Rachel Wong: Startup Lawyers, Fundraising Contracts & Legal Tradeoffs - E103

· Singapore,Women,Podcast Episodes English

"When I first started my Founders Doc I thought it's just launch it and then get a consumer response. So I would say if it is your first time doing a startup, just focus on getting consumers or getting a product market fit before you spend money on legal. It's always a risk and reward thing, right? If you only have two consumers and you spend $5,000 on legal documents, then it's just a waste of money. So make sure you get your product market fit right first before you put any more money in it, whether it is it legal or anything else actually. And that is the lean startup model, right?" - Rachel Wong

Rachel graduated from King's College, London (LL.B.) in 2013 with First Class Hons. Since then, she has worked as a corporate M&A lawyer in leading international law firms such as White & Case LLP, Hogan Lovells Lee & Lee and Allen & Gledhill LLP in Singapore and London. She is also a committee member of The Law Society of Singapore (Corporate Committee and the CPD Committee). 

Whilst helping a founder in his series fundraising process in Singapore, she was impressed by how 'founder-friendly' certain venture capital funds and law firms in Silicon Valley were – in particular, Founders Fund. She also felt that the legal community in Singapore could do better in providing more robust legal support for the growing startup community in South-east Asia, whilst noting cultural nuances and trends in this region. With this in mind, Founders Doc was born in 2021.

Founders Doc collaborates with Eugene Thuraisingam LLP, where she spearheads the Corporate Practice, with the hope that founders in South-east Asia get the full support that they need.

This episode is produced by Kyle Ong.


Jeremy Au (00:00): 

Hey, Rachel. Good to have you on the show. 

Rachel Wong (00:02):Thanks for having me, Jeremy. 

Jeremy Au (00:03): 

I'm so excited because you're someone who's tackling the legal tech world and you have a good view on something that seems very akin and complicated to a ton of founders. And so I'm sure that there'll be some interesting discussions that are going to have, not only about your professional journey, but also your perspective on the startup and legal intersection in South East Asia. Of course, before we jump into all that, tell us a little bit about yourself, to those who don't know you yet. 

Rachel Wong (00:32): 

I'm Rachel, I'm the founder of company called Founders Doc, which is the legal tech company, and I'm also the head of the corporate division at Eugene Thuraisingam LLP, which is a local law firm. I started my journey in international firms as well as your Big Fours; so the big four law firms, and I decided to step out and explore how we can reimagine how lawyers deliver services to clients with Founders Doc. 

Jeremy Au (01:03):That's amazing. Let's talk a little bit and go back in time. So there you were, and somewhere along the way, after junior college, you decided that you wanted to go do law, right? So what drove that decision? 

Rachel Wong (01:19): 

Yeah. It isn't as romantic. I actually wanted to be a broadcaster, but my dad says no, and my dad was like, "You got to do medicine." So as a rebellious move, I decided to do law and the inspiration for it was a Hong Kong drama. So there was nothing romantic about how I ended up in law. 

Jeremy Au (01:37):So it was good reverse psychology by your parents. It's like, you don't become a doctor, but you become a lawyer, right? 

Rachel Wong (01:46): 

Yeah. In fact, my dad didn't really like lawyers, but because I was in debates... I'm not a very good debater, but I was in debate, so the law schools just accepted me quite easily, So that was the natural calling of nature. 

Jeremy Au (02:03): 

Okay. So you have been doing debate for a while and so you felt law was there. That does mean that you did have some preexisting interest in at least the law side of it? What was your visuals of lawyer versus the actual reality of it? You must have had a certain mental image of law at that time? 

Rachel Wong (02:27): 

Yeah. Anyone who has seen me debating would agree that I would not have made it to law school because I like to stand there and crack jokes. And then the coach would be like, "Oh, gosh, I just put her in the wrong place." In fact, if anyone trained me for law school, it would be my sisters because we were constantly fighting over the pen and the dresses that we wore. So my older sister takes credit for the fact that, "Okay, you're now in law school because I trained you well when you're a kid and we got into enough quarrels." And then I'll be like, "Yeah. Mom, now I learned in law school that you need to be given equal hearing." I was given my chance to give my case when I was younger. So I think that was the genesis for me getting into law school. 

