Interview with Niels Martin Brochner, CEO & Co-Founder of Contractbook.
Are you still sending Word docs into Docusign? Thanks to Contractbook, legal tech has been taken to the next level with contract lifecycle management. Contractbook helps SMBs to automate everything related to their legal documents. In fact, the company sets out to make its users feel like legal professionals. Contractbook has already made great headway in this sphere and has huge ambitions to help every SMB in the world in his area of need.
This week, scaleup ally Roland Siebelink spoke with Contractbook co-founder and CEO Niels Martin Brochner on the Silicon Valley Momentum Podcast. Niels shared all of the details on how Contractbook was founded, the market it serves, and its plot to dominate the world of contract lifecycle management:
Roland Siebelink: Hello and welcome to the Silicon Valley Momentum Podcast. My name is Roland Siebelink and I'm a startup coach and ally for scaleup founders. Today, with me is the CEO and one of the three founders of Contractbook, Niels Martin Brochner. Hello, Niels. How are you?
Niels Martin Brochner: Hey, Roland. How are you doing?
Roland Siebelink: So glad to have you on the podcast. Contractbook is one of a number of very hot companies in the legal tech space, right? I think what you do is to digitize contract management. So can you tell us a little bit more about that?
Niels Martin Brochner: Yeah. It's interesting, I had a long discussion about legal tech today, actually with one of my employees. If you should call it legal tech. We'll just call it Contract Lifecycle Management because we sell CLM more than we sell legal tech. And legal tech is more something that the legal professionals call it. But as we talk of the SMB segment, most of them don't have legal professionals. It's more of a kind of optimization product than it's a legal tech product for these guys. Most of these guys actually work with it as an automation and an optimization play more than an actually defined legal tech solution.
Roland Siebelink: Wow. You heard it here first. We don't talk about legal tech anymore. We talk now about contract lifecycle management, a whole new term for us to actually come to terms with, right Niels? Tell us a little bit more about that. What does that mean for those SMB customers that you target in offering them contract lifecycle management?
Niels Martin Brochner: Yeah, basically, Contractbook is very much different than our competitors. Who we normally target and what you normally see is that when you go out there - I would call it green field selling - so when we go out there and talk about different kinds of clients that we speak to, we normally say, they have the cases that they have, let's say, contract management. And then we ask them, "what does contract management mean?" And contract management means that they have a point solution call, a digital signature, like DocuSign, and storage, like Dropbox. And then we asked them, "Okay, so how would you feel about having everything in one platform?" And they would be like, "So I can do that?" And I'm like, "Yeah, you can do that." And then people go out and they say, okay. And then you can embed all the processes with all the data into my CRM system, HR system, et cetera. And then they're like, "Yeah, you can do that as well?" So people tend to buy into the integration where you take the data from one system into another instead of having this dead data format of PDF. Everything is stored in JSON in Contractbook. It's a very, very machine-friendly data format, which allows us to work with the data for the future. We don't need OCR scans to convert it. But you can just work with it in the raw data format from day one. We also allow people to upload the history, like the legacy documents. If you have documents which are signed with DocuSign, you can also upload these documents to contracts and you can add tasks, future things, negotiations, that kind of stuff as well. And everything is in Contractbook in our data format, meaning that we can actually automate everything. Everything gets moved on automatically just being working in Contractbook, which is very much different than having five point solutions stitched together.
Roland Siebelink: Absolutely. I am intrigued though that you say your key customers here are SMBs. That means companies without a legal professional on staff. Does that then actually get the traction for, let's say, I'm guessing it's the owner here who's going to be buying into this solution? Can you talk a little bit more about that?
Niels Martin Brochner: Yeah, I think that you can look at it from a general view. For a long time, in Contractbook, we didn't have a HR employee. We don't have a salary person because we have a salary payment system. In the same way that the pace of systems and the CRMs and whatnot allows you to automate and facilitate for SMBs, Contractbook just automates it and allows them to feel like legal professionals. They don't need - in the same way, I love the analogy of, we use HubSpot - when I used HubSpot the first time, I got fully embedded into it. And I was getting notifications. I was like, "Wow!" I was so addicted because I felt like a sales professional. And the only thing I had was software on a phone. And I felt like a sales professional. And the same way, we make our users feel like legal professionals. When an HR employee or a sales professional, they work in Contractbook, we give them the peace of mind for them to house-manage documents. They feel like, "Okay, when it's here, it's fully controlled and automated." And I'm like, "I can have peace of mind." And that goes way through the organization.
