THE

Managing
Partners
podcast

Episode # 130
Interview on 10.12.2021

Hosted By
Erik J. Olson

Featuring Attorney

Mehak Rashid and Neil P. O'Donnell



Managing Partner of
Legal Scale, LLP

About Mehak Rashid and Neil P. O'Donnell

Mehak Rashid and Neil P. ODonnell are the Managing Partners of Legal Scale LLP in New York.

Prior to founding Legal Scale, Neil raised and deployed debt and equity capital to purchase cell tower ground leases in South America. Neil also previously worked in Restructuring Group and Equity Derivatives Group at Davis Polk & Wardwell LLP. Neil is a chartered alternative investment analyst (CAIA) and chartered financial analyst (CFA).

Prior to joining Legal Scale, Mehak worked in the Finance Group and M&A Group at Davis Polk & Wardwell LLP. In addition, Mehak also worked in the Strategic Lending Group at Morgan Stanley Bank, where she created and presented financial models for the business side of transactions and reviewed credit agreements on the legal side.

Learn from their expertise and what trends are helping grow their firm on this episode of The Managing Partners Podcast

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Episode Transcript

Erik J. Olson:
Hey everybody, it is Erik J. Olson with another live episode of the Managing Partners Podcast, where we interview America’s top managing partners to find out what they’re doing to grow their law firms and to keep their case pipeline full. And today I have a duo with me, Mehak and Neil, how’s it going?
Mehak Rashid:
We’re going great.
Neil ODonnell:
Great.
Mehak Rashid:
How are you?
Erik J. Olson:
Great. Well, thank you both for joining us. Let me tell the audience a little bit about you. So Mehak Rashid and Neil ODonnell are partners at Legal Scale. Their practice primarily focuses on private transactions, including representation of private credit funds and corporate borrowers in a wide range of financing transactions, including asset-backed financing, leverage acquisition financing, working capital and factoring financing, and other secure and unsecured financing. Now, what I’m getting is, if I have a financial legal question for my business, I should probably come to you, huh?
Neil ODonnell:
Talk to Mehak.
Mehak Rashid:
That’s right. No, [crosstalk 00:01:08] you definitely hit the nail on the head as to what we do. We do a lot of private transactions as well. So specifically, I focus on, like you were saying, the financing world. I come from a background with tons of experience at Data School, where I worked primarily within the finance group and joined Legal Scale after five years there. And even prior to that, both Neil and I did our JD/MBAs at Cornell as well. So we are very business-focused.
Erik J. Olson:
I love it. No, I think it was great. And by the way, I mentioned this beforehand, and I’ll mention it as we’re recording. I love the name Legal Scale. So how did that come about by the way, is that something you’ve always wanted, or did you look for names and then it just kind of clicked?
Mehak Rashid:
Yeah. I think Neil and I are often brainstorming a lot of things. And one of the things that we love to brainstorm is names of not only our business itself, but then other subsidiaries that we also create. And so this was a combination of figuring out, how can we best bring businesses to scale? And that’s really our primary focus is working hand-in-hand with various companies, businesses, borrowers, lenders, and helping grow their business alongside ours. So not only reaching scale, but also the legal scales of justice themselves as well.
Erik J. Olson:
It has a dual meaning.
Mehak Rashid:
Exactly.
Neil ODonnell:
Exactly.
Erik J. Olson:
Yeah. From a business perspective, when I think about scale, it’s scaling up, getting bigger, doing more things. So it resonated with me right away, I really like the name a lot.
Neil ODonnell:
Appreciate it. Thank you.
Erik J. Olson:
You got it. So let’s talk about different ways that you go about getting clients. So all business clients… You mentioned private equity or private funds, but are we talking about individuals or is it always business related?
Neil ODonnell:
It’s a great question. So one of the great things that we’re now in the position to do is help entrepreneurs. And like Mehak said, the reason for the name and the reason that we’re out here is to help businesses grow. So we are looking at a lot of different types of businesses, both on the borrower side or the equity issuer side, and then on the credit fund side, or the lender side. And so there’s a broad spectrum.
Neil ODonnell:
What I would say is that we have a special focus on future-forward businesses. So we tend to work in a number of really interesting niches on those companies that Mehak has worked with in the Amazon roll-up space that have been really interesting, and we could talk more about. So, e-commerce, fintech, we like future-forward businesses. We don’t do coal companies for example, and we really don’t have a specialty in oil and gas either. We do like when there’s a tech component, so that these businesses can scale very quickly.