And then watching Hong Kong dramas at that time, there was this very pretty lawyer with a pink, feathery pen. And I was like, "Wow, becoming a lawyer, I can get this pink, feathery pen, put it outside my door and then go to court and then win the case." So when I first started training, I actually bought a pink, feathery pen, which I put in my cubicle. And I think all the other trainings looked that means they were this weirdo. Why does she have this long pink feathering pen. So yeah, so that was how I started my journey as a lawyer, being the weirdo in class. 

Jeremy Au (03:49): 

Well I think it's pretty common because we are all kids, we just watch movies and that's our articulation of it. I used to watch all these action movies, in the military and then I'll be like, "wow, national service be lots of fun, we get to carry this stuff and look very macho." And you do get that of course, but there's so much cleaning the rifles, waiting around, sweating and then carrying the stuff, getting very fit. 

Looking fit in a movie and be attractive like that is very different from Brad Pitt. It's very different from all the work you need to do for two years running around to get there. 

Rachel Wong (04:29): Yeah. 

Jeremy Au (04:30): 

So, big difference between the actual reality and obviously the movie. So I've been there. And okay, so there you are at kids college and you made an interesting decision, which was you went into law school and you said, "actually I'm going to continue being a lawyer, because a lot of folks at that point of time go into law school because of those movies and the drama series and say, oops, I will graduate as a lawyer, but I will do something else." And you decided to continue being a lawyer. So what was that about? 

Rachel Wong (05:04): 

So actually my plan was to go to law school and then work as a lawyer and then go into advertising. And now in retrospect, I should have done that because Google and Facebook make so much money for advertising. And if I just stuck to it, I would become a tech billionaire, if I did the more silly path of just sticking on. 

What I enjoyed about law was, I do corporate law. So I look at every agreement or contract a story. And that was what I enjoyed since I was a kid. I liked biology and history because they narrate, a story and that's the way I see every agreement. And then I just liked the space time that you have when you concentrate on something a little bit more complex, and then you try to make sense of it. That's what really gets me going in law. And now I try to gel the two together, So I have started producing cartoon videos for my clients which is available for public view. And that is the way I try to get my bit of social media advertising genes out and try to let it explore and groom itself. 

Jeremy Au (06:13): 

So, I mean, that's a great skill to have because the truth is everybody needs to do a little bit of that social media advertising for whatever they're building. And in this case you spend pretty much eight years as a lawyer, So I'm just kind of curious, what did you learn from eight years of lawyer so far? 

Rachel Wong (06:33): 

I think I did learn quite a fair bit. So the beginning bits were quite administrative and that is where the legal tech driving force comes from. The first few years, a lot of the tasks that was assigned to me were very administrative or paralegal, in nature, which I felt like "can we do better"? And then it's only when you start in your second or third or fourth year where you least you're pushed to becoming a real, real lawyer. And that's when the real grilling starts. So yeah, because I do MMA so you picked up the skills in an MMA transaction, which you can probably not read up on, these are practical skills, which you have to pick up on the job. 

Jeremy Au (07:18):What are some myths about the legal profession that you'd to help us understand differently now? 

Rachel Wong (07:26):Yeah, it's totally Suits, 100%. I'm just kidding. 

Jeremy Au (07:29):What is Suits for those who don't know yet? Can you explain what suits is versus the reality? 

Rachel Wong (07:37): 

Yeah. In a nutshell in Suits, Rachel finds Prince Harry and becomes a princess, that's all. That's all you need to know from Suits. Yeah. Suits is American TV drama about lawyer, this very good looking guy called Harvey Specter. And then he has this genius associate that helps him with this day to days. And then there's about politics going on, all quite dramatic, but kind of true, actually. I would say, Suits is just all the fun things in a law firm compressed into a show. Some people say it's fake, but I've seen it in real life. So I think it's true. 

Jeremy Au (08:16): 

Yeah. I think that's a lot of truth today. And there's a show I used to watch caught House of Lies, which is about consultants lifestyle. And the funny part, when you watch it is like, again like you said, it's all the fun slash funny moments of that lifestyle being compressed into one day. And they skip out all the boring stuff in between Excel spreadsheets and modeling... 

Rachel Wong (08:42): Proofreading. 

Jeremy Au (08:43): 

Yeah. You're writing minutes. Yeah, exactly. Sending out emails about the minutes, reminding people about the next meeting, scheduling across time zones. All the un-fun parts really don't fit daytime TV. So what do you think is real reality? So you're implying real reality there's a lot more mundane stuff, compared to Suits, even though there're some parts, some things that ring true about this Suits thing, but what else did you learn about being a lawyer along the way, that other people have misconceptions about? 

