Legal Disruption: 60 million Euro investment in the establishment of a pioneering RegTech group

Berlin, June 6, 2023

Legal Disruption: 60 million Euro investment in the establishment of a pioneering RegTech group

Companies
lawpilots GmbH
Focus
Legal-regulatory e-learnings
Location
Berlin
Founded
2017
Invested
2023
Status
Active
  • FLEX Capital enters a partnership with the successful serial founders and lawyers Kathrin Schürmann and Simone Rosenthal to build a new RegTech group in the field of Alternative Legal Services.
  • The first platform investment is the company lawpilots. The training platform is the No. 1 for legal e-learnings in all business-related areas in German-speaking countries. These include data protection, compliance, ESG, IT security and other regulatory requirements.
  • Regulatory requirements in Europe are becoming increasingly complex, making compliance more difficult. This poses ongoing challenges for many medium to large companies. There is an urgent need for adequate business models that tap into the immense automation potential in the legal industry and relieve the respective legal departments of companies.
  • Together, FLEX Capital and the founders of lawpilots want to invest in appropriate legal business models. FLEX Capital is providing a budget of 60 million euros.

FLEX Capital partners with successful serial founders and attorneys Kathrin Schürmann and Simone Rosenthal to build a new RegTech group in the Alternative Legal Services sector. RegTech (“Regulatory Technology”) refers to the use of technology to overcome regulatory challenges and optimize compliance processes. FLEX Capital’s Next-Generation Private Equity Fund is making its first platform investment in the company lawpilots, the number one in the German-speaking region for legal e-learning.

The Berlin-based company was founded in 2017 by the successful lawyers for technology and data law and offers e-learning courses in the areas of data protection, compliance, ESG, IT security and occupational safety for company employees.

The bootstrapped company has over 1,200 customers in Germany and Europe. They include Audi, AutoScout24, BASF, Deutsche Bahn, Freudenberg, Infineon, Konica Minolta, Siemens, Ströer and Volkswagen. lawpilots was able to win over 480 new customers in 2022. The company employs 65 people. In total, lawpilots offers more than 48 different e-learning courses in 35 languages and has already trained more than 3.5 million employees.

RegTech - an essential part of the everyday life of heavily regulated companies

Compliance with increasing regulatory requirements poses significant problems for many medium to large companies. In this context, one of the most drastic and well-known pieces of legislation in recent years is the 2018 General Data Protection Regulation (GDPR). Since then, further legislation has been continuously added in various areas of business, and a trend toward excessive regulation is apparent, particularly in the technology sector. Current examples include the Supply Chain Due Diligence Act, which came into effect on January 1, 2023, and represents further ESG regulation, as well as the Cyber Resilience Act from September 2022, which is an additional expansion of compliance requirements in the cybersecurity area. A number of other laws will come into force in the near future. The Data Act, the Digital Services Act, the Digital Markets Act, the Data Governance Act and the Artificial Intelligence Act are just a few examples.

Every company is obliged to comply with the relevant regulatory requirements. Otherwise there is a risk of high fines in addition to image damage. A breach of compliance can result in costly business disruptions.
Therefore, companies are faced with the particular challenge of training employees carefully and continuously and making the dangers resulting from a violation of these requirements transparent to them in the long term.

A study by Globalscape underscores that data security training programs are one of the key levers for avoiding compliance costs.

“At lawpilots, we currently assist over 1,200 active clients in regularly training their employees through 48 online training modules available in more than 35 language and country versions in the aforementioned areas. In total, over 3.5 million employees are currently learning how to deal with legal requirements in their everyday work,” says Philipp von Bülow, Managing Director of lawpilots. He further adds, “As one of the first providers in the market, we are setting the standard for legal-regulatory e-learnings, providing people worldwide with greater security in their daily work.”

“With lawpilots, we not only see ourselves as leading experts in the field of legal e-learning, but also as a strong RegTech provider,” says Kathrin Schürmann: “Legal training courses are too important to be complicated. Our product was developed according to the latest learning psychology approaches and is designed to ensure learning and, above all, understanding of the complex regulatory content. With this combination of multiple award-winning expert knowledge and innovative learning methodology, we want to continue to stand out from the competition in the future.

