Seed Funding Without The Headache

We sit down with Michael McDowell from Seed Legals to talk about making early-stage fundraising faster, cleaner, and less mentally draining for founders and funds. We dig into Northern Ireland’s startup ecosystem, the reality of SEIS and EIS rounds, and where AI can remove admin without replacing human judgement. 
• why Northern Ireland produces resilient founders and strong university spin-outs 
• Michael’s path from commercial roles to crowdfunding and legal tech 
• teaching early-stage basics through Raise Ventures like cap tables and term sheets 
• when shutting down early and returning cash can be the most mature move 
• what Seed Legals handles across SEIS and EIS documentation and compliance 
• how funds use the platform for term sheets, negotiation, signatures, and cap table updates 
• AI support for founder questions using up-to-date HMRC and Companies House guidance 
• why speed matters most at the exact moment founders need to build and sell 
• the shift in the market towards traction, efficiency, and revenue focus 
But come on to your platform and it'll explain it all beautifully and it'll become perfectly clear.

SeedLegals
The platform for Startup Legals including SEIS Advance Assurance.

Scribe
Find and connect with angel investors in the UK Founded by Rob Cossins

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Business banking from Revolut

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Note: you can also watch these episodes on youtube.com/@canopycommunity617 

Transcript

Summer Opener And Welcome

Stewart Noakes 0:01

All right. Well, this is hard to believe, but it must be summer because I've been for a barbecue this morning, and it must be summer because we're doing our first investor circle interview. Welcome, Michael. For those people that don't know who you are, would you be kind enough to introduce yourself and tell us what you do?

Michael McDowell 0:15

Yes, hello everyone. I'm Michael McDowell. I'm the Ireland country manager and investor lead for Seed Legals. And if you don't know Seed Legals, we're a legal tech platform established to help founders get all their legal documentation for funding rounds, right? From creating your first cap table, SCIS, CIS Advanced Assurance, right? Through all your funding docs and then go under the RD and options and everything on our platform. So we're they're there to help founders scale and grow.

Stewart Noakes 0:48

And I'm a big fan of Seed Legals,

Meet Michael And Seed Legals

Stewart Noakes 0:50

use it personally for a couple of my companies, and I think we're going to be using it for our fund as well. So great to have you here. And uh, you know, we obviously don't know each other very well, so it's good to get to know you through this process as well. Um Northern Ireland's where you live, right?

Michael McDowell 1:02

Yes, um, been based um in Belfast, um, grew up here, moved away, lived um in Scotland and Australia and all other places, and then moved back um good 20 years ago. Um and it's a it's a nice place to be based. Um, you've got the rest of Ireland on your doorstep, nowhere's too far away, and you come in central London in four hours, as I tell people. So um it is very accessible. Um, and we also get to escape the 35 degrees heat, see much more calmer, 25 degrees in the summer. So it's been lovely this summer, actually.

Stewart Noakes 1:40

Yeah, yeah. Well, it's been a nice 26 on the beach already this morning, uh, here in just in the UK. So it must be uh pretty balmy elsewhere.

Why Northern Ireland Punches Above

Stewart Noakes 1:47

Um so Northern Ireland's got a bit of an ecosystem though, right? So uh Boyd from Sapphire, who we deal with for our fund, he's based there as well, and the universities seem to be thriving as well. What is it about Northern Ireland that makes it so special?

Michael McDowell 2:00

Yeah, I think we've got a really strong um we've got a good university um spin out at Queen's University and University of Ulster. I think the the spirit of innovation and creating things, um taking responsibility and um being your own boss is sort of quite strongly ingrained in Northern Ireland. Um we have an economy with a very like in Tyrone and Armagh, you've got lots of heavy industry, um, and a lot of companies have sold from that, which has then led to new people coming through who want to reinvent those traditional businesses using new technology and doing new ways. And then through Belfast, where you have the universities, and we have um Catalyst at the Science Park, Ormo Baths, which is founded by a number of exited entrepreneurs from around the world, um, and a really vibrant um Nat West um hub there as well. So if you're a founder and you want to create and build something, there's loads of support, there's places that you can go to, there's people you can lean on who've got lots of experience and knowledge. Um, and as I say, we're also so close to those UK and Irish markets that you can easily get across and do things. So it's um it's a it's a great place if you do want to create and build something.

