LISTEN: InCloudCounsel’s Pospisil on document abstraction
In the second instalment of our mini-series, Alice Murray talks to Troy Pospisil, founder and CEO of InCloudCounsel about what document abstraction, how it works and how it supports private equity legal teams, as well as the wider organization.
Excerpts from the interview:
Document abstraction: what is it, how does it work?
“At a high level it means taking a legal contract and turning it into usable data. When a contract is finalised it’s typically saved as PDF in a drive somewhere, it’s ‘entombed’. There’s a lot of information in that document and historically the only way to access that information was to read through it.
“When I worked at a PE firm, I used to have all the credit agreements, purchase agreements, operating agreements and so on printed out on my desk, with a great deal of coloured tabs for key parts that I knew I would need to access regularly. And I think this is still the case.
“With document abstraction, we’re taking a contract and putting into data form the key terms of that contract. We’ve also built features that allow you to organise and reference that data in an easy way so you can reference it and analyse it across similar contract types.”
What are the key benefits of document abstraction?
“It saves time. If you’re organised and have the data associated with any contract, that saves time and money. Often, to find these terms you have to email a law firm, ask them if they have the agreement, and then ask them specific questions. But, if you have the information at your fingertips you can access it and deploy it immediately.
“Second, you have obligations across the organisation and if you’re not meeting them, you’re not in compliance with what has been agreed with your counterparties. There may not be immediate consequences to missing a reporting deadline on a credit agreement, say, but over time, it will damage relationships with counterparties. It is critical to get organised and track obligations.
“The most compelling driver, and for the deal team specifically, is being able to benchmark against what has previously happened. That allows you to negotiate from a more informed perspective, which will allow for better results.”
How does this align with a GP’s wider data strategy?
“This is some of the most important data. Fund agreements, credit agreements, service provider agreements, employment contracts within portfolio companies; these are the most important agreements that govern your most important relationships. Being able to reference them quickly, to analyse and benchmark should be the cornerstone of any data strategy. I can’t think of a more valuable data set. If data is important, and if developing data strategy is important, this should be top of the list.”