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The odds were stacked against Felix Rackwitz and Filip Corveleyn becoming start-up partners.
As senior lawyers in large firms, they would have had to sacrifice the material comforts of secure employment, corporate gold cards and first-class travel. There was also the not insignificant matter of growing up in different countries and working at opposite ends of Europe.
Mr Rackwitz had studied law at the Philipp University of Marburg in Germany before joining a law firm in St Petersburg and later Kiev. Mr Corveleyn, a Belgian, was based in Brussels.
What brought them together was their decision to enrol on the two-year executive MBA programme at Cambridge university’s Judge Business School in 2010.
Despite their different histories, the two men quickly discovered that they were kindred spirits when it came to their desire to shake-up the legal industry.
“In the introduction week, I turned to the left and there was Filip,” Mr Rackwitz recalls. “We worked out we were both lawyers, the only two on the course, and we were both highly frustrated, despite our generous salary packages, with the work we were doing.”
The problem both saw with the big law firms was that the system of charging by the hour for work meant they had no incentive to complete cases more efficiently for their clients.
“What law firms do is sell expertise to clients in time units, which drives all your targets as a business,” Mr Corveleyn says. “To be blunt, I have no incentive to change if a client asks for me to be more efficient because I would be spending less time working for them and so would lose revenue. Why would I do that?”
Having spotted the problem, the pair tried to work out a solution, writing their dissertations on how the financial crisis had changed the market with companies looking to save money on their legal bills.
“We both initially joined the MBA programme with the idea that we would propel our careers in the companies where we were working,” Mr Corveleyn says. Much to their surprise, they found themselves thinking they should take this a step further and explore how to change the traditional structures of the industry itself.
The pair concluded that there was a need for a new licensing model that gave corporate clients more for less money. This would be hard to do for expert legal advice, but Mr Rackwitz and Mr Corveleyn realised that much of the legal market involved less specialised work that could lend itself to a different method of charging and more efficient delivery to clients.
“We looked at the legal work most people needed to get done and discovered that it was not necessarily highly complicated, but draft work,” Mr Corveleyn explains.
“It was work that could be automated with the use of technology.”
The pair graduated in 2012 and went their separate ways but decided to stay in touch, as both were reluctant to start a business on their own.
Mr Rackwitz, who had set up new offices for legal firms he had worked for in the past, also felt more comfortable in the role of “intrapreneur” than entrepreneur.
Then Mr Corveleyn discovered Xenion, a Frankfurt-based technology start-up, doing exactly what they imagined needed to be done.
Rather than set up a rival firm, they asked founder Carsten Reimann, a fellow lawyer, whether they could join him. So earlier this year, Mr Rackwitz and Mr Corveleyn became Xenion’s chief operating officer and head of R&D respectively.
Although the business is small, with just four employees, it has quickly earned enough revenue to be cash-flow positive. The team is now looking to raise a first round of equity funding to double the headcount.
Both Mr Coveleyn and Mr Rackwitz are having to survive on much lower salaries than they are used to, and each have personal commitments, not least their responsibilities as fathers of young children.
However, they are enjoying the opportunity of helping create a business they believe will become the norm for legal service provision in the future.
“There is a sense of liberation,” Mr Corveleyn says. “Of stepping away from something that is known and venturing out.” He says they have been encouraged by members of the teaching faculty and student body at Judge.
“Cambridge itself is an excellent platform to find help [for]a start-up. There are some good incubator programmes to support early-stage companies to grow fast and a strong network of people. In our year [for example], there were 50 people, from vets and bankers to others who were starting companies. That was a wealth of experience and know-how that we have been able to tap into since. The bonds made allow you to pick up the phone and bounce ideas back and forth.”
The benefits of studying abroad
Why would a lawyer move overseas to study for an executive MBA?
Felix Rackwitz: “I had worked like a horse for several years and was intellectually dried out. I felt that I needed to be somewhere completely different. Cambridge was my only application.”
What was it that brought you together on the executive MBA programme?
Filip Corveleyn: “It was quite funny to find that we were the only two lawyers on the course. We had something in common, which is what initially sparked the conversation.”
What was the main benefit of your business education?
FC: “There is a strong network of business people that can provide you with insight both on and off the course.
Perhaps the most important thing these people provide is the reassurance that you are not doing this alone.”
How supportive was Judge in your entrepreneurial ambitions?
FC: “We received the full support of the school in what we were doing.
I think they are quite successful at keeping the fragile balance between doing what a business school is meant to do in helping people get an executive education while supporting those who want to build new companies. This is not easy when the business school rankings depend so much on how much people earn after they graduate.”
Judge Business School is number 16 in the FT Global MBA 2014 ranking, and number eight for value for money. The ranking features 100 business schools.