Stewart Noakes 3:26

Amazing, amazing.

From Sales Jobs To Crowdfunding

Stewart Noakes 3:27

So you've obviously had a few careers and and moves around before you got involved in seed legals. What brings you to this space? You know, were you an investor before, were you in finance before? How does it work for you?

Michael McDowell 3:38

Yeah, I I I did remarkably boring jobs after I graduated. Um sales commercial jobs in um technical training. Um I then worked for Scottish Executive Agency um selling e-learning solutions. Um and I think I was on the edge of lots of innovation, lots of really interesting stuff, but never properly involved in it. Um and then went off to Australia for six months um and had the most ridiculous. Well, it wasn't ridiculous, it was a bit ridiculous. It was selling a window and PVC cleaning material, which was sold on UK shopping channels. So I went to Australia to try and get Australian shopping channels to stock and sell this um product, which was invented in Northern Ireland, manufactured in China, well, manufactured in China-ish, and then we wanted to get it in Australia. But the big selling point in the UK was that there was D Icer in it. So you can imagine having D-ICER conversations in in Australia. But that that got me working for myself. So I came back, worked for a startup in the property sector, managed to get a little bit of an exit from that, um, and then got involved in the crowdfunding space, um, which was just emerging at that time. But I recognised that I'd been helping a couple of companies raise investment, and I was sick of running around with PDFs of pitch decks, having coffees with investors. And I felt like this new way of um sharing deal information, getting access to investors in more interesting and difficult places, and broadening rounds, um, really became I found that really, really interesting. And did a lot of consultancy work around that um until it was approached by seed legals. Um, and it married into that sort of thinking. The whole thinking of how do we make it easier for founders to connect with the right investors, but also close out funding rounds in a really neat, tidy, process-driven way. Um, because I think we'd all experience long, difficult funding rounds with well-meaning and great lawyers, but just who lawyered the life out of every deal. What we want was this process. Get these.

Stewart Noakes 5:58

And those bills can get quite considerable, can't they? You know, when the bills look heavy next to the investment, it's uh you know, one percent, I think was the benchmark I was given when I first started. But you know, when you see anything north of that, it starts to feel painful.

Michael McDowell 6:12

But that's it. And you also um I think while I was going through that, you started to meet founders who were brilliant at what they did, but they didn't have the base knowledge, therefore they were making mistakes, which then became very

Building Founder Basics With Raise Ventures

Michael McDowell 6:26

expensive. So, but actually, just before I started with a few years before I started C Legals, I found myself with uh an investor here in Northern Ireland called Jenny Irvine and an old friend, Marty Neal. And we set up an accelerator called Raise Ventures. Um, and the thinking behind that was to try and help really early stage founders get really good solid foundation. They're really quite a boring accelerator, as we saw. We wanted to explain what a fun, we wanted to explain to them what a cap table was. We wanted people to know what a um what a cap table was, what a term sheet would look like. We wanted to make sure that they were properly incorporated in company size. We wanted to make sure that they had proper foundations. Um so when they took on the filming rounds, they knew and we obviously did loads of stuff around product and customers and everything, but we got really granular and boring about stuff as well. And I think that boring aspect then led into this illegal stuff where trying to take all the boring stuff away from finders.

Stewart Noakes 7:25

What uh what were the stats like on race ventures? Did you did you run many cohorts or anything?

Michael McDowell 7:30

Yeah, yeah, we we I think with over 30 companies came through the programme, and we have um six who are doing pretty well at the minute, um, with a few high flowers. I won't name names because they're all brilliant, and you don't want to pick one of your favourite kids, but um they are I think it's it's been like really like satisfying to see how well all those founders have done and and all of all of them for the the great the determination and the resilience that they've all shown, the the successful ones, and also a lot of respect for the ones who got so far and realized it wasn't gonna be a thing they wanted to do and stepped away. I think that has to be celebrated as much as anything else.