Roland Siebelink: Okay. Talk to me a little bit more about the technological advantage. You mentioned that everything is stored in JSON format. Very cool, of course. How is that adoption barrier for people moving from more of a legacy system to JSON? Does that mean they have to rewrite all their contracts? How does that actually work?
Niels Martin Brochner: Basically it means nothing. Because we can take the format of what we have. You basically copy-pasted your word file or whatever you want to use into our editor. And then it converts it into JSON. It looks like a normal doc, but it's stored in another format.
Roland Siebelink: Right. It's just an internal storage format. That's how it starts. And then how do you start getting the benefits of having that stored in a specific structured technology such as JSON?
Niels Martin Brochner: What you can do is automate all your future tasks based on the data and the contracts. Imagine that you have renegotiation, date, prices, all that stuff, all that jazz. And then all the cool stuff, which basically is your company, you have all the data that you need. Everything is then stored in that format. And then it's only your imagination that sets up where you want that data to go, what you want automated, and what you want re-negotiated. You can even recreate, it can file it when signed. It can create a task or multiple tasks, tag people based on signature date, et cetera, et cetera. It files it. It stores it. It even extracts the data and puts it into your sales system or in another external storage system. Basically, it can work into whatever workflow you have. But we ensure that the data format of the full kind of lifecycle management is one place. So imagine that you have a thousand contracts and you need to fire a thousand people. And then you figure out that you only to need to fire 30 people. A thousand contracts, 30 people. You need to find out of those thousand contracts, you need to figure out, you need to identify the permission that allows you to fire which people, which you can decide among for you to go hassle-free through that firing process. We can extract that data. We can extract based on the field. Instead of reading through a thousand contracts and hoping that you're going to hit 30 that makes sense. It's just going to outline the ones where permission or accessing in the document that actually allows it.
Roland Siebelink: Niels, how did you even get into this space? Do you have a legal background or what was the journey into this space of contract lifecycle management? As all the kids, I always dreamed about being a CEO of a contract management my whole life. ;) My background is, I studied both Bachelor and Masters in London. And I worked With Shell Oil between my Bachelor's and Master's. And I quickly figured out that the normal corporate world wasn't for me and working with Shell Oil wasn't for me. I actually started my first company Wou simultaneously when I was writing my thesis for my Master's degree and raised money for it and launched this product straight after my university. Obviously it crashed and failed miserably. It was a great product but a bad business.
Roland Siebelink: What was the business of your first startup? It's always interesting to hear a little bit more, even if it crashed.
Niels Martin Brochner: They would say it was a preference-based city guide called WouWorld. There was the second time we moved back to London and it occurred to me that it took me a while to figure it out; where to go and which coffee place to visit and stuff like that. And then I figured out that TripAdvisor only gave me places based on if it was expensive and close by, or if it was cheap and close by. And I wanted to kind of differentiate a good experience based on people. The whole thing was built around preferences, built around a color guide of preferences so you know that if you like that place in Copenhagen, you will love that place as well in New York and Paris and Moscow. We never cracked the business idea. At the end of the day, it was a great experience. And I've taken a lot with me into Contractbook. What we did afterwards was created inso studio, helping other startups, companies, apps, products, brands called Wou Media. At that point, we had a client who contacted us and said, "Hey, I have this idea for something in the contracts sphere. I can't really kind of pay you guys to do it. But I would love to try to figure out what you think of it." And I had a meeting, I drank a coffee with the guy called Christian. And he said, "I've been trying to figure out what to do in this space for a while but don't know how to solve it." I basically explained to him over two hours and two cups of coffee that night, how I would do it. I turned it all around. Don't care about the precedent, the data format. You need to start from the bottom up, build it again, figure out how are the Millennials and Generation Z going to work this? Not the boomers. How do we have it? How do we turn it around? So we started, going data first, trying to build something that looked like Word and Dropbox. I knew this was a difficult product to start with. But we launched and the good learning for me was that if we had big plans from day one. He was out hunting plans since day one with Slideware. Just doing how it works and the signboard. We had pretty cool plans. We had a rainmaking loft, which is an office space in London. And we had Domino's, RedCar, and we had some pretty cool friends using it from day one. But the product wasn't the best, so they gave us loads of feedback on how to make it better. We needed dozens and dozens of clients who could actually give us proper feedback, so we could build something that made sense for them. That's what we've been trying to do from day one. And we're still doing it.
Roland Siebelink: A lot of startups, Niels, know in their heads that they should be out with the product right away, even if it doesn't feel quite ready yet, just like you described. But in their hearts or their stomach, they really don't dare to, right? How did you overcome that fear of going out of your office with a product that really didn't feel ready yet and already selling it to big clients ,like you mentioned?