Rachel Wong (09:16): 

Yeah, I think not so much misconceptions, but one of the things that left an impression on me was when I started working my new case while in London. And this guy called Richard Yore and Ian Beckshaw, they were very innovative and creative, and aggressive in the way they looked at service delivery. And that really changed my mindset about how things can work when you are delivering advice to people. So in Singapore, how I was trained was, you got to put everything in technical, wonderful, chronological order, and it has to be in black and white, and cover your ass. And then they were actually like "our clients to do not like to read words, they want see is color, they want to see infographics, so we need to redesign how we deliver information to clients." "We want it to be succinct and not think the way things were done traditionally." 

So that was what was quite interesting for me, and I tried to sort of implement it when I came back to Singapore. Misconceptions about lawyers, Whatever you read about lawyers being drunkards and stressful work and talk too much, and all the evils they have. That's probably kind of true, although I do think that disproportionate number of people really hate lawyers. So actually we're quite nice people. I try not to tell people I'm a lawyer actually, so whenever people be like, "oh, what do you do?" I pause, and I'm like thinking for five seconds, should I say, I'm a lawyer? Because then they'll frown and they'll be like, I don't wanna talk to her anymore. 

Jeremy Au (11:00): 

So there you are, you're Rachel, and don't worry we're referring to covering your donkey here. So that's why we're able to publish but here we are talking about the fact that there's this societal negative view of lawyers. Why is that negative view? 

Rachel Wong (11:24): 

Well, it's partially true. Maybe the negative view is driven by the fact that we didn't really improve with times in some sense. I think people are always afraid of the hourly billing rates that we have, and the bills they see when it comes, they're like, "oh my gosh, your five minute or 10 minute of checking, the email cost me $300." So there is some truth behind it, and that's why people generally speaking fine lawyers a bit, in some sense, some people find them inefficient or charging too much, too pricey. 

On the flip side, some people say, "wow, that lawyer really saved my life, without them I would have gotten myself into huge trouble." So I think we as a profession, we just need to innovate a bit more and try to find that nice balance, and price point and service delivery that people truly respect us. And then also, maybe partially because of the rules that surround lawyers, we are not allowed to do a lot of things. So there's a disarm between in communication, so we cannot exactly communicate and deliver what we wanna tell clients in a way, which we should do. It's just a lot of traditional cultural things that we need to fix. Yeah. What is your experience with lawyers? Do you have any good lawyer, best friends? 

Jeremy Au (12:59): 

I do actually have some good lawyer, best friends actually, and we do rip each other about it. And I also have very expensive lawyers that I paid a lot of money over the years for as well, who are friendly, as friendly as someone who is paying them hundreds of thousands of dollars will be. I think there's two parts to it, and I think I resonate with that is the expenses really have an eye popping rate because we don't normally as entrepreneurs or founders or even business folks, we don't really measure ourselves an hourly rate. We just work a lot, and to have someone, bill us feels a bit like nickel and dimming for everything, especially reading emails, things that. So I don't send an email to my analyst and say, "Hey, I read your question about my what's going on, so I charge you x dollars." It makes the relationship very transactional in that sense. 

Rachel Wong (12:59): Yeah. 

Jeremy Au (14:03): 

And so the negative way of looking at it is, is nickle or dimming, but I think the tricky part is that it moves it away from a relational partnership to a transactional one. And then it comes, "how do I, as a client get the most value from this lawyer." 

Rachel Wong (14:19): Mm-hmm (affirmative). 

Jeremy Au (14:19): 

Which drives again, the transactional nature of it more. And it also sometimes avoids the understanding of what is the trust that we're trying to have here? What's the thing we're trying to deliver as fast as possible, right? And I think the best lawyers I've worked with so far really build that trust and on a radiational side, and try to get to drive decisions, not to be process oriented, but like "This is the document that we need because this is the business value we're trying to deliver." 

Rachel Wong (14:50): Yeah. 

Jeremy Au (14:50): 

And so finding lawyers that understand the business as well as you do, and shaping the legal docs to be like that versus I think I had a horror story. One of the first startup lawyers I ever engaged was the total opposite. They were trying to drive what we needed towards the templates they had, and definitely not listening to what we wanted to do. And we had one large grunt of money of their free services from a startup competition at Harvard and we just never got any value from them at the end of the day. 