When Shutting Down Is The Win

Stewart Noakes 8:16

That's a hard reason. Especially if you've invested weeks, months, years of your of your life into something, and then you make this somebody's pointing out basically it's not gonna work. You know, how do how do you make that decision?

Michael McDowell 8:32

It just takes an incredible level of self-cont. It's a ridiculous level of self-confidence and maturity. I was talking to a fund manager yesterday actually, and he told him that one of their companies well have I think like 18 months of runway, they have the cash. They did a funding around, but they've been talking to customers and they realize there's no market for the thing that they're building. Therefore, rather than just keep going until the runway runs out, um, they're gonna return a little bit of cash to some investors, they're gonna help um others get loss relief from their SEIS and EIS, and they're gonna shut up shop and then take some time and come back with something new. And um, like both myself and the fund manager going like that's a finder we want to keep an eye on. Yeah, he's gonna come back with something bigger, better. Um, and it just takes I think it's that confidence piece. I mean, we need I think it's a UK trait, an Irish trait as well. We still don't embrace and celebrate failure like the Americans do. Um that's something we really need to start to start doing, I think. Like you must have found that with your accelerator and your different programs as well. You must have had to put the odd arm around the shoulder.

Stewart Noakes 9:47

Absolutely. Um yeah, when I first started this stuff when we were doing things in Bangalore, there was uh a stud up there who did quite famously give money back to the VC fund that invested in them. And they said, We we worked out there wasn't a future for this, and rather than burn the last one uh 500k, we're gonna give it back to you and do the similar take a break and do something else. And it really was just there were two camps on that. Nobody was ambivalent about that. Some people praised them to the roof, and the others just lambasted them in the press, and they were like, This is insane! Like, you've got the VC money, you should just carry it on. You don't know it's gonna fail because you don't know the market, right? That's the point of the VC money. You're supposed to be trying out this thing and they're happy to lose it all. And it really was like split points on that as a decision. Uh, I have always aired on the side of, well, if you can see the future or you've given up internally and decided like you don't have uh the juice for this anymore, then the fair thing to do is to give the money back and let them redeploy it to somebody else. Because they're not gonna they're not gonna distribute it back to the LPs, they're gonna go and put it into another idea.

Michael McDowell 10:52

Yeah, exactly. And that could be yours in 18 months' time, like who knows? So yeah.

Stewart Noakes 10:57

Yeah,

Seed Legals Scale And EIS Reach

Stewart Noakes 10:58

absolutely. So Seed Legals does a pretty awesome job in the UK, right? I mean, what's the stats that you talk about nowadays?

Michael McDowell 11:05

Oh, 60% of all EIS advanced assurances come through Seedle. Um I was actually telling about that the other day. I think 3,000 founders a year will be raising money in some way or other through our platform, whether that's funding around using um seed fast advanced subscription agreements um or um convertible loan notes. So we have a a big chunk of the UK startup um ecosystem and market with that nice um yeah, so most founders um we would like to think will come and check us out when they're starting to get going and doing what they do. And we're as we we love it even if they're using our information and our guidance notes and all those great tools. Um because yeah, we want them to be as well educated as they possibly can. And it's a loss to us if they go off and use someone else. But if they've used some of our documents and learn something before they go there, hopefully they'll they'll they'll still get a good outcome of what they're trying to do.

Stewart Noakes 12:20

I mean, we we i Canopy have our own uh SEIS fundraising course which people can can take as a one-off when they're getting ready. And we use a number of your different articles and stuff as additional information on that course and point them over to the site and stuff because it's uh up to date, it's relevant, it's accurate, it's useful, it's like uh it's a it's a very informative section.

Michael McDowell 12:41

Yeah, and we're we've just launched a new nice this one.

