Emerging industries with high growth potential are the Holy Grail for law firms large and small. But marketing for upstart companies can require some untraditional efforts by enterprising law firms – even those steeped in Wall Street’s institutions.
For those at Richards Kibbe & Orbe LLP, a 70-lawyer New York boutique that specializes in representing financial services, hedge funds and public companies, partners Scott Budlong and Jahan Sharifi, along with name partner Jon Kibbe, weren’t afraid of adopting a new marketing approach in fintech, the term commonly used for the burgeoning financial technology industry.
“In the early days, there were meetups for those working in the peer-to-peer lending industry. Those interested originally met at small bars until the group started to grow,”
Sharifi said Tuesday. “Now, after a few years, the expanding group meets at law firms or some of the institutional investors.”
The firm has been receptive to new areas, Budlong said, since it began in the 1990s by representing those investing in the then-nascent distressed debt market.
Still, this foray is a bit different.
Marketing efforts included taking a booth at the second annual conference sponsored by LendIt in San Francisco last year. Pepper Hamilton LLP – represented by partner Ed Dartley – was the only other firm to brave the predominantly young, tech-focused conference that year, Sharifi said.
“We were sitting next to someone who had developed an algorithm for the industry, but it didn’t seem anomalous to have a law firm there. There were lots of representative to the ecosystem, so no one thought it was strange.”
In an interview Tuesday, Dartley concurred, describing the participants as “a young group who is not afraid of technology and very much wants to be visible.”
A few other firms followed in April of this year, when the LendIt meeting returned to New York and there were 2,500 attendees, a more than eightfold increase from the first conference in 2013, when 300 people went. LendIt, according to its website, sponsors “conference series dedicated to connecting the global online lending community.”
The efforts at marketing have paid off. Richards Kibbe now represents both institutional investors as well as companies in the fintech space, especially in the segment of the industry known as marketplace lending.
Because of its practice, Budlong and Sharifi approached the FinTech club at Wharton, the business school of the University of Pennsylvania, to conduct a study of institutional investors and their interests.
“We were interested in how investors were thinking about the space and we wanted to give the funds a benchmark of what others were thinking,” Sharifi said.
The study surveyed 300 institutional investors in their views of the market, which was originally known as peer-to-peer lending.
The market is huge – according to the survey, lenders in the sector issued $5.5 billion in loans last year. And it’s only expected to grow, as “a wider range of participants, as new platform operators, new types of borrowers and new sources of capital enter the scene.”
The survey found that 75 percent of respondents were already familiar with the sector and 71 percent expect “strong or moderate growth” in the next 18 months. Despite the projected growth, only 29 percent of those responding they have capital allocated to the area.
Institutional investors noted several perceived risks with this sector of investing which the report said reflected “a fear of market growth driven in part by declining credit standards.” In other words, the memory of the financial crisis has not receded.
In addition, regulatory uncertainty hovers. While federal and state regulations exist for lenders, rules remain relatively sparse in comparison to traditional banks and lenders.
The big unknown is whether the Consumer Financial Protection Bureau, which recently released proposed regulations on payday lending, will eventually attempt to oversee marketplace lending as well.
Samuel Gilford, a spokesman for the CFPB, said in an e-mail that the agency hasn’t “made any announcements regarding peer- to-peer or marketplace lending.” He added that the payday lending rules are expected later this year.
But that’s not to say federal regulators won’t eventually get involved. Budlong said that “the industry has been lightly regulated, but that isn’t to say that the traditional sources of regulation won’t infiltrate. No one will be surprised if they do.”
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