So it was just an interesting dynamic for that one. But I also do remember another in Singapore for my other business. Engaging a lawyer, and again, it was like just the output is being terrible. I'm just basically saying that. We basically told them, "We're not going to use any of this and don't try to justify any of it." And we had to get a third party to help very quickly just articulate. We're not trying to be terrible people to be like, "Hey, we want to take this product and run," but it was just like, "Hey, this is totally not to spec." Anyway, so I think that's a really tricky part. 

Rachel Wong (16:09): 

Yeah. When I was a kid, my dad was like "I asked my lawyer this question, he took a long time to respond and then he wrote an essay and then charged me 10,000 and didn't answer my question." So, I think that resonated in my head, even though I knew he didn't want me to become a lawyer, but things that kind of play an effect on my mind. The irony is that when we are training in law firms, that's actually how we are taught. We're taught to write that long memo and deliver in this way, which is not exactly what some clients want. So it's trying to find the right fit. Yeah. 

Jeremy Au (16:47): 

Yeah. And a tricky part for a startup is that they're not normal businesses. So they don't have the standard mechanics. So when you're a large company, like a multinational corporation, you've been working for five years, really. There's a standard point of contact that standard transactions that are being run, and there's a standard process of workflow to get things there with the trust there. But with startups is totally different ballgame. I also understand for my two startups, both times, it was because I walked in with a totally different business to what they were expecting, and they just couldn't flex. But of course the interesting part was they told me they could do it, so I just took them at their word and then they didn't do it. So, I guess, I don't really blame myself because at a time, a first time founder and a second time founder. 

Whereas for them, they must have seen lots of startups go through the door. So they were making that judgment call to tell me they could service me well. Anyway, my key takeaway was and what I learned from that experience was, you can only work with lawyers who have worked with startups before. And so if you are a first time founder and you have a C stage company, you have to ask whether the partner you're working with has worked with C stage startups, right? 

Rachel Wong (16:47): Yeah. 

Jeremy Au (18:09): 

And even better, they've worked in your field because the agreements for biotech is totally different from the agreements you're going to write for a marketplace terms of service. So what do you think about that? 

Rachel Wong (18:21): 

Yeah, actually that's the genesis of Founders Doc. So I think four years back, my friend raised five million in Singapore and then he was looking for startup lawyers. Back then I was working for... All my law firms are quite extensive, so I said, "Okay, let's sit down and then I will write a request for fee proposal to 13 law firms with you, including the law firm that I was working in then." And then after going through all the 13 law firms in Singapore, he was not happy with any of the responses he received because he's like, "They don't really understand startups." And then he hired someone from Shanghai instead but that person also had a shortfall in the sense that he couldn't sign off on Singapore law stuff. 

That was many years ago, that made me realize like, "Hey, it's impossible that you reach out to 13 law firms and he as ambitious and a pretty good founder, couldn't find someone that supported him." And the other thing that was interesting for me interacting with him was, one of his cornerstone investors was one of the key founders of DC funds in Silicon Valley to co-fund his fund. And the way they approached investing in a startup was mind blowing for me, because in traditional M&A, the investors that I want these reserve matters and that board seat and that and that and that, and the agreement is got to be 40 pages long. They invested X amount of money in him, and then they were like, "Okay, this is my seven page document, this is my due diligence process, I'll ask for a few documents and they were good to go." 

So I was just kind of curious. I was like, "Wow, they can give you this amount money with just this short form document?" And then he was like, "Yeah, the mentality behind it is the DC fund wants to support the founder, so that the founder has the maximum space to grow and they don't want to clip their wings." So that got me thinking as well. Back then a startup, a vibrant startup community did not exist in Singapore but since then, we've sort of grown in leaps and milestones. So now I think it is right to say that I want to support startups as a community. I cannot support every startup, but I think that there'll be a proportion of startups that I can look through their lenses and say, "This is why I think we need." The thing about startups is they grow really fast and you choose the right one, they're actually really smart. They figure a lot of things out themselves. In fact, I learn a lot of things from them. Luckily they're not charging me hourly rates. 

Jeremy Au (21:02): 

I can tell you as a startup founder, that the ability to save a couple $100, if you do the legwork yourself is highly incentivizing for a founder to get smart and use the time well. Because I remember I was a consultant and in a big company you're like, "Yeah, it gets charged to corporate." So you can take your time learning and asking the lawyers to do all the legwork on understanding it, versus as a founder, you're like, "Whoa, I'm being charged an X per hour, let me at least use Google and spend a couple hours reading before the meeting to make sure it's an efficient meeting as fast as possible." 