“lawpilots is a pioneer in a rapidly growing market. The legal requirements for companies and thus the training needs of employees will exponentially increase in the coming years,” says Peter Waleczek, Managing Partner at FLEX Capital. He explains, “With lawpilots, we’ve chosen a strong initial platform investment in the RegTech sector, and we will heavily invest in the technology and the product. Together with the founders, we will elevate lawpilots and other RegTech companies to the next level of growth.”

Founding of a platform for alternative legal services in the field of RegTech

The investment in lawpilots is just the beginning of a visionary collaboration between Kathrin Schürmann, Simone Rosenthal and FLEX Capital. The capital is also planned to be used to set up a new platform for alternative legal services with a focus on RegTech. This makes sense against the following background:

Kathrin Schürmann and Simone Rosenthal are founding partners of the renowned law boutique Schürmann Rosenthal Dreyer Rechtsanwälte (SRD). The highly specialized team at SRD has been advising on all areas of technology and data law for years and has been nominated several times for the prestigious Juve Award for their special expertise in these areas, which they won in 2020.

Away from their established law firm boutique, the founders have also demonstrated their entrepreneurial flair on several occasions in the past, seizing market opportunities at the right moment to launch a number of other successful start-ups in the RegTech space. In addition to lawpilots, this includes the management consultancy ISiCO, which specializes in data protection certification, compliance, and data governance, as well as the Privacy Solution Platform caralegal. With its innovative legal workflow, caralegal automates data protection management in companies and supports it in a legally secure manner.

The founders have thus built up a conglomerate that has the character of a “full-service provider” focused on “digital business”. The interaction of the components of the company conglomerate repeatedly results in very important impulses and feedback for alternative legal services.

FLEX Capital is a Next Generation Private Equity Investor founded by seasoned software entrepreneurs helping bootstrap mid-market companies to reach the next stage of growth. lawpilots is the first investment of the second fund launched in January, amounting to 300 million euros. For the first time, this includes a commercial structure that enables FLEX Capital to operationally support portfolio companies with a specially built team of 30 experts, which sets the investor apart from many other private equity funds.

“We experience the pain of legal departments and law firms on a daily basis as they grapple with the lack of digitization in the legal sector, resulting in efficiency losses and a shortage of skilled workers. We see immense potential for automation and recognize the need to relieve companies through appropriate business models. This is where we, together with FLEX Capital, come into play. In the future, companies should be able to respond effectively and quickly to legal requirements thanks to our offer,” says Simone Rosenthal and continues: “Our new partner is known for implementing growth strategies with precision and foresight. During our strategic discussions with FLEX Capital, it was evident from the outset that we can plan and decide on an equal footing with this partner. FLEX Capital convinced us not only on a professional level but especially on a personal one. We are pleased to have found the right partner in FLEX Capital to implement this vision and grow together.”

“The topic of Regulatory Compliance and the potential of the RegTech market has intrigued us for some time. With Kathrin Schürmann and Simone Rosenthal, we have now met two successful and visionary entrepreneurs who are absolute pioneers in their field. We are delighted that out of all their options, they chose us as their partner,” says Christoph Jost, Managing Partner of FLEX Capital. He adds, “Together, we want to invest in pertinent legal business models in the Alternative-Legal-Services market and have allocated a budget of 60 million euros for this purpose.”

About FLEX Capital

FLEX Capital is a private equity fund founded by successful serial entrepreneurs that invests in profitable and growing companies from the German Internet and software midmarket. Announced in early 2023, the second fund of €300 million includes a commercial structure for the first time, enabling FLEX Capital to provide operational support to portfolio companies with a purpose-built 30-person team of experts, differentiating the investor from many other private equity funds. Currently, the FLEX portfolio comprises six business platforms. For more information, visit www.flex.capital.

"The topic of regulatory compliance and the potential of the RegTech market has fascinated us for a long time. With Kathrin Schürmann and Simone Rosenthal, we have now met two successful and visionary entrepreneurs who are absolute pioneers in their field. We are delighted that they have chosen us as their partner from all their options. Together we will invest in relevant legal business models in the alternative legal services market and are providing a budget of 60 million euros."

Christoph Jost, Managing Partner of FLEX Capital
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