsel, a hiring platform for freelance lawyers, raised more than $4 million from crowdfunding.
- The legal-tech startup picked crowdfunding over venture-capital money to grow at a steadier pace.
- Startups considering crowdfunding should make sure they have an existing large community.
UpCounsel, an online marketplace where companies such as Airbnb and
Postmates
post job listings for freelance lawyers, raised more than $4 million through crowdfunding.
UpCounsel launched its campaign on Wefunder, a crowdfunding site for startups, in July. Over the next five months, CEO KJ Erickson posted videos about the company, answered investor questions, and hosted webinars. When the campaign ended in December, the startup had raised $4.22 million.
The legal-tech startup picked crowdfunding over venture capital because it didn’t want to “jump onto the VC treadmill,” Erickson said. She said VC money could increase pressure on startups to grow at all costs.
“The Silicon Valley religion is ‘spend to grow,'” Erickson told Insider. “It works for venture capitalists because they need one in 10 companies to blow up and become billion-dollar companies.”
VCs invested more than $1 billion in legal tech this year, data from PitchBook indicated. But the “move fast and break things” VC credo didn’t align with UpCounsel’s goals, Erickson said.
Recent changes in regulation crowdfunding, which raised the cap for funding from $1.07 million to $5 million, also made the option more appealing to UpCounsel, Erickson added.
Crowdfunding is best suited for startups with an existing user base and strong financials
But Crowdfunding wasn’t for everyone, Erickson continued. Her biggest piece of advice for other startups was to make sure they had a large user base that already knew and loved the product.
“It’s very difficult to do a large crowdfunding if you don’t have a large community,” Erickson said. “It’s all about how much do people love you, and do they love you enough to open their wallets for you?”
UpCounsel has about 2 million monthly users, 500,000 of which were subscribed to its email list when it launched the campaign, which it used to circulate news about the crowdfunding.
It also helped that UpCounsel was already profitable, with $1.45 million in revenue this year. The startup shared those key numbers on its Wefunder page.
UpCounsel’s pitch to investors included financial information, but Erickson said her pitch video was the most important part.
“It’s the opportunity to tell your story. We saw an incredible uptick of traffic, jobs posted, and people coming back to our platform because of the visibility we got from launching the campaign,” Erickson said.
UpCounsel’s sales numbers doubled month over month this year, and the startup planned to use the fresh $4 million to grow its sales team to keep up with demand, as well as further build its brand with marketing. It’s also considering expanding from corporate law to areas such as personal law, upping its tech, and branching out to international markets, Erickson said.
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