AI Help That Uses Real Context

Michael McDowell 12:45

Yeah, this is 20 minutes on the conversation. My first mention of AI. This this must be a record on any podcast around Northeast Days. Um, but we are using lots of new tools um to integrate our knowledge base service with Claude. So you'll when you use our help function, and I'm probably describing this really badly because it's only gone out the door a few weeks. So we're still learning how it works, we're learning how to describe it. I won't quite get it. You get the information from our from our knowledge base from all the articles that we have prepared, and then they get LinkedIn also to Claude finding all the relevant um articles and documentation from HMRC and company's house um as well. So you get the actual company's house guidance or HMRC guidance, and then some of our articles linking in between that, and then it can also now with our MCP server um check what you have already uploaded onto our platform regarding your company as well. Um so it can give you an answer based on where your company is and what all the um other stuff does. Now, I'll apologize for the most clunky explanation of something I don't 100% fully understand. And Mr. Rules, if you're watching this apologies. But um, yeah, just I think everything's getting really nicely integrated um to make sure that your decision making on what you do with and for your business is based on the right up-to-date information and what you've got um going on under the bottom of your business. So it's quite exciting.

Stewart Noakes 14:20

No, it's very helpful, isn't it? Because one of the things that founders have said to me in the past is they they love like the simplicity of using seed legals and stuff, but when they get stuck, it's like, oh, who do I speak to now? And there's like this little gap, and maybe that that sort of clawed type thing, really, because it's got your context and it's got the information that could really navigate that for them. I like that.

Michael McDowell 14:42

It it should go through that, and then we still have loads of people in the background as well. So um, if anyone ever gets stuck and can get through to somebody, contact me, and um, I'll get them someone really quickly so we can always yeah, we're we're still a pretty much people-first business. Um, yeah, we find that really important.

Running A Fund Round Inside Seed Legals

Stewart Noakes 15:01

I mentioned at the start that we're going to be using seed legals for a fund. Like maybe you could explain to folks how that actually works and the particular bits that we like in terms of the connection to a founder who's on seed legals and then the fund that's on seed legals as well.

Michael McDowell 15:17

Yeah, well, I think it's what the what the fund can do is create their term seat, um, which is usually pretty much standard for most funds investing in the companies, and then that can be shared straight through from the platform. The founder then can receive that. Um and there's an opportunity for the founder then to red pen or make comments on anything that they're not necessarily happy with. Then you can have a bit of a negotiation um around those areas, um, which is often more an explanation from the fund why that particular point is there and why it's nothing to worry about. Would that be a fair comment, sir?

Stewart Noakes 15:56

Um with the FCI stuff, there's a lot of cookie cutter, right? There's a lot that just can't be can't be changed. There's some there's some discretion, but there's some bits that just been moved.

Michael McDowell 16:06

Exactly. So you can have that discussion, and then once everyone's happy, um it can be signed on the on the platform, then the founder will have their cap table updated. So it'll it'll show the new investors coming on there. Um and so when you guys invest, you usually come in with co-investors from different places.

Stewart Noakes 16:26

Uh yeah, we will be uh the first uh 10 checks we're writing are 100k, so there'll be other investors coming in alongside that.

Michael McDowell 16:33

Yeah, so you can then share out if if you guys are leading, you can then share out that term sheet um to the other investors as well to see if they want to come in on the same terms and it can be negotiated, um, and then it can all be done there on the on the platform. So what it really does is give visibility to everyone. There's no like the thing that everybody wants to avoid when you're trying to close any deal of any sort, and I'm sure everyone realizes this, is horrible email chains of complicated negotiation and different version 12s coming through as well. If you can keep everything tidy in one place, it just makes the negotiation quicker and cleaner and easier to track. Um, and also then when you particularly for the SCIS and EIS, um, when you want to come around to do your compliance um to make sure that all the investors get their um appropriate tax reliefs. Um, all the documentation can be then done through the platform as well. Um, and our guys can review and check everything to make sure it's been done properly. Um so all those certificates then can be shared out from there as well. Because I think that's it all it all it's yeah, it's one of those awkward things that funds find chasing founders to get bits of paper and different things signed, and the investors are chasing funds and everyone's chasing everyone. We can just keep it all nice and tidy in one place, um so it doesn't distract. I think sure you must also find a lot of this admin and a lot of this stuff is being done at exactly the same inflection point for the founder who are trying to onboard their first or their biggest enterprise customer or other things that are other things that are going on, and then the founder gets an email about SEIS compliance, and you can just feel their hearts sink from 50 miles away.

