How bad financial and legal hygiene can make or break your startup | Charles Brecque, TextMine

In this episode, we had the pleasure of speaking with Charles, the founder and CEO of TextMine (formerly known as Legislate), about the journey of his company and the critical aspects of legal and financial management in startups.

You recently rebranded from Legislate to TextMine. Tell us more about that decision and why TextMine? 
Changing the company name is a big deal, but our core focus remains the same - structuring unstructured data in documents. Initially, we started with contracts, and we did this firstly by providing a platform for users to create contracts with structured data in them. But with the rise of language models, we've actually been able to broaden that to documents that have already been signed. 

Our goal is to extract key terms and answers from these documents. Even if a company has an organised drive with folders and subfolders, answering questions about contracts or documents requires manual searching, extraction, and spreadsheet work, which is prone to errors. We automate this extraction process and present the insights, reports and metrics in a convenient dashboard so our customers can make proactive decisions about your documents.

Legislate was a great name, but it caused confusion because people assumed we only worked with lawyers. We actually focus on helping COOs, CFOs, and operations teams manage data in contracts like supply agreements and client agreements. We felt like outsiders in the legal tech industry because our goal is much broader than building legal-tech solutions. So, changing the name just made sense for us.

Charles, tell us more about yourself and what your day to day looks like at TextMine? 
I have an engineering background and joined an AI spin-out from Oxford in data science. Although I consider myself a generalist, I wear many hats at TextMine. I've worked on product development, business development, and sales, but I leave legal and HR matters to my co-founder Amber. Finance is an area where I feel I have too much responsibility. My biggest challenge is figuring out where to focus my time and energy. Sometimes I get caught up in tasks like SEO or product development, and I worry that I may be spending too much time on things that don't make a significant impact on the business.

Someone once told me that finance and legal are two critical areas to handle properly in a business. When dealing with investors, it's important to have lawyers review subscription agreements. While day-to-day operations may not highlight many concerns, improper handling can come back to haunt you in the long run. Signing contracts with unfavourable terms or making financial mistakes can have serious consequences. It's essential to pay attention to these areas to avoid future complications and ensure things are done correctly from the start.

You mentioned having legal and finance hygiene in order is important. What does that mean? 
Proper handling of documents is just so important for any business. Employment contracts and consultancy agreements, for instance, require attention to intellectual property (IP) ownership. If you fail to retain IP rights that can raise concerns during audits or investor rounds, as it undermines the value of a company's assets. Another important document is the Non-Disclosure Agreement (NDA). While some may think NDAs are not that important, in essence they protect sensitive information.  Not having an NDA in place leaves a company vulnerable to others that might want to replicate their ideas or actions. I couldn't stress enough how important it is to review NDA terms thoroughly. Clauses such as non-compete agreements can impact future funding rounds or your ability to reach new markets. 

You recently raised $3m, has the way you were managing your cash changed since the last fundraise?
Certainly. It forces us to reevaluate and strengthen how we manage our cash. We hired a bookkeeper and put in place more streamlined processes. We considered hiring a CFO, but ultimately decided against it feeling that it was a bit premature for our current stage of growth.

With this latest funding round, we completely changed our target customer focus. That's why we decided to hold off on getting a CFO for now. Once we have more customers and a more predictable business, then we'll think about it. But I do believe that as we gear up for the next funding round, having a CFO will be crucial. They can build strong financial models and show investors that we're a business worth investing in. 

Do you have any advice for the founders out there currently fundraising?
You can waste a ton of time, especially when you end up talking to investors who don't even invest in your type of company. I should've done more homework on who to approach, what they're into, and what they're looking for. Some of these so-called early-stage investors are actually only interested when you've already hit some major turning point. Or they claim to be early-stage, but they're expecting you to already have a million in annual recurring revenue (ARR). These are just some of the filters they use to weed out companies they don't want. So aim for investors who understand your space, and if possible, already know you. 

What does financial hygiene mean to you? How do you build that culture within your business? 
The first step is keeping track of receipts and invoices and getting them sorted in your accounting software like Xero or QuickBooks. I understand it might seem like a chore, but it's worth it when claiming back VAT. 

I thought I was quite diligent but since we brought in a bookkeeper I realised I had a huge room for improvement. Thankfully, everything's sorted now, and the mistakes weren't too major in the grand scheme of things. But here's the deal, as a founder, time is precious. So, in the early days, it's important to get your hands dirty and understand how things work. But once you can afford it, consider bringing on a freelance bookkeeper to handle that stuff for you.

Talking about financial hygiene R&D tax claims is where some founders tend to go a bit rogue. They don’t realise that HMRC keeps an eye on those. So, if you're thinking you'll get a £50k thanks to your R&D tax calculations, you better make sure you check your calculations. 

So, bottom line, get the basics right, you know, receipts, invoices, reconciliation, and budgeting. Once you've nailed that, then you can start exploring other fancy financial moves like buying treasuries or investments. But truth be told, there's so much value to unlock just by focusing on the basics. 

So what's next for TextMine? 
2023 was all about discovering our ideal customer, why they buy from us and the value we bring to the table. That's why we're shaking things up with a rebrand. 

This year we're pushing the boundaries of large language models (LLMs). Now, LLMs have only recently become big since ChatGPT. But running those open source models is a whole other level of complexity where you might realise that a chat interface might not be exactly what your business needs. 

Since we've got this massive database of legal documents, we've been able to fine-tune those open source models to handle some very specific use cases. We're pushing the boundaries and seeing what's possible. That's the stuff that gets me excited.