Rachel Wong (21:37): Yeah. 

Jeremy Au (21:39): 

I think that's an interesting part you talked about which that... And I love the part where you said the seven page document and tree documents is the shot form. And then for most founders like, "Whoa, seven pages legal document, that sounds a long form to me." 

Rachel Wong (21:54): 

Yeah. Yep, yep, yep. I think there are some standard documents being thrown around in Singapore and my first response as a nobody was, I sat in front of my partner, then I was like, "You know what, no founder is going to use it because it's too long." And then she was just like, "No, you do not understand what you're talking about, this has been vetted by all the top people in the world." And I was just like, "No, our founder, time is the most valuable resource, they need to understand things." They're not stupid, they're very smart people, but not all founders, but most founders are smart people. And then they will pick things up really quickly but you need to have a document that actually works for them. 40 pages are not going to work, 15 pages... Seven pages to me is quite short but you can say that, it's too long for you. Yeah. 

Jeremy Au (22:40):Yeah. I think my buyers always tell peoples, I always try to push for of legal documents to be one page of actual stuff, because there's one more page, which is all the preamble and all the stuff, arbitration clauses, which are relatively standardized. So I always tell people, "It's a two page document, one page is this signature fields and dear X and here's the address all these other things." But I think maximum is one page of clauses, and I think the best lawyers are so frame it up from a positive angle. I think you raise a good point, versus reserve matters, which is a very defensive language. And I think that's a big differentiator between great startup lawyers and average to better ones. 

Because I think the great ones are able to structure the language in a way where it feels straightforward. It still gets the protection that we need. But it doesn't trigger the other person to lawyer up. Whereas I think the weaker lawyers, they write in a way that is simplest because they're think about other downside protections, but they end up causing the other person to lawyer up. And when the other person lawyers up to understand the contract, then they start generating fees and work and velocity by pushing for changes and then the lawyers start sending stuff to each other, which is, I can awesome from a billable hours' perspective but jaw dropping to founders or a founder and employee figuring stuff out or a founder and a strategic partner, they're just trying to get a deal done and then suddenly we spent two weeks with the lawyers emailing each other and we're still not really closer. 

Rachel Wong (24:28): Yeah. 

Jeremy Au (24:28):And I think that's a tough spot, I think a lot of founders have discovered. 

Rachel Wong (24:35): 

Yeah. It really depends on who you're dealing with. If you're dealing with a private-equity fund or a corporation, they're not going accept a two page document. And while dealing with founders where it's always a ritual thing. If a company has not even started and you guys are ideation stage or very early stage, then I don't think it's worth being too over things. But at the same time, I've also been sort of late stage startups where every course that is, and the fact that the other lawyer does not want to accept one sentence actually had implications, like they were trying to hide something. So those are rare instances, which I try to avoid, but yeah, it happens. 

Jeremy Au (25:16): 

Yeah. I think that's a fair point, which just says, really about the right amount of legal judgment between protection and simplicity, but also it changes with the life stage of the company. And I think the tricky part is, I think obviously if your company is the sites for Google, then you can use lawyers the way that you use any other lawyer, to some extent. 

Rachel Wong (25:46):I think that they all law firm, there's so many lawyers, they can call on some of Google law firm. 

Jeremy Au (25:46): 

Exactly, right? There's somebody in-house lawyers dealing with the regulators, dealing with court opinions and so forth. And so I think the converse is really at the other end of the scale. Your first time founders doing their pre-seed and seed investments and then doing their series A. I think those are the two sets periods where simplicity of documents is really important, and I think that's why we saw SAFE Notes really become super popular, not just in YC, but Silicon Valley and even globally because of the simplicity. Could you share a little bit more about what you think about SAFE's and how they're doing? 

Rachel Wong (26:24): 

Yeah. I mean, a safe and case is a great idea. In Singapore, we have the SVCs care document as well. My general sense, I mean, you are investor yourself but some of the investors that I meet are still not comfortable with the safe and case because they're too short. So it really depends on who you're dealing with. If they really are able to understand and are willing to take the risk with the $50,000, $100,000 investment, then the SAFE is way to be able to go. But even within the safe and case regime, there are very many different variations, like discount, no discount, debt versus equity. So founders just need to be aware about what they are signing themselves up to, not just negotiating strongly for everything but just knowing what you're signing up so that how to proceed in next capital fundraising exercise, you know what will happen if your company doesn't do well. 