Stewart Noakes 18:22

I mean, the first you know, any first-clime founder who's watching this, they might think, oh, this sounds like a great idea, and I understand the concept and stuff, but I'm probably only going to do one raise, and what does it really matter to me? But I can say, like, when when I went through the raise with Supo with Yuri, and that was the first time we'd used this Seed Legals integration piece and hatched with the investors, and we were on the platform and we were doing stuff, and I sort of blinked and we'd done it, and I was kind of like, hang on a minute, this is normally incredibly painful. I'm expecting like six weeks of back and forth and silliness and uh track change word documents and all sorts of things, and and we're dropping them, we're clicking them, we're uh updating them, we're done. And I'm like, this is amazing. And and it wasn't my first rodeo, so I could really see the difference and and not not just in how long it took or didn't take, but it was the cognitive load, but it hadn't gotten away from you because funding should be about moving forward, not getting stuck in this admin loop where you needed a a CFO to be on tap to actually help you through it or a an extra legal fee to sort it out. You just want to get the money in and get going. Sure, if you're in the 20 million race category, okay, we can be a bit more nuanced, but when you're in the 250k just trying to get started, but you you just want to get it done, right?

Michael McDowell 19:40

Exactly, because you need that money, and because you have that maybe developers standing by ready to come on board to get going on that next iteration of the thing that you're trying to build. Um, and the only barrier that's stopping do that is having the cash available to do it, and that's from a frustrating stage for any finder, is you can see the prize, but you need to build these things, do these things, and then you can start taking advantage of it. Um, so what we wanted is make sure that we are not a difficult barrier for that. Um it's you know, allowing the founders to do what they want to do.

Stewart Noakes 20:17

I think the other thing we recognise in Psychanopy is that the SCIS and EIS tax regimens are proving to be some of the best liquidity areas in in the world. Like it's one of the best systems for early stage fundraising, and tools like seed legals, and there are other site founder catalysts and stuff, these all help you to do it efficiently, which if you're coming from another country to raise into the UK, that's a massive thing as well. You don't want to have to try and go to this education piece, let the platform do the lifting.

Michael McDowell 20:45

Yeah, I thought that

US Expansion And Fixing Incorporation

Michael McDowell 20:47

that's exactly it. And I think we're so we've launched in the States as well. Um, so we've got Anthony Rose spends a good chunk of his time in New York, and we've got a guy over there. So and that's sort of been the mission in the States, weirdly, is um smoothing out early incorporations, smoothing out the right type of company incorporate as, making sure that you do your Delaware flip in the most appropriate way, making sure that if you're in safes, they're done an appropriate way. Um and um I think the it's a slow burn over there because we're doing it in that process-driven way. Because it's a great example of a market where there's an assumption that you'll launch quickly, you'll get everything wrong, you'll string everyone along until you're in a position where you can break the legals to fix everything and then go for your next funding round. We sort of think there might be a better way. Um, so that's the what we're what we're aiming for.

Stewart Noakes 21:46

I remember a great moment when I met my first lawyer in the US, and I was a complete new for trade in the US, and I've been sent along to a trusted attorney, and uh we have the first meeting, and as I arrive, he shakes my hand and warmly and he gives me two. Business cards, and I went to give him one back. And he was like, No, no, one's for you, and one's for the guy you refer me to after this meeting. I was like, This is a whole different ball game.

Michael McDowell 22:10

I like that, yeah. I was gonna say I might try that. I can just imagine a startup phone or in Belfast what how they'd look at me.

Stewart Noakes 22:19

But um, yeah, I like that. I don't know, see what happens when you get a pine now, but I don't know. Um so there's always a lot happening on C legals. I noticed it doesn't stand still as a platform, it's always iterating. Even the fun thing as we went through it with Super, I didn't even know it existed at the point where Hatch sent us over the link and stuff, and it was, you know, and obviously we've now built into that as well. What what what is next on the roadmap? Is there something else already planned?

