I’d like to make a wager. My bet is there will be a new legal technology company (i.e., not LegalZoom, Rocket Lawyer, Avvo or Clio) that is valued at over $500 million by August 2019 at the latest. I’m not sure which company it will be or what that company will do, but the industry is ripe. Any takers?
Writing for TechCrunch last week, Christine Magee offered a more tepid view, citing data showing that venture capital investment in legal technology has slowed in 2014 after a banner year in 2013. Legal startups might well struggle to get funding (I’ll let others, I know you’re out there, take issue with the data), but that does not mean that legal startups won’t succeed and big-time at that.
- Change must happen. The tools lawyers use to conduct research, review documents, assemble documents, communicate with clients and invoice and accept payment are inefficient. Inefficiencies are costly, and consumers are more and more vocal about wanting to keep legal costs down. There are many smart startups figuring out how to address these pain-points, and they will only get more sophisticated as more users try their product and give feedback. While true that some lawyers with more established practices will reject change, these companies are often starting with law students and recent graduates to teach a new generation. I have no idea which of the current crop of startups will be successful, but the status quo will not stand and companies that take advantage of that opportunity will thrive. (In case you’re curious, here are some companies doing excellent work in these spaces. Research: Ravel Law and Judicata. Document Review: DiligenceEngine and Ebrevia. Document Assembly: PlainLegal. Workflow: LawPal, Billing/Invoicing: ViewABill).
- We do everything online, there’s no reason to think law will be the exception. In the early aughts, online dating was a joke, online communities were the fringe, online banking was a dream and doctors scoffed at the idea of patients finding them online. My, oh my, how the world has changed. I’ve written elsewhere about why law has been slow to adapt to technological change, but don’t confuse its tardiness with intractability. As consumers expect technology to make everything easier, law will not be immune. Law is idiosyncratic, so many of the first generation of products have not seemed like “improvements” on antiquated systems. It’s better to do something an old way that works, than a new way that fails. Since law is an old profession with lots of entrenched, unique processes and behaviors, it will take a while for startups to figure out how to be more efficient than the current ways of working. But, they will come and revolutionize the way the business of law works.
- Here’s the biggest point, detractors: the boom hasn’t even started yet. This is early days. Over the past two years, plenty of companies with business plans similar to Priori’s have cropped up. For now, though, I can only see my competitors as collaborators in the collective and noble project of changing the way the business of law works. Sure, there might be a time in the future when that changes, but for now, the field is wide open, and startups are experimenting with lots of different approaches. It might be true that legal startups struggle to get venture capital funding, but that doesn’t mean that some of these startups won’t be wildly successful. Since there haven’t been many homeruns in the legal space YET (a legal process outsourcing company, Pangea3, was sold for $100 million—one of the biggest acquisitions in the space), venture capitalists might not know how to bet successfully, and don’t want to risk it. And raising in such a space (as Hire an Esquire’s, Jules Miller, points out in the TechCrunch article) might be dangerous when VCs are driving hard for fast returns.
The TechCrunch article might well identify a funding trend, but when we’re assessing whether the “jury has decided” on legal tech, venture capitalists’ verdict isn’t final. My view from the ground is that one or two or seven legal startups will have at least a $500 million dollar valuation in the near(ish) term, even if the road there is slow and nonlinear.
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