In Southeast Asia things are a bit different, I think from Silicon Valley because in Silicon Valley people have very aggressive risk, they have very high appetite for risk versus in Southeast Asia, a lot of the funds you raise are from family and friends. The community is very small. If you burn bridges, it's not a nice feeling. So some founders actually come up to me and say, which is rare for startups but they'll be after, in three years time, if we are not able to raise our next round. We want to be able to give it back to them at 3% interest or something because they wanna maintain a good relationship. So I think that is how Southeast Asia is a bit different from the other regions, the family, the close connections amongst the communities is something that you just want to be careful about. Yeah. Not burning bridges. 

Jeremy Au (28:23): 

Yeah. Those are really important points you raise, right? Which is about how Silicon valley is different from the rest of the world in terms of their risk appetite and then the second of course, is acknowledging that Singapore is a small community, so people know people, right? And not just legal dynamics but it's also reputational risk, right? 

Rachel Wong (28:43): 

Yeah. I mean, I could categorize the founders that I see over the years in Singapore in three categories. So one category is your ex-Ivy league guys who came to Singapore to start their businesses. So them, and then investors would likely be from Silicon Valley or Silicon Valley influence and they're much more open to safe and case notes and whatever they're sure. You have the second category, which is your third generation kids. So the family started traditional businesses and they want to build a name for themselves, they want to do something techy. So those questionable, and on the flip side, you also have family offices investing in startups. So those, I find tend to be bit more traditional because they're still not comfortable, they're in traditional M&A space before, they're still not comfortable with the seven page document. They want to have a bit more skin in the game and they also want to follow a bit more skin in the game and the relationship quite strong. And the third category is hustlers who did very well, serial entrepreneurs. They either raise funds from any of the two categories before or institutional money and if you raise money from your sovereign link funds or whatnot, you're probably not going to fly with a SAFE Note, I'm not too sure about that, but the last I check, I don't think that's possible. 

Jeremy Au (30:11):Yeah, totally makes sense. And I think that's a pretty good summary, especially I think at least to me, I feel the trend is really of category one and to some extent, category three, right? The category of American capital that's cascading across the wall from the zero interest rate printing policy, cascading into... The US funds coming to Southeast Asia, but cascading as US LPs into of regional funds as well. And I think also when I meet all the new founders, they're all reading Paul Grad and Y Combinator and reading a bunch of stuff in the states, which I think they should because it's free information. So they're getting spot on it and because of that, I think they have a very strong bias to say like, "Hey, SAFE Notes are something I understand and someone actually took the time to explain this to me, not just their block posts but a whole ecosystem of block posts on Quora and websites and magazines. So I can actually understand what each term means and read up." Whereas I think the issue with some of these more local standard notes is they don't have that same ecosystem of explanation, let alone champions of those documents. So I think there's a big challenge, I would say. 

Rachel Wong (31:31): 

Yeah, actually between the one and three, I like three the most, but I think all of us have our own preferences. If I spoke to someone else they'd be like, "Oh, we the three." Especially the more traditional guys they'd be like, "Yeah three is the best," three is the institutional one. Sovereign linked ones. Two actually is the one that I track along a lot more and surprisingly, a lot of the family offices are currently very interested in investing in startups. So I think that's a space to be watched. 

Jeremy Au (32:05): 

Yeah, for sure. I mean, I think there are different paths to be a founder and also I think why articulating, so is different types of capital that's out in the market. And it's a bit of a multi-sided matching process and lawyers are the middlemen in that process. You've been talking a little bit about, and I noticed you being in many ways, an expert to founders about what the local legal documents and standards. So would you happy to share maybe your high level summary of how first time founders that you got evaluate safe and care, what would your high level articulation of the trade offs would be? 

Rachel Wong (32:44): 

So I think the first thing the founder needs to care about when they first launch a business will not be legal. The first thing is even for me, when I first started my founder'sI thought it's just launch it and then get a consumer response. So I would say if it is your first time doing a startup, just focus on getting consumers or getting a product market fit before you spend money on legal. It's always a thing, right? If you only have two consumers and you spend $5,000 on legal documents, then it's just a waste of money. So make sure you get your product market fit right first before you put any more money in it, whether it is it legal or anything else actually. And that is the lean startup model, right? Which I think is quite useful actually. 