Michael McDowell 22:41

Yeah, well, I think we're very excited about we're sort of continuing on that founder process, and where we always feel that we've sort of stopped is the actual connection then with investors um and trying to bring that the whole ecosystem together. Um,

Roadmap To Connect Founders And Funds

Michael McDowell 23:00

because as I described earlier, you can do everything up until that point, and then off you go, go and find an investor. Um and then I think, sir, as you've explained, you've used the platform. So loads of investors um have come on to sign um advanced subscription agreements, have come on to sign term states, come on and use the platform, and often founders go on to be investors. So, what we want to be able to do is then take, give founders the opportunity to share their opportunity with the investment community through our platform. So we're working with um a company called Wealth Kernel. So we'll be we're SCA authorized and we're building out the platform to do that. So it's not quite ready to go live. Um, but the one thing that we we can do at this stage is help founders um meet um regulated funds um and syndicates and companies that invest. So what we're doing is we're sort of launching this slightly in stealth mode, um, and we'll work with so founders will be invited to submit a pitch, their pitch, a video of what they're trying to, a video of their pitch. Um they'll have to have a full data room all ready to go. Um, and we'll review that. And if we think we can help them, this sort of gradual move, we'll um we'll work with them and then start introducing the different funds. So that's that's what the rest of this year is going to be about, which is which is very exciting for something unfolding. Um then other things that we're doing, um integrating loads of AI tools through the platform and to make sure that um our knowledge base is then fully supported by other information HMRC and um companies house and to make sure that our knowledge base is up to date, making sure that when people are using our help functions, it understands what their CD's account looks like. So making sure that any advice and guidance we give is based on how their cap table looks. So I think an example that was used was you could go on and um suggest um some terms of an investment round and ask how that would look on a company's cap table. And then we're able to come back and say, well, that would leave you with um X percentage left in the company. This is what you're you're holding in your position would look like. So we're just trying to integrate loads of AI tools through the platform to make it as functional and as good as we can. Um I'm only hearing about these AI things at the moment, and I'm probably not the most technical person in the world. So um I'm learning loads as well. Um, and it's fascinating to see how these things can work.

AI In Investing Without Losing Judgement

Michael McDowell 25:46

And um while yeah, because like I you are sure you must get AI first decks on an hourly basis at the minute, uh people recreating things and building things.

Stewart Noakes 25:59

Yeah, there's a lot of stuff floating around that's got AI written on it for sure. And uh we're building a lot of our own stuff internally with uh with Canopy as well. So uh one of the things we do um is we take all the interviews we've ever done with investors and we put them into a little project space. And then whenever we're reviewing decks for people within programs, we review it against those transcripts and then pull out uh using the AI basically the recommendations if you were gonna go and visit this investor and you wanted uh them to raise this is how you would change your deck and update it and everything. And we can now do that in literally minutes rather than the sort of long-form discussions it used to take to go through that. And uh, we've sort of decanted all of our knowledge into a base, which means that other people in the team can do that as well. It doesn't always have to be me or Pedro or somebody who's met all the investors doing that that review, which is amazing, to be honest. We literally couldn't do this four years ago, uh, and now we can we can do it on tap.

Michael McDowell 26:58

I think that's fantastic, and I think that then will help them get through the yeah, the thing that Sure Valley Ventures, I'm not sure if you know those guys, um, are now they have now a fully an AI first onboarding process for all um new investments that they do. So your deck is just taken through um initial review, then it goes to the investment manager with the key points of what's missing, they can then go back and then it can go through anything there almost making noises that they feel they can almost get things right through the investment committee untouched by among the investment team. So um, but then that always I always takes away the most important decision that all investors have to make, and it's the founder. Do we get on? Do we like the founder? Are they what's that connection like? So I don't think all these tools just help speed things up, but it comes down to the the individuals, doesn't it? The people.

Stewart Noakes 27:59

Yeah. I like to think the tools take away the barriers that maybe persisted before and enable you to have more time dwelling on the important stuff, right? So if I take the the what the use case example I mentioned before in Kenope, you can now really clearly see there are two rather than 20 investors that you should be speaking to because you really don't fit with them. So now we can go into how do we approach that particular investor? What do they really want? How are we going to nuance this for them? How are we gonna present ourselves and how authentically will we match? And that's the key bit that we always work with the founders the longest on is for them to present themselves authentically as themselves and do it in a way that is presented and presentable for the right investor. So we know sometimes they're not gonna be a good fit for certain investors on the personality, they're just literally not gonna work together well for seven to ten years. So we're excluding on that basis alone, but we can have that proper conversation because we've not had to wade through all the other stuff, we've just taken that lift away. Yeah.