Niels Martin Brochner: Going back to the city guide, the city guide was a perfect working product. It was so awesome. The frame was so good. But there wasn't a business plan. We didn't know what our clients would do. It was the basic experience. At business school, you could learn how to run big businesses. How they would do brand management and how they would do it. But in the real world, you don't have the budget to fail with a big, well-funded, functioning product. You need to fail fast. You need to figure out what doesn't work, what people are happy about. We need to figure out what's out there.
Roland Siebelink: The relationships that you build, people underestimate how people in a corporation in a big client are just eager to see you succeed. And helping you understand their business, helping you do better as a startup because you have that special thing that a normal vendor doesn't have. You allowed them co-creation of the product?
Niels Martin Brochner: Yeah we do. We give them as much ownership as we can. I would also say, on the other hand, if you're asking normal clients about how they do contract management, if they want to change it. They have a process where it's a Word, manual, Word process that then gets converted into PDF. And then they put it into DocuSign and when it's stored, they put it back and drop it into their Dropbox. They don't feel like they have a problem because they don't see the problem. They have a process. They don't understand that they can make this a one-step solution. Asking people for feedback, you need to have a good enough product to also understand that you have more insight than they do. And then you need to educate them on the possibilities that are actually there. Co-creation is as much about not letting them control it as far, in my opinion. Because they need to share your vision. Otherwise, you're going to start building their vision. And they might not be the right guys; their vision might not be the correct one. Your investors, as a startup guy, invest in your vision and your product. They don't invest in a client's idea of how they think that it should be incorporated with SMBs or something. That's not about the investment. They invest in your vision for how it should be done.
Roland Siebelink: You said you wanted to get quite a few big customers to really learn from. Your target group is now defined more as SMBs. Was that an evolution from your original target group? Or how did you land on that target group of SMBs?
Niels Martin Brochner: I think at some point we analyzed the buying behavior, analyzed the purchase cycles. And we figure it out, if we adjusted the price appropriately, we could create a sales cycles that was fairly short, adding a lot of value from day one, having a fairly high NPS score, and obviously, decreasing churn. What we did is that we said, "Okay, if we target customers who are less than six years old and less than a hundred people, or departments less than 30 people, we give ourselves the best chance of success." For them to have low churn, high NPS, fairly high in expansion and bias with potential of expanding there, and half the maturity to expand into the automation play that we want to. We sell them CLM, but what we're building is data-driven document automation. They're looking for, and to kind of make it clear, they're looking for contract management. They find contract lifecycle management. But what we're building is data-driven document automation. And they're not ready for that. But the companies I'm talking about here, the companies in that segment are ready to buy in and to grow into data-driven document automation. Because they start in our CLM and store in the correct way, we can automate themselves out of multiple employees on forward documents. And that's the whole kind of division I was saying.
Roland Siebelink: Yeah, that's awesome. A lot of the earlier stage startups that we work with, especially when people have more of a technical background, they say, "Our technology is so awesome. We don't want to focus on one target group. We should basically offer this to the whole world." Every vertical, small and large. Why do you think that ultimately companies do focus on more of a specific target group? Like you were saying, SMBs less than six years old, less than a hundred people. What's the reasoning behind that in your experience?
Niels Martin Brochner: There's 50 million companies in the world, in the US and Europe, in the SMB segment. I think it is more reasonable at this point. We have a well-growing business. But we only have around, let's say a bit more than 500 who's generated more than a hundred thousand users. Imagine if there's 50 million companies and we right now have five at 500 and a hundred thousand users, you're going to do the math. The virality of the product is pretty good. And our NPS score is 85. We have an indication that people are very happy using our product and growth three, four, X year-over-year is the trajectory of what we are and where we're going. It all depends on who you are as a company. And we just figured out that this is where we can drive the most growth. We could have the highest retainment. Spreading ourselves too thin over too many, too high of a group of people - like you say, our software is so awesome. Our belief is that our software is awesome. But what we also believe is that we are not able to help the Geicos of the world at this point because they have so much legacy storage and legacy processes that we simply cannot embody in the system we built. We need to go down. We have companies who are 60,000 people. That's not it. But it's a company who is really ready for it. And in most cases, companies are not 10,000 or 15 to 20,000 man companies are not ready for that process yet. We just agreed with ourselves that we basically put them on a waiting list and if they are ready to embody our product or get in with it, we want to get in with them. But we don't want to target them because the sales cycles might be three years, implementation 18 months. And if we calculate it backwards and say, Okay, in that time, in those four and a half years it takes us to close a sale with Geico and implement it, and they're still not happy because it doesn't really facilitate their legacy processes, we could have thousands of SMBs with high volume that generate more velocity in signature and storage and enables us to actually change the future with the data format we're working in. For us, it's just made it very simple. We could just grab onto the whole forest of SMBs who nobody cared about in this segment and make that process super simple with a holistic product that just solves their basic needs.