And then the second thing is then you need to get your in-house documents in order. So terms of conditions, privacy policy, just anything risky from my perspective, it differs from industry to industry. So if you're influencer then your risk lies in someone bad mouthing you or non clause. And then saving case only comes in with you're fundraising. So fundraising is very dependent on your investors and what industry you're in, which also dictates what kinds of investors are interested in you. If you are in traditional F$B business or nothing, so tech related, your investors will most likely be a more traditional minded investor and they will ask for your... They may even ask for shareholders agreement, a full flat one. 

So just be prepared for that. But if you are in a very tech focused business and your investors are Silicon valley inspired, then you can start thinking about safe and case. To be honest, safe and case they do it quite a lot. The only difference is things like, is it gonna be equity or debt? So, I mean, equity means when they convert, they can only convert into shares, with the debt element in it, is to say that after the expired, let's say three years, the investors can ask your money back. It really depends on the terms and negotiation at that point in time. Yeah. I would say just try to understand what you're signing, that's all. There's no good or bad. 

Jeremy Au (35:08):Right. And when you say about safe and case and all the way up to the share, whole agreement, what do you also think about cares? 

Rachel Wong (35:16): 

I think we can be a bit shorter maybe, and also it is a good start to standardizing documents, but I think there are some provisions which maybe we can discuss a bit further. So I think it's a very good message that we know we want to give founders a document they can start with but maybe a bit of understanding about founders and the risk that they're taking could be helpful as well. 

Jeremy Au (35:49):Let's go into what those topics should be discussed into cares from your perspective. 

Rachel Wong (35:52): 

I mean, one of the clauses that have raised eyebrows amongst founders. I mean, it's a great instrument drafted by wonderful people, but things like most favorite nation clauses, I think some people sign it without knowing what it was, and it pains my heart a little bit because as a founder myself, I know what the kind of risks you're taking to start your business. And it pains my heart to see when they realize that they're either handcuffed in some sense, or they didn't know what they were getting into. So I think we can probably try and find a compromise between the two. I also see where the investors are coming from and the consent that they have in terms of protecting capital that they're investing on behalf of other people. So from their perspective, I perhaps also actually think the safe and case may be a bit aggressive for Southeast Asia. So I think eventually there'll be a middle ground that people use. In fact, I still have quite a number of people investing one buck, two bucks using a shareholders agreement and full shareholders agreement. What about you? What are your thoughts about the care? 

Jeremy Au (37:09): 

Well, I haven't used that instrument, I've used safe for sure. And I've it between safe and case? I think the crux for every legal document is, does the founder with his limited time and limited legal budget understand what the person is signing? Because and I feel you see there's a bunch of wishy washy stuff to be buyer beware caveat emptor dynamic, which I get when you're trying to be very transactional. But it's just is I think very shortsighted and I think this is a phrase they use, right? It's like, you want to be a long term greedy you want to be thinking about how do you create the most upside over the long term and that normally implies some sort of win-win transparency, trust dynamic, and that's especially true for startups, right? 

Where you're expecting the founder to really do a hockey stick of their growth and if not to keep trying. And if they, along the way, one year down the road, suddenly have a chat with Rachel and suddenly realize that a contract was not what they thought they had signed, it leaves a bad taste. 

Rachel Wong (37:09): 

It happens a lot. 

Jeremy Au (38:32): 

It happens a lot, right? I'm sure. There's probably like, all your business is probably people walking to you because they finally have a budget to talk to you and they finally have enough a network to get in contact with you. And then they realize, "Oh no, I was suspicious about this clause then and had no idea why I signed-" 

Rachel Wong (38:46):Yeah. By the way, talking to me is free. I don't trust by the hour as well. 

Jeremy Au (38:49):Oh, see that's every founder who's listening to podcast right now is very happy right now. 

Rachel Wong (38:52): 

Actually it kind of goes both ways. I've seen investors signing convertible loan. They invested like 600,000 or 800,000 using convertible loan, no term sheets, which they didn't even know what the terms were and a conversion for your convertible loan note is an IPO. So they also didn't know. So it's a two way thing. I also think what we want to strike is something that's fair, not necessarily that is one sided. 