Neil ODonnell:
And another fortunate aspect of that, in terms of just ways of getting clients is that, we view ourselves as growing alongside the businesses that we work with. Certain businesses that we worked with, we’ve done their series or seed round, or worked alongside of them for that. So they started off with an enterprise value of zero and are now worth more than $220 million on a post-money basis. And that’s really one of the most exciting parts for us is not only just seeing our results and our deals get done, but then by virtue of our efforts, these clients create value and be able to go out and help so many others.
Erik J. Olson:
That is a pretty crazy growth there, no matter what the time span, from zero to what was it, $220 million valuation?
Neil ODonnell:
Yeah. In terms of the time span, just like you said, we started working on them in February of 2020, and then that equity round was completed actually in April of 2021.
Mehak Rashid:
That’s right.
Erik J. Olson:
Oh, geez. That’s amazing huh?
Neil ODonnell:
Yeah. I hope that they can acquire our law firm.
Erik J. Olson:
Yeah, they may be soon, right?
Neil ODonnell:
Exactly.
Erik J. Olson:
Although, they probably don’t worry too much about your fees now.
Neil ODonnell:
That’s it. And I think that’s the best part is that we do… Because of that, we can do higher quality work, we can do more work, and we can grow our efforts and grow alongside these businesses.
Erik J. Olson:
That’s really impressive. And it’s also a very nice niche that you’ve discovered and worked your way into the rapidly growing technology-focused companies one way or another, right? Are you kind of embedding yourself in that community? Is that how you’re finding people, finding the movers and shakers, like the VCs, the angel investors, kind of like that?
Neil ODonnell:
That’s a great question. Yeah, we’re really lucky to be able to work with companies like Architect Capital, Upper90, from very early on within their funds. And so when we’re working with the funds side work, it’s really exciting because these funds have grown as well. Upper90 has grown from 150 million on a regulatory asset basis to more than 600 million now, since we started working with them. And so we get to grow along these funds as well.
Neil ODonnell:
And the nice thing about venture debt is it’s a relatively small market. It really started in earnest after the Great Recession. And so unlike venture capital that’s been around for 30 years, venture debt is relatively new and much smaller. Venture debt is about 1/40th the size of venture equity, just 2.5%. And so it’s a smaller community, and one that we’ve been able to get a foothold.
Neil ODonnell:
And then the nice thing about corporate work is that there’s always two sides of the transaction and we try to be friendly. We always try to get work done, we try to get deals done. So it’s not more like litigation or there might be some scorched earth. And so because of that, we can sort of have literally viral growth where when we do a good job… And of course, while respecting our clients confidentiality and while never wanting to work on different sides of a transaction, for that next transaction, for that person that we were against, we have landed many of those as clients and been able to work with them.
Neil ODonnell:
And so that sort of sales process I think, was what drove us initially within the business. And what I can say though is just knowing your business is that, I think that we can focus more on marketing. Young businesses like ours focus so much on sales and one-off transactions versus building a brand. And Mehak maybe could speak to you more about that.
Mehak Rashid:
Yeah. I think like Neil says, there’s no better marketing than the work on your desk. And so what we really try to do is do excellent work for everybody. And then from there on build the relationships, build the brand, and continue you to just uphold our name Legal Scale as high as we really can. And I think a lot of what we’ve done so far has been organic growth. And I think the next step really is to start doing it such that we’re taking an active step towards putting our name out there.
Erik J. Olson:
Your reputation precedes you, and it goes very far in getting new clients. And certainly, it leads to things like referrals, which is a great way of getting new clients. It’s interesting how you’ve been talking about working with the funds primarily to get the fund organized. And then I assume once they invest in a company, then they’re like, hey, new company, you need a lawyer, go talk to Legal Scale. That’s great, that’s awesome.
Mehak Rashid:
Go ahead.
Erik J. Olson:
Oh no, no. Well, after you, because I have a question actually for Neil after this.
Mehak Rashid:
