JC Glancy and Rafael Lopez, co-founders of the Austin-based tech startup Counsl, had never stepped foot in Delaware until about 10 days ago.
But by the time they boarded a plane back to Texas on Friday, their company had become one of the most talked about businesses in the state, with a slew of business leaders working to woo them into Wilmington’s nascent tech scene.
“We’ve been so overwhelmed by the outpouring of support from the Wilmington and Delaware community,” Glancy said. “The reception we’ve received has been mind-blowing.”
What had been planned as a three-day visit stretched into a week because of the recent blizzard and a growing slate of meetings with some of the state’s biggest movers and shakers.
Their visit ended up including face time with Gov. Jack Markell and top officials in the Delaware Department of State, casual chats with a few political candidates, sit-downs with some of the city’s top law firms, an appointment with the state’s largest incorporation service provider and investment meetings with some of the area’s most powerful business leaders.
Not bad for two out-of-state entrepreneurs in their late 20s who have no actual product on the market, no employees and a website that consists of two words: “Coming Soon.”
What Glancy and Lopez do have is an early version of a mobile app that promises to streamline and modernize the creation of legal business entities, a process known as incorporation.
It’s a tool that could prove to be both disruptive and highly profitable for the incorporation and legal sectors, two complementary industries that still prefer paper over pixels.
“The Counsl guys may be young, but they’re a reasonably experienced team that seem to have the right idea at the right time,” said Dan Freeman, who heads the University of Delaware’s Horn Program in Entrepreneurship. “I think they’re intriguing both in this space and to the state because they offer such potential returns for investors.”
That promise already has helped Counsl’s co-founders land a non-exclusive partnership with CT Corp., one the largest companies in the world dedicated to helping businesses through the incorporation process.
It’s a business with tremendous appeal in Delaware, which has been regarded as the nation’s incorporation capital for more than a century.
Favorable incorporation laws, a renowned business court and some of the country’s top law firms have helped to convince nearly 1.2 million business entities to make their legal home here, including about 65 percent of Fortune 500 companies, such as Facebook, where Glancy previously worked.
Taxes and fees paid by those corporations account for as much as a third of the state’s annual revenues.
Delaware also is home to Corporation Services Co. (CSC), New York-based CT Corp.’s biggest competitor. Founded in 1899, the rapidly growing company now employs nearly 1,000 people in New Castle County and is in the process of building a new $75 million, four-story corporate headquarters off Centreville Road in Greenville.
“Austin doesn’t understand us,” said Lopez, Counsl’s chief technology officer. “We have an investor ready to jump in, but it took us five months to educate him on the market and why our product is needed. Here in Delaware, people we talk to get it in five minutes.”
Traditionally, an entrepreneur or team of business partners looking to incorporate in Delaware or anywhere else in the country starts by hiring a law firm.
Those lawyers help a business fill out detailed paperwork that record ownership stakes, set bylaws and apply for incorporation in a given state. The law firms then contract with companies like CT Corp. or CSC to review the paperwork, set up a legal address in the state of incorporation, secure online domains and manage annual reports, business licenses, permits and other corporate concerns.
The problem, according to Counsl, is that providing those services is a financial drain on most law firms. The roughly 6.5 hours of legal work that goes into providing incorporation assistance for each client outweighs the $1,000 to $3,000 in fees collected by the firms, who generally provide the service in the hopes it will lead to more work in the future.
Yet most companies end up failing and then don’t pay their legal bills. Volume, meanwhile, has been hard hit by online, do-it-yourself services provided by companies like LegalZoom.
The app being developed by Counsl seeks to merge the assurance and security of the traditional approach with the ease of use offered by more modern online services.
Law firms would be able to put their own brand on the app and direct clients to complete most of the heavy lifting themselves before reviewing the finished forms. By reducing the work hours needed for each client by nearly to 40 percent, lawyers would be able to provide the incorporation service for as little as $200 and still turn a profit, Counsl claims.
“We’re not a Band-Aid for these law firms,” Glancy said. “We’re a painkiller.”
Businesses, meanwhile, would have a lower financial barrier to incorporation while retaining the expertise of a law firm and gaining the advantage of mobile access to their documents.
Companies like CT or CSC that partner with Counsl would still provide fulfillment services and then split the one-time fees and subscription costs. In return, Counsl expects partnerships with the trusted industry giants to open doors at the law firms they hope to serve.
“With their branding behind us, these firms will feel secure in trying out our software,” Lopez said. “And then in the future, they will be more willing to adopt other software products we develop for the legal industry.”
Launched in 2014, Counsl last year released what it claims is the only mobile incorporation service in the Apple Store. The rudimentary tool, called StartUp, is a consumer version of the more robust enterprise software they’re developing for a much larger segment of the market dominated by law firms.
All they need now, they say, is less than $500,000 in venture capital to help bring that product to market.
“Right now, our team of programmers are working on this part-time, entirely for equity,” Lopez said. “We would love to do it full-time, but we still need to cover basic living expenses.”
In an effort to seek out that venture capital, Glancy and Lopez traveled to Delaware on the advice of another startup founder who had just moved in the opposite direction.
Last month, the two entrepreneurs were attending an event hosted by the University of Texas when they met John Kirk, who had just moved his online-based collaborative planning company Cnvrg to Austin – home of what Forbes magazine recently named the fastest-growing tech scene in the country.