Michael McDowell 29:05

Yeah, no, it's and no, I and and it's it's exciting as well. And it's you're not describing a complete revolution or a complete change of how an industry works or anything, it's using these tools to make things more efficient. And that's I think what a lot of people are missing on a lot of the AI tools and things that they're doing. It's more simple process-driven stuff, which is where the real value lies. And if it I know it's sad to say, but if you can introduce a new tool to an industry that reduces the headcount by 20%, then there's going to be real value for that business to use your tool. Um, now it's sad for those people when you describe it in that way, but it's I think that's how technology's always worked, hasn't it? It's I'm sure there's a yeah, it changes things, right?

Stewart Noakes 29:53

It changes, it takes away what is in effect some waste from the process, because it didn't need to be like that. And then that gets turned into something more useful elsewhere. That time available now, that manpower, that uh brain space gets used for something more important now rather than wasted on on cycles like Cox, you know. Actually, yeah, we'll we'll see. I think the biggest thing we're we're concerned about and that we don't know how to map is how it's going to change exits and what that looks like. But you know, today we're talking about investment, which is slightly different. But uh yeah,

Traction Expectations And Selling Is Back

Stewart Noakes 30:24

yeah.

Michael McDowell 30:24

Well, I think one thing that it's impacting, um, and that was the conversation I had with a fund manager yesterday, was um early money is being seen to be um much easier to get at the minute. So if when you're seed round in early rounds to get off the ground, there's money available out there. But the expectations now that if you've taken in half a million quid, have you built something and have you onboarded customers and have you shown some tracks in the proper growth? Um when you go out to the market then to maybe do uh a seed or a series A, depending on which market you're talking about. And there isn't that expectation.

Stewart Noakes 31:05

You can do a lot with that money, right? You can do a lot.

Michael McDowell 31:08

Exactly. And if you haven't, if you haven't got loads of customers using your thing, or if you're a deep tech or if you're a med tech, if you're not then up at maybe testing levels or trialing or something like that, if you're not showing that traction with that money that you've received, it's incredibly hard to get that next round of funding at the minute. Um, which I think puts a lot of pressure on the founders. Um that they do have to move a pace and they have to be really efficient and effective with the money that they have, and keep a real eye and a prioritization on revenue growth and selling. Um which it's yeah. Selling's back, big thing, like it's no, it is right.

Stewart Noakes 31:59

So the blockage for a long time used to be do you have the technical ability to do stuff? And where do you find that from, and how do you raise money to afford that talent? Doing the deeper tech stuff still requires that, but there's now such a high watermark, so much you can achieve as a non-technical founder with the AI tools and with a semi-technical founder, you can achieve an incredible amount. Um, and we got a great couple of great examples in the last six months in Canopy where people have freed themselves up by just using things like replete and using things like lovable and using things like Ford to create things they didn't believe they could do to the point where they're putting you in people's hands, and it's really quite complicated stuff now. And uh, you know, yes, they've got to go to a CTO now, but as a solo founder and a non-technical founder, they've gone so far down the road. It's um it's amazing. It's what we always hoped would be exist, you know, and there it is.

Michael McDowell 32:52

Oh, you know, it really is, and um it's it's glorious to

Exits IP Risk And Rising AI Costs

Michael McDowell 32:57

see. Um and yeah, and I suppose that's where the yeah, are are we gonna see are we gonna see a lot of exits more on strategic purchases by big organizations who just want to buy these tools in and use them and not let anyone else use them? Is that where the future lies, or are we gonna start seeing big conglomerates of AI-built products all under one roof? Like it's who knows what that's all gonna look like. Do you have any sense?