Jeremy Au (39:22): 

Yeah. And I think that's exactly true. So what's interesting is that there's been a bell curve of founders who are currently high performing and founders that are currently low performing and then I added a scale that also found investors who are high performing investors and are currently lower performing investors. And so that's ends up shaping it into the negotiation and the negotiation gets boils down into the economic rights as well as the control rights in a document, that's really the heart of this legal document and this is fluctuating negotiation, right? That is in motion. And I think it's interesting because you see lawyers are on both sides of this transaction being that intermediary and trying to shape that negotiation to a close, right? What tips would you have for founders in terms of how they should conduct the process of that thing? My tip has always been to focus on the trust building side but I don't know what advice you would normally give founders as they enter that process here. 

Rachel Wong (40:35): 

That's a really, really, really good tip because I mean, that's what the Southeast Asian fabric I call is about. But I would always say, know what you want before you go in, because sometimes founders just want the money in and they just be like, "Oh, let's just sign it and let's get it over." And then that round, they're fine. The next round or the bridge round they're stuck. So I think just know what you want and maybe plan a little bit ahead, so you plan for this round, the bridge round and the next round. And then know where your endgame is so that when you conduct your parent capital fundraising, you will not be stuck in future and the second thing is, evaluate your investors the same way they're evaluating you, right? Because they are going the people that you're going to work with for a pretty long time. And if they're going to be aggressive from day one, then it's a dating phase. You can choose your boyfriend. So choose it right. Yeah. 

Jeremy Au (41:41): 

Yeah. I mean, I would say it's more than choosing a boyfriend or girlfriend because when you sign a legal contract, it's a seven year, 10 year document, I think it's closer to a marriage actually. Once you get into the legal thing and actually, I think you say something that's very true, right? Which is knowing what you want before you go in is a tough decision for a lot of founders because they're working on the business, they're working on the customers, they're working on themselves, and their own psychology of fear, right? And formal and scarcity and it's tough to know in the midst of your own, especially first time founders, to learn that... I think it's easier once you've been a second time or third time founder, because you know all these documents inside out by then. 

But I also really like what you said about be picking investors. I think the way I talk about it is like, "Would you hire this person to be on your team?" That's what I tell farmers Like, "would you..." I mean, because everyone's very picky about their head of VP of sales or the chief of staff or the marketing lead, everyone's very focused on culture fit and everything. And then suddenly you're... Like you said, they're not applying the same standards, the high standards they have for hiring an employee to effectively hiring an investor, right? To join the board which will be important both in the good times and creating the conditions for the good times. But also there will be tough times and that's where it's going be really make a break if you have the right investors or the wrong investors on board. Awesome Rachel, so something to wrap things up here, could you share with us a time when you were brave? 

Rachel Wong (43:33): 

I think my bravest moment was probably to do law instead of medicine because I knew that my dad really wanted all his children to become doctors. And then after that, continuing to be a very strong headed female lawyer because my workplace is quite male dominated and some people will view me as a female rather than a lawyer. So setting the record straight is quite important for me. 

Jeremy Au (44:06): 

Wow. Thanks sharing that and I really appreciate you doing everything that you have been to articulate and be the bridge between law and startups. So I'd love to share least the three things that really jumped out at me based on our conversation. First of all, I was really struck by, I think the fact that your frankness about your journey towards being a lawyer and what you learn from being a lawyer and what you gain in terms of skills but also the areas improvement for the legal industry. And I think that's a pretty fair point of view because I think a lot of people don't really understand what lawyers do or who lawyers are other than, like you said watching Suits, which is a positive fun version of it versus the big, bad evil lawyers in other movies. 

And I think the second thing I really appreciate of course, was I think the dive that you and I did around really what core the founder trade offs in terms of being someone who has to start building customers, but also start thinking about the fundraising and the legal documentation associated with that. So I think lots of helpful handy tips on SAFE NoTes, case, care and some of the regional differences and things to watch out for. And then I think, thirdly of course, thank you so much for sharing with us your own entrepreneurial journey, really spearhead that bridge dynamic between the legal profession and the startup vocation. And I think that's a huge piece because I think the more we have great lawyers like you helping bridge that gap and having that founder psychology, I think the more investors win and the more founders will win over the long term. So I think that's amazing. 

Rachel Wong (46:00):Yeah. Thanks for having me Jeremy and it's great. Your podcast is great and I mean, I'm not a great 

lawyer yet, I'll be there with the help of you guys. It's gonna be a two-way process, I learn from you guys, you guys learn from me and hopefully we can work together to create a more robust startup community in Singapore and Southeast Asia.