5 minutes with… Troy Pospisil, InCloudCounsel

The Drawdown recently caught up with InCloudCounsel founder and CEO Troy Pospisil to find out how the legal technology company is transforming the way PE firms manage repetitive contracts, and their plans to bring LPA and side letter management into the digital era.

The Drawdown: How did you come to set up InCloudCounsel? What were you doing before?

Troy Pospisil (TP): I started out in management consulting and then joined a large middle-market private equity firm as an investment professional. We were experiencing the pain of handling a high volume of routine legal contracts, such as NDAs, joinders, and non-reliance letters. We were processing thousands of contracts and approaching it with a patchwork of solutions; some were being processed by our internal legal team, some by our deal teams, and some by external counsel. Additionally, there was no system of recording who was doing what and when, and we weren’t really tracking our obligations or what we had previously agreed to with repeat counter-parties and contract types; and whether or not we even had contracts in place. It wasn’t an ideal situation.

I started thinking about developing an end-to-end solution, combining people and technology. And that’s what we’re doing; we combine proprietary cloud software with expert attorneys to deliver an efficient, scalable, high-quality solution to this problem.

TDD: So given your background, would you say private equity is part of InCloudCounsel’s DNA?

TP: We started serving private equity because that’s the industry I knew well. We started out by creating solutions for the largest Californian-based private equity firms and then we expanded across the US. Naturally that meant doing more global organisations so we invested in building global operations, so that we could deliver a one-stop, global solution to global enterprises. We have opened offices in Europe and Asia so we can now process contracts everywhere our global customers have contracts to be processed.

TDD: What are the most important aspects of working with private equity clients?

TP: They care about quality and turnaround times so we guarantee a certain speed of service, which is critical because in most cases the contract we are processing is the only thing that sits between a deal professional and moving forward on a potential transaction.

And then there’s the cost savings compared with whatever they were doing before. So if the work was being performed in-house, there’s the direct cost of those people’s team and the opportunity cost of the important work it’s pulling them away from. Keeping this work in-house can also cause issues with employee retention, as reviewing contracts is a pretty thankless task. It’s also just generally a distraction from the core business; I’m a big believer in outsourcing whatever isn’t core to your strategy, as it allows your team to focus on those activities that create real value. At the end of the day, our goal is to create freedom for internal teams to focus on meaningful and impactful work.

Additionally, we capture lots of data about each contract and that’s become a big part of our value proposition. We have metadata on who submitted the agreement, what business unit the contract is for, the counterparty contact information, etc. Our tools then let our users sort and filter that data, set bespoke invoicing groups, and also report on the data within a robust permissioning framework.

We also capture all of the key legal terms of all finalised agreements, and because we generally take over all contracting work globally we can deliver incredibly valuable reporting and benchmarking tools that are useful to various functions within a large organisation - compliance, legal, HR, finance, etc. Even in a document as simple as an NDA, it’s important to track what has been agreed to across the organisation. There are often clauses related to stand stills, non-solicitation, term, jurisdiction, auto destruction of information, etc. We use machine learning to help automatically capture a lot of this data, which saves a great deal of attorney time and helps ensure that the data sets are complete and accurate.

TDD: What about privacy and security, which are major concerns for private equity firms?

TP: We invest a huge amount of time and money in data security. We’ve been through hundreds of service provider due diligence processes with some of the largest and most sophisticated financial institutions in the world. Furthermore, we work with the consulting firm Accenture to do an annual penetration test of our systems and review every line of code for potential vulnerabilities.

All of our data is encrypted and all users require dual-factor authentication to access our platform.

Additionally, every attorney on the platform goes through a one-on-one security onboarding process with our security team to ensure they have the latest security patches and are aware of the latest hacking strategies. We’ve really made data security a priority because we are servicing sophisticated, regulated customers that care deeply about the safety of their information.

While checking all of the boxes around systems vulnerability is a must, it is rare that systems get truly hacked. Most data breaches are the result of an error in human processes, which has a lot more to do with culture and training. With that, we make security a cultural priority. On the first day of employment at InCloudCounsel, team members go through one-on-one training with our CTO. Training and alertness are critical; you can make as many investments in security as you want but if someone on your team accidentally gives out their password on a phishing page.

We even have a Slack channel dedicated to security where our IT team posts information about recent security breaches and events at other companies to keep us all up to date with the latest forms of attacks.