Stewart Noakes 33:29

Uh we've been thinking about it a lot and genuinely we're not sure. Like listening to some of the narrative from the West Coast, where they tend to be a little bit more ahead in that sort of what's the burning head of the comet look like stuff. Um, there's a lot of uh distrust around uh things being built uh uh inside AI for enterprise, um, how much knowledge is being given away by going to the LLMs and um what is it in terms of secret source for companies that they've got to hold on to. Uh life sciences is one of the more recent ones that that's had a lot around that. I think Claude have been trying to build a life science instance, like they do Claude Code and Claude um uh co-work and stuff, and we're trying to do a life sciences, and that's that's sparked a lot of interest around where's my intellectual property gone and what do I actually have if I'm a life sciences firm that have given it to to Claude, etc. So there's a lot in there, and that put back more walled gardens than the more openness of how much things can flow backwards and forwards, and we that's almost better for exits than where things were heading maybe six months ago. But we'll we'll see. It's gonna be in an interesting world. I don't think anybody knows yet. Um we're gonna find out.

Michael McDowell 34:43

I think we'll just have to take a pretty breath. I think the big the mumbles I hear around the place as well is yeah, what happens when Claude and Lullabula and all these guys start tweaking up the subscription fees and the cost of using their tools and all this sort of stuff as well. I think that's the other thing that we're starting to have slight concerns about as well. Around if people are completely reliant on this, when does it become when do the the yeah, the models now start to look a little bit disjointed in terms of cost and return because how can they afford to keep building the servers? How can they keep affording to fill in the clouds? So it's gonna be interesting to see how that side of things actually progresses.

Stewart Noakes 35:29

Yeah, and there was there was a quote in one of the famous podcasts the other day, and I do it don't do it justice, but he said something to the equivalent of the founder of Anthropic has raised $120 billion. You better believe he's chasing sales targets, right? So if you think it's free now, it's not gonna be free for long. And if you think it was affordable before, it probably won't be for long because he's got to make a good billion dollars a year on top of what he did last year just to keep going. So and it's a fair point, right? It's a fair point.

Michael McDowell 35:56

Absolutely. Yeah, it's not a charity, so we'll yeah, but it'll be interesting.

Stewart Noakes 36:04

It's been great to have you. Thank you so much for sharing your your wisdom and the insights around Seed Legals. As I mentioned before, we love the platform and it it does a lot of good for founders in our community. So thank you for everything that Seed Legals brings.

Practical Advice For First-Time Founders

Stewart Noakes 36:15

Um, what is what is your best advice having seen so many founders go through for first-time founders that are starting now? And if they're watching this and they're thinking about raising investment.

Michael McDowell 36:25

It's incredibly boring, but um have a good close eye and understanding of your cat table. Um, don't give away equity to early staff members lightly, use option schemes and get yourself really well organized before you even start talking to investors. Have a really good solid data room, have a really clear vision of what it is you're open to do and open to achieve. Um so when you then start talking to investors, you can move at pace, um, at their pace because they don't have much patience. Um and on the same on that same um embrace, listen to and take the no's, but don't get bought down um when investors say no to you, and there'd be a very good reason. I don't take it personally because I know a lot of amazing people who've set up businesses who've been successful in everything they've ever done, and now people start suddenly saying no to them. And I take it very personally. It's not you, it's the other thing. So yeah, stay strong in yourself.

Stewart Noakes 37:32

Thank you for that. That's good advice. It's very hard to remember in the moment, but it's good advice.

Closing Thanks And Next Meet-Up

Stewart Noakes 37:38

Thank you, Philip. Yeah, exactly. But it'd be great to have you here. I look forward to meeting you in person when we finally get our Northern Island visit in in the poll. Come on over to see Boyd and the and the team at Sapphire and uh make a point of uh looking you up and popping up for dinner or something while we're there.

Michael McDowell 37:54

That would be absolutely brilliant. We look forward to that. Thank you very much for having me. I really enjoyed it. And um I hope we didn't ramble too incoherently, particularly even trying to describe Sea Negles. Particularly trying to describe Seen's new AI integration. Yeah. It's something like that. But come on to your platform and it'll explain it all beautifully and it'll become perfectly clear. So thanks for having me. Really enjoyed it. Thank you.

Stewart Noakes 38:20

Cheers.

Michael McDowell 38:20

Bye.