When the EU’s new Market Abuse Regulation came into force, in 2016, John Engholm’s first reaction was that it would mean more work. His second was that this work could be automated. His third was that if no one else was going to do this, maybe he should. The result was a simple tool, 350 clients in two years and acquisition by Euronext after one.
What makes a general counsel turn software developer? For John Engholm, it was a mix of frustration, an eye for opportunity and being in the right place. That place was Serendipity, a Stockholm-based tech incubator that he joined in 2015 after five years at Sweden’s third largest law firm. Serendipity had five publicly traded portfolio companies that would fall under the MAR rules on insider dealing, unlawful disclosure of inside information and market manipulation. “We could see it would increase our workload significantly, and we just felt that this was such an obvious thing to automate because, basically, all you do is move data around,” he explains.
We signed the first five customers before there was a single line of code!
Although his focus was on Serendipity, John thought other companies might like to co-finance the project. He was right. “We signed the first five customers before there was a single line of code; it was all PowerPoint,” he recalls, laughing. “We spent one afternoon with some designers to make print screens, and when meeting prospective customers, I just clicked around in this presentation showing what a finished product would look like. Dream big, start small, right? Often when we talk about legal tech it’s about artificial intelligence doing due diligence and blockchain for smart contracts. But this was just a super simple way of replacing something that would otherwise be done with Excel and Outlook, but which takes a lot of time and which has a lot of room for human error.”
Save time and ensure compliance
The result was InsiderLog, a piece of software that automates MAR compliance: the emails, the reminders, the time stamps and transfer to Excel. “We basically just streamline all that data collection using a very precise form, we include validation that it’s input in the correct format and we have automatic reminders and audit trails – all those things.” It saves time and ensures compliance, as the InsiderLog tagline goes. John: “You just add an email address and the system will take care of the rest, which means you don’t need to be involved in this or worry that someone or something has been forgotten. You know that you are 100% compliant.” And he points to a further plus: “InsiderLog makes it easier to delegate, because you don’t really need to know the order of things or know by heart all the things you’re required to do under the regulation. The system won’t allow you to continue until you’ve done everything.”
I woke to a text message from my dad saying: ‘Isn’t this what you’re working on? Golden opportunity!
With the concept drawing interest across Sweden’s legal community, John realised that InsiderLog had commercial potential and started working towards a full market launch in 2017. Then all hell broke loose. On 30 November Sweden’s biggest financial newspaper ran a story warning of the nightmare of MAR compliance and the dangers of getting it wrong. “I woke to a text message from my dad saying: ‘Isn’t this what you’re working on? Golden opportunity!’” It was the ideal marketing campaign. “We flung ourselves on the launch button the same day.” John fired off an email highlighting the article, his background and asked if the recipient would like to know more about his solution. “For all of December and well into January, I literally ran between meetings in central Stockholm.” InsiderLog launched soon after, as a separate company. “We decided we should do this properly.”
12 months, 350 clients and Euronext
Two years on and a lot has changed. InsiderLog has gone from five to 350 clients, primarily in the Nordics, but also in the UK, France, the Netherlands, Spain and Portugal. “The fact that MAR is an EU regulation made international expansion a lot easier from our perspective, as it’s been applied the exact same way all over Europe.” Companies in every country have the same challenges, and InsiderLog has the solution.
The other change is that InsiderLog is now 80% owned by Euronext. The deal was announced in January 2018. Why did John sell? “They contacted us,” he says, “and they were clear about their ambitions to get something in our space. Listed companies were struggling with MAR and Euronext, with 1,300 issuers on its markets, wanted a solution. From a start-up-journey perspective, it was too soon to sell, because we were growing so quickly. But then we started thinking: ‘Okay, this was not supposed to be a long-term commitment.’ I mean, I hadn’t planned to stop being a general counsel and become a software vendor instead! Also, we felt that if they didn’t buy us, they were going to buy someone else.” And then there was the fit: “Euronext is in the middle of the ecosystem, plus, if we were going to have hundreds of customers all over Europe, were we really the best people to take care of them in the long term?”
I don’t think the legal industry is ready to start using artificial intelligence and blockchain on a large scale, because we don’t conceptually really know what to do with it
Legal tech innovation: begin with the easy wins
What of the future? For the moment, John is dividing his time between InsiderLog and Serendipity – the ratio is about 90:10 in InsiderLog’s favour, he says. He’s the MD of InsiderLog and he and the management team remain in Stockholm, with the support of Euronext and local sales managers on the ground throughout Europe. As for the InsiderLog software, it is already expanding beyond listed companies to meet the compliance needs of their advisors in the legal, banking and auditing industries, as these all have similar workflows and processes. Several international law firms and two of the Big Four auditors are using InsiderLog to comply with their own MAR requirements to keep “sub-lists” in cases involving inside information of listed clients.
Of his own future, John says he plans to return being full-time general counsel at Serendipity. But he has clearly developed a taste for legal tech innovation: “I can see us trying to look more actively for future opportunities rather than waiting for it to just fall in our laps the way InsiderLog did. Serendipity could become a sort of innovation lab for legal techs, because we now have a good track record among people who could be attracted to come to us with their ideas. We made an exit in a year and we have a really good network within the legal industry, so I think we’re well positioned to repeat this.”
Just don’t pitch AI and blockchain without a convincing use case: “I don’t think the legal industry is ready to start using artificial intelligence and blockchain on a large scale, because we don’t conceptually really know what to do with it. And there are so many easier wins before going into that. I mean, there’s low-hanging fruit, like learning how to use Microsoft Office to its full potential, that I think would save more time for most major law firms. Also, I think there are more solutions and simple tools that people have developed to solve their work-related headache that could have commercial value outside their own organisation. It could have happened to us – built the equivalent of InsiderLog and then just kept it in-house. No one else would ever have benefitted from it and we would not have made any money from it that can now be put into new ideas.”