Yeah, I was just going to wrap that up and say it’s really been fantastic growing with these companies as well because they’re also entrepreneurs. They’re also young, they also want to build something that’s great. So having that excitement behind every deal brings new life and new energy rather than working with companies that have been around for hundreds of years, and just are stuck in their ways. I think it’s a neat way like Neil was saying, to be future-forward.
Neil ODonnell:
That’s exactly it. And the nice thing about that too, I think for a young firm like ours is that, a lot of deals tend to be very different than what big firms are used to. And where other firms might be more used to just sort of being a turning screwdrivers. We can honestly say that a ton of precedents or whatever else might not be as helpful within our field just because each deal is so different. And often, relying on precedent or stale knowledge won’t really get you as far as thinking about the business, thinking about the nuances of the business, and then driving a transaction that makes value for both the funds and the company that’s receiving the credit.
Erik J. Olson:
Really smart, really smart. The question I was going to ask and I kept pretending I’m asking this for the benefit of the audience, but it’s really for mine, because I don’t know. I’ve heard of venture capital, but I haven’t heard of venture debt. What is the difference there?
Neil ODonnell:
Venture debt is going to companies that have a non-pivotable business model. So, one that’s a repeatable business, but is typically getting debt or debt like capital for the first time. So after you’ve gotten your Brex credit card or whatever, that first extension of credit is into the business, they might not even carry a balance on. The next logical step would be to get a credit facility or… Especially if you’re a SaaS company or if you are a fintech company, you’re often creating assets, right? You’re [crosstalk 00:09:49]-
Erik J. Olson:
I got it.
Neil ODonnell:
… extension of your own. And then, so there’s a process of basically underwriting the underwriters, understanding how these businesses work and operate. And then the loans that these business take on, often have a variety of elements that you might see in other spaces. So you might have a relatively higher interest rate and it also might have an equity sweetener, like a warrant, so that the… Because the companies are so new that it’s inherently risky to lend to them, but this helps them get money into the business for the first time.
Neil ODonnell:
And because they might not have assets that qualify for credit coverage like a typical bank. They might not have traditional assets in a way of a building or anything else, but it might be very valuable in terms of the contracts and the [inaudible 00:10:27] that it’s creating for customers. And have [crosstalk 00:10:29] come out of the long-term.
Erik J. Olson:
Okay. Yeah, so extending a line of credit, if you will, to a new company. That’s considered in generally speaking, or over-simplistically as venture debt.
Neil ODonnell:
That’s right. And especially when there’s a warrant piece and other elements. What we’ve often seen and actually very interestingly, is that there’s often a venture debt offering and a venture equity offering completed in tandem or close in time. So if a company raises $10 million of additional value on the equity side, they might also get a $10 million credit facility. And that would help them hit more milestones before they were series A or series B raised. And by virtue of hitting those additional milestones, they could raise a lot more money with less solution and keep more ownership. But at the end of the day, “It’s not just how much money you raise, it’s how much you own,” as one of our clients Upper90 says.
Erik J. Olson:
Got it. I appreciate that. So you’re working with high-growth companies?
Neil ODonnell:
Correct.
Erik J. Olson:
So speaking of growth, what are your growth plans for the next couple of years? Let’s say two to five-year time range?
Neil ODonnell:
Perfect. I think the biggest item, just like Mehak said, is just doing the work on our desk, sort of steering the ship each day. There’s always an unexpected number of items. Right now, we’re in an NDA fire drill. We’re working on literally hundreds of NDAs for one client, and we’ve been running it so that they can begin to open up data rooms and run a diligence process. But in terms of the day-to-day operation, what we always want to do is… We’ve sort of doubled in size roughly every year. And so our rule of thumb is that we can continue that growth trajectory of doubling in size.
Neil ODonnell:
The nice thing about that is that we’re not taking on too much work we’re losing quality in terms of who we’re hiring, but on the end… And we’re also making sure that we’re sufficiently vetting clients and making sure that we can add value for each client that we add. We want double in size. We also would like to add a tax personnel as maybe our fifth or sixth attorney. We’re currently at three attorneys right now.
