The Series D round: Paddle

This is an interview from our quarterly, community-led publication, The Bundle. Download volume two, issue #1 now to hear from legal leaders at Klarna, Form3, Omnipresent, and more.

Congrats on the Series D! How long did it take to get that over the line?

We were working to an extremely tight deadline.

We agreed to acquire ProfitWell in early January with proposed close at the end of the quarter, and we essentially needed to raise funds in order to be able to buy the company. We were running two projects at the same time!

We managed to get ahead of the prep work - we had a data room ready, with our documents in order, and Paddle approached investors in January 2022. We signed term sheets in late February, and completed the round by early April, all against an increasingly unfavourable macro backdrop regarding the tech market and a war in Europe.

How did the legal team manage its time between two huge projects?

It was intense; we have an incredibly lean team of two lawyers and a paralegal who only joined us at the start of this year. We had to prioritize ruthlessly and do as much of the heavy lifting in advance as possible.

It helped that we raised a Series C round not that long ago, so we could take the learnings from that round to improve how we approached the Series D. We knew exactly what investors would want to see, how to frame the message internally, how to efficiently prepare for due diligence, and so on.

We were really strict on having a same-day turnaround for the due diligence questions, and worked with great external counsel to support us with the funding documents.

We also kept the same law firm for our Series D as we did for our Series C, and that was super important - they knew our documents and our ways of working really well, so comms for the D round were seamless.

What was the biggest challenge during the Series D?

It was actually the acquisition, which we ran in parallel to the round. There were so many unknowns, interesting curveballs and variables that were out of legal’s control.

We spent weeks working through extensive diligence and trying to get our heads around how to structure this acquisition from a tax perspective. The key was to ensure we didn’t lose momentum on both the funding and the acquisition.

Legal also had really strict timelines; we wanted to close out the acquisition before our all-company summit in May, so that employees from ProfitWell could also join us. We had to be relentless with our approach in order to succeed.

By Series D, legal should be at a confirmatory stage of diligence and be able to anticipate the information that will be required

How was this round different to the Series C?

The funding rounds never get easier but they do get less painful!

The biggest difference was resource - I was sole counsel when we did our Series C. Our CFO, wider finance team, and external counsel ran the Series B round; the legal hygiene and data room were good, but not to the same extent as they would be if we had legal input earlier.

This meant I had to get everything up to speed for the Series C, which usually involves really extensive due diligence. By Series C, you’re no longer a scrappy startup, and you need to have everything in order.

We cleaned up house and it smoothed out the process for the Series D. In between our Series C and D rounds, we implemented Juro so we had a mature contract automation process in place - and this had a massive impact.

The other difference was the style of diligence. By Series D, legal should be at a confirmatory stage of diligence and be able to anticipate the information that will be required: here are the contracts, here’s a financial update, here’s the FAQ , and so on, instead of scrambling to get that information together.

And does legal’s involvement change from one round to the next?

It’s still exactly the same - you are front and center, you’re the glue that sticks everything together.

You’re project managing to an extent because you need to ensure those threads are tied together - aligning the C-suite, wider business, investors, external counsel.

There’s a point where legal steps in to manage different functions and ensure we’re all on the same page, prioritizing the same tasks and responding to requests from investors in a timely manner. That role doesn’t change - if anything, it’s more recognizable as you go through the funding rounds.

It’s painful, but it’s a temporary pain. You’re going to clock up hours; it’s the nature of the work. But getting to the end result is incredibly rewarding

What advice would you give for lawyers at scaleups about to raise a Series D?

I learned so many lessons from the Series C that I implemented in the Series D round.

1. Keep as much work within legal as possible

We had external help to manage other functions, and that didn’t work well. Keeping as much control internally can help legal shape the direction of the project and avoid confusion.

It’s not easy to do this, especially when you’re part of a lean team, but it’s important to take the short-term pain over a quick fix that’ll be more difficult to manage over time.

2. Be ruthless in your turnaround time

Make sure legal isn’t sitting on work, but instead delivering in as short a timeframe as possible - because that work will pile up! Make sure you have an effective strategy for prioritization, and don’t shy away from saying ‘no’ if you have too much on your plate.

Most importantly, remember that it’s painful, but it’s a temporary pain. You’re going to clock up hours; it’s the nature of the work. But getting to the end result is incredibly rewarding, and will be worth the investment.

This is a chapter from our quarterly, community-led publication, The Bundle. Download volume two, issue #1 for the latest need-to-know insights, by and for scaleup lawyers.