Roland Siebelink: What a lot of founders ask me, if I do get into that growth mode or when I get in that growth mode, how should I allocate resources? Do we keep spending most on products and engineering or do we spend it all on go-to-market build up? How have you guys decided how to balance your resources in your growth phase?
Niels Martin Brochner: For us, it's very much figuring out how to - we've been very product-led until now - and we now need to scale sales for the first time. Being a product-led company, it's going to be a funny challenge, I would say. I'm not too worried about it. But we will need great talent to help us with that process. And accept that you need to do maybe a hard reset on some parts of your business as well when scaling. I think the most important thing is that, in our case, we call it people-centric. That makes us client-centric. I believe that the people is where you start and the founders should be recruiting the people to be the pillars of the business going forward. It's not only about doing a cultural check, but really understanding how we hire future leaders of the groups. Will this person be in one role today, and who's such a great person that you can move them in a completely different role another day due to their talent and people expertise. We look at very diverse profiles. We like specialists, obviously. But we also very much care about the attributes of the people. Who are they as people? Do they belong? If people ask you about the culture, for example, I'm a strong believer in the cultures and living things. The culture we had a year ago is not the same as we have today. And the culture we have now is going to be very different in half a year, in 12 months. And the culture is going to be defined by the targets. And the targets, obviously very steep when you work in our field. Therefore, you will have a very competitive culture. But you also have, if you grow, higher grade people. You'll be able to have a great culture with great people, even though the steep staircase and targets. Even though you have some steep targets, it's okay. As long as you have people with empathy who support each other and work with each other, don't work against each other. In my opinion, it's very simple.
Roland Siebelink: So, Niels, what's the vision for Contractbook? How far do you see this grow? Where do you guys want to be five years down the road?
Niels Martin Brochner: I like to say world domination. Our ambition is very high. We believe that we have a very, very solid foundation for our product to enable data-driven document automation, in let's say 25. I think that in a couple of years or less, our hope is that people start app-shaming other people for not using Contractbook in the same way that they do with Superhuman, as an example.
Roland Siebelink: App-shaming, I love the term. We have to make that the form of virality, right?
Niels Martin Brochner: Yeah, exactly. Because if you can get to a place where people say, "Yeah, so I use this GMail importer the other day with Contact Books that just extracted all my DocuSign documents from Contractbook and uploaded it to Contractbook and then extracted the data and created future tasks for me to remember." If people started talking about that, then you're going to be unbeatable. I hope with the vision for business is so next level, in my opinion, within contract management, we won't botch on our ambitions.
Roland Siebelink: Niels, as we close this recording, what can our listeners help you with? Are there certain jobs you're desperate to hire? Do you want them to try out the products? What is the most helpful contribution they could make to Contractbook?
Niels Martin Brochner: If they're in our target group, then they should definitely use the product and see if it works for them. I'm sure it would be. I would be happy to give them a listener's discount or something to get them started. Or as a potential person who's looking for a job in business or in sales or CS or even product, they should definitely reach out. We're hiring basic people at the moment. We're looking at international scales. We are remote first or distributed first, so location doesn't matter too much for us. If somebody is interested in working with me and my team, then they should definitely reach out.
Roland Siebelink: Awesome. And for those that do want to try the product, is there a free trial or something that they can download? What's the best next step there?
Niels Martin Brochner: There is a free version of it. We also have an early-access program. If you are an early-access startup, you would be able to get that where there's a lot of discounts and there's some perks as a young company.
Roland Siebelink: Excellent, okay. And the website that they should go to?
Niels Martin Brochner: They should go to contractbook.com.
Roland Siebelink: That’s awesome. Well, thank you very much, Niels Martin Brochner, for joining this Silicon Valley Momentum Podcast. This was an awesome interview. And I'm looking forward to seeing all the growth and funds raised that should be announced hopefully shortly. For everyone else, if you want an introduction to Niels, then feel free to reach out, if you know me already. Or just go to contractbook.com to try out the product. So thank you very much once again, Niels, it was a pleasure to have you on the podcast.
Niels Martin Brochner: The pleasure was mine. Thank you so much.Roland Siebelink talks all things tech startup and bring you interviews with tech cofounders across the world.