Neil ODonnell:
And the broader goal of that is that there’s just a tax element in so much of what we do, but the general item is to grow three buckets, one, venture debt, the other is private equity piece, which is often coupled with a venture debt transaction. And then last is a general corporate work so that we can make sure that we hit all the milestones for all of our clients. And Mehak has seen some very interesting general corporate items of late that we can tell you more about.
Mehak Rashid:
Yeah. I mean, that’s the funny thing is once your foot is in the door, you have a client, they trust you. You’ve done great deals for them, transactions for them. They’ll start to come to you for literally everything else. So if there’s ever a question that they say, hey, I might need a lawyer on this, regardless of our specialty, regardless of our focus on finance, they’ll come to us first.
Mehak Rashid:
So for example, one of our clients that we initially started off by doing an acquisition financing facility for them, just recently, they’re in this Amazon third-party roll-up business. And so they go out, they buy mom-and-pop Amazon stores and they roll it up into their own business, so they get synergies and cost savings. And recently, they launched a Tesla referral program, where essentially, if you refer an Amazon third-party seller to them, they acquire it, then you receive a Tesla. And so we actually did that program for them. And it’s been getting great press and they’ve… Talk about marketing, they’ve done a great job there.
Neil ODonnell:
It’s really exciting. [crosstalk 00:13:50] They’re the most scrutinized deal that we’ve ever worked on. It was one of those really great… We got coverage in CNBC, host of newsletters, it’s super exciting.
Erik J. Olson:
I bet, that’s a really good idea. It’s certainly a lot more memorable than money, but-
Neil ODonnell:
Yeah.
Mehak Rashid:
Yes, exactly.
Erik J. Olson:
I mean, money’s not bad, but a Tesla, that is good marketing for sure. So really interesting. Let’s talk about your marketing in particular, and some of the things you have experienced over the last couple of years. What is something that is working especially well for you when it comes to your marketing, and then what is something that just hasn’t worked well and you stopped doing?
Mehak Rashid:
Yeah, I think I’ll take the second question first. So I think the hardest thing is to cold-email anyone. So you see all these companies coming up, you see all these companies starting to grow, especially within this space, all these competitors are popping up and you think to yourself, hey, maybe I can help them out because I do have expertise in this fields. But that never works to just reach out to someone randomly and say, hey, we provide a great service. Despite the fact that we really do provide a great service, but they don’t know that, right?
Mehak Rashid:
So the easiest way to lose someone is to come at them blind. And I think on the opposite side, the best way to really reach out to someone is to have, like Neil says, a warm intro. Where you know someone in between, you can make that connection and that person that it liaises for you also believes in your product, and is able to give a great referral. And the other person on the other side trust the person referring you. So that I feel has been a great way for us to continue on this oral marketing scheme that we’ve been doing.
Erik J. Olson:
Absolutely. That’s great. Wow, love it. I’m quite impressed with everything that you’re doing. If someone wants to pick your brain, a listener, or the audience, they want to find out more, or maybe they have a client that they would like to refer to you, what is a good way to reach you?
Mehak Rashid:
Yeah, I think absolutely check out our website legalscalellp.com. And I think the best next way is really to reach out to us directly. The great thing about our firm is that whenever you call us, you’ll get one of us on the phone. You’ll get special attention and you can reach out to us directly by email at mehak, M-E-H-A-K, @legalscalellp.com, or-
Neil ODonnell:
Or neil, N-E-I-L, @legalscalellp.com
Erik J. Olson:
Mehak and Neil, thank you so much. All right everybody, if you would like to listen to more awesome episodes like this, we have over 125 in our backlog at arraylaw.com/podcast. And if you would like to double your revenue every year like these two have, then check out our services at arraylaw.com. My company Array Digital, focuses exclusively on digital marketing for law firms like yours, things like websites, search engine optimization, online ads and social media. Well, thanks again. I really appreciate your time.
Mehak Rashid:
Yeah. Thanks so much.
Neil ODonnell:
Thank you so much.

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