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• Former lawyer recommends taking a year off to explore your idea and look for traction
• Advisory world and entrepreneurial scene both call for dynamism, attention switching
• Angel investing is a way of getting involved with startups without founding one

While the worlds of M&A and private equity (PE) have been digitising at a rapid rate, there are still plenty of opportunities for innovators. What is the best course of action for deal advisors who want to develop new ways of working?

“If you have a good idea, my advice is to go to your boss, resign and then get going,” according to James Sutton, CEO of Avantia, a London-based legal services firm that combines artificial intelligence (AI) with human legal services. He has supported multiple advisors interested in becoming entrepreneurs, he said.

Advisors who are interested in entrepreneurship often over-think the loss of income and the perceived loss of prestige if the project fails, Sutton said.

“Give yourself a year, which should be enough time to see if you have gained traction or not,” Sutton said, adding that even if a project fails within that time, the experience should make the founder more employable when they return to the advisory world.

In general terms, the most successful projects are often those that advisors have ruminated on for a year or two, Sutton said. These often involve ideas like digitalising M&A, automating workflows and/or the compilation or analysis of data, he said.

Sutton is a former corporate lawyer with Slaughter & May, who worked as managing director and general counsel at Och-Ziff (now known as Sculptor Capital Management) before founding Avantia in 2019.

Avantia has created a custom-built AI platform, which it uses to offer a more flexible form of legal services for asset managers, corporates, investment banks and law firms, according to its website. It also offers a flexible working model for lawyers, who can leverage the tech to work faster.

Understanding dynamics 

There is an emergent trend of experts in tech deals moving into startups, according to Slava Jaravine, a Barcelona-based angel investor with a background as a partner at a Big Four firm. These people often get familiar with success stories as advisors and understand the dynamics of the market, he said.

One former advisor to make the jump is Gerard Garcia, a former investment banker who founded Barcelona-based deal-matching platform Deale in 2021. Although he always wanted to develop a project, he said that he decided to develop a skillset in banking first.

There are similarities between the advisory world and entrepreneurship, such as the dynamism and need to regularly switch focus, Garcia said. However, there are also differences, not least the pressure that founders endure, he said. His advice is to create value from day one, he added.

Deale is on track to generate positive EBITDA in Spain this year, Garcia told Mergermarket’s DealTech column in October. It could delay this milestone if it enters new markets, he said at the time, adding that it is exploring moves to Italy and Mexico.

Recent DealTech articles include an analysis of the need for deeper due diligence because of the risks posed by AI; and the launch of a new platform from Ocarian that will streamline and digitise the process that PE general partners (GPs) use to onboard limited partners (LPs).

Legaltech is one of the hottest areas within the deal workflow space. Mergermarket data shows that global deals in the sector hit combined volumes of EUR 970m over 35 deals in 2023, up 226% by deal volume compared to 2022. 

The largest deal of 2023 was the sale of Casetext of California to Thomson Reuters [NYSE / TSX: TRI] in June for USD 650m cash. Founded in 2013, Casetext uses AI and machine learning to build tech for legal professionals.

One venture capital (VC)-backed company to watch in the legaltech space is Icertis Inc of Washington state in the US. The company, which specialises in AI-backed contract lifecycle management, has a score of 67 out of 100, according to Mergermarket’s Likely VC Exit predictive algorithm.* It was preparing for a NASDAQ listing in early 2022.

Options in angel investing 

Meanwhile, angel investing and consultancy work are also options for advisors who want to get involved with the entrepreneurial scene without necessarily founding new companies, Jaravine said. Startups are risky investments, so it is important to diversify through angel groups and angel funds, he said, adding that it is best to go through the process with others before striking out on your own.

Some advisors might be able to become angel investors without giving up their day jobs, Jaravine said, adding that it is important in these cases for advisors to understand any investment restrictions set by their employers before taking the plunge.

Advisors and former advisors can add value by helping founders think about the exit potential of projects at an early stage, Jaravine said. He recommends angel investors participate actively in their investments with an entrepreneurial spirit. “Angel investing can be very hands-on to create value.”

Golden parachute payments can help advisors who are thinking of a career change, said one former investment banker. This is particularly true for people who have saved the bulk of their bonuses for several years while living a modest lifestyle, as well as those with inherited wealth, he added.

Portfolio careers are common for former advisors, the former banker said, adding that common options include investing, running a business, sitting on boards and teaching at business schools. Some join or form M&A boutiques, he said, adding that there are significant opportunities in private credit advisory right now.

*Mergermarket’s Likely VC Exit predictive analytics assign a score to VC-backed companies to help track and predict when an exit could occur through M&A, an IPO, a direct listing or a deSPAC transaction.