“I knew immediately this is a startup that would really fit in Wilmington,” Kirk said. “And my hope was it was the kind of company that could kick the larger Delaware business community into gear in recognizing the importance of its startup community.”
Hours after meeting the Counsl guys, Kirk promised to introduce them to some key contacts back home.
One of those contacts was Mona Parikh, community engagement liason for UD’s Horn Program and a central figure in the burgeoning tech scene centered around the coIN Loft, Wilmington’s oldest co-working space.
“It was clear to me what these guys were trying to do and why Delaware made sense,” she said. “So while they booked a flight, I started setting up meetings with everyone I could.”
Those meetings included a handful of appointments with law firms that might be interested in becoming potential clients.
Officials from CSC also sought a meeting, but later declined to discuss any details about their conversation.
“We’re definitely supportive of anything that helps promote the regional entrepreneurial ecosystem,” said Matt Terrell, who works in CSC’s business development office.
Rick Geisenberger, deputy secretary of state who oversees Delaware’s division of corporations, also met with Counsl’s co-founders, along with Andrea Tinianow, the state’s director of corporate and international development and a former executive at CSC.
“I can see why they might be very intriguing to some people here in Delaware,” Geisenberger said. ”There are lots of people with web sites designed to help law and accounting firms create legal entities, but as far as advanced, mobile-friendly apps capable of supporting a two-way discussion with a lawyer, I haven’t seen much of that.”
A handful of prominent business leaders with a history of investing in startups also took meetings with Counsl.
Labware founder Vance Kershner, Chris Buccini of Buccini/Pollin Group and Paul McConnell of McConnell Johnson Real Estate were among the deep pockets who scheduled time with Counsl’s co-founders. All three previously invested an undisclosed sum in the novel, tech-based Wilmington advertising company Carvertise.
Kershner and Buccini were not immediately available for comment.
Michael Bowman, a partner in the year-old venture capital firm Leading Edge Ventures along with Kershner and others, said he was impressed by Counsl.
“Clearly, there is market interest and they’re focused on a niche that does not yet exist,” he said. “I’m not recommending an investment at this time, but I can say you don’t see a company with this kind of use and with this kind of clarity this early in their existence.”
McConnell, who co-founded the tech-focused co-working space 1313 Innovation in the Hercules Plaza Building, also expressed interest in the young entrepreneurs.
“I haven’t made up my mind about investing yet, but I know several of my friends are also considering it,” he said. ”And that’s great because we want people to come here, knowing we can network them into the opportunity to raise money.”
While Counsl waits to learn whether they’ve brokered any new deals in Delaware, Glancy and Lopez said they’ve seen enough to know they want to make their own investment in the state.
Counsl is currently negotiating a lease at The Mill, a 12,000-square-foot co-working space set to open next month on the fourth floor of The Nemours Building in Wilmington. The site will initially house about a half-dozen programmers from Massachusetts Institute of Technology who are helping to build out the company’s app.
“Even if we don’t get a dollar in venture capital, I’m still committed to opening an office in Delaware specifically for our programmers,” Glancy said. “The entire industry is here, the cost of living is low, the intellectual capital in a 300-mile radius is unbelievable and you have the fastest internet in the country. For a company like ours, it makes perfect sense.”
Counsl may be a fledgling startup today, but Lopez said he believes the company could eventually grow to become a sizeable employer.
“With some of the products we want to build in the future, I could easily see ourselves employing over 100 engineers,” he said.
While it makes sense for Counsl to grow in Wilmington, insiders in the area’s tech scene believe the company could provide equal value to the city.
Wilmington only recently developed its own tech scene anchored by co-working spaces like the coIN Loft and 1313 Innovation.
But what that scene still lacks is a major success story that members can hold up as an example as they work to attract new startups, while keeping others from leaving for bigger markets like Austin, Boston and San Francisco
“We always thought we were going to have to solve the retain portion of attract-and-retain, before we even got to the attract part,” Parikh said. “What makes Counsl a big deal for us is they would be moving from Austin to Wilmington, which could go a long way in showing other companies that we’re a viable destination.”
SevOne, a network infrastructure monitoring company founded in 2005 by two UD graduates, already has shown tech companies can succeed in Delaware, Freeman said.
Despite moving its corporate headquarters to Boston late last year, the company recently opened a 50,000-square-foot Technology and Innovation Center at UD’s Science, Technology and Advanced Research campus in Newark to house more than 230 employees or about 40 percent of its global workforce. The company’s revenues also have grown by at least 60 percent every year, while attracting more than $200 million in private financing since 2007.
“SevOne predates Wilmington’s tech scene,” Freeman said. “And what that community really needs is a highly visible win for some validation of its own.”
Glancy said he hopes Counsl can be just the company Wilmington is looking for.
“This visit has convinced us we want to be part of this community,” he said. “Our story here is only just beginning.”
Contact business reporter Scott Goss at (302) 324-2281, [email protected] or on Twitter @ScottGossDel.
EDITOR’S NOTE: A quote was removed from this story because it unfairly singled out a company as one whose incorporation applications are frequently rejected when the state official who oversees incorporations said 80% of all applications initially submitted in Delaware are rejected.
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