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- Investments in legal tech startups have steadily increased in recent years after an initial slow start, as law firms, in-house general counsel, and clients are seeking greater efficiency across the industry.
- Legal tech is still an emerging category said Miriam Rivera, co-founder and managing director of Ulu Ventures, but with “big opportunities for growth.”
- Business Insider spoke with six prominent VC investors to see which startups they’ve been looking at and why.
- Visit Business Insider’s homepage for more stories.
Legal tech startups are on the rise, and many prominent venture capital funds are seeing them with increasing interest.
With the coronavirus pandemic squeezing the economy and stoppering workflow, some law firms have seen their billable hours shrinking, forcing them to weigh pay cuts, layoffs, and furloughs, as previously reported by Business Insider.
And, in a world where much of the country’s workforce is still operating remotely, law firms are having to virtualize all aspects of their business processes, from reviewing contracts to analyzing case law.
“Legal tech can ramp up these processes at scale without the type of team resources a company might typically have, reducing the need for manpower,” said Vas Natarajan, partner at Accel.
As a whole, legal tech is typically seen as what Miriam Rivera, co-founder and managing director of Ulu Ventures, calls a “laggard” tech sector.
“It’s still an emerging category, but with big opportunities for growth,” said Rivera, who was also the former deputy general counsel at Google.
Read more:How top law firm Mintz is using AI to help reduce costs for clients and alleviate work for associates
The slower adoption of technology in the legal industry is a characteristic that’s essentially built into the job, since lawyers are, by nature, risk mitigators.
“Their entire job is about identifying and mitigating risk, which is constitutionally the opposite of VCs and startups, which are more risk-embracing. The reason contracts are so long and complicated is because of all the different contingencies,” explained Patrick Chung, managing general partner at Xfund and former lawyer.
Law is ripe for automation
But most VC investors think that’s been changing over the past decade. Last year, legal tech investments surpassed $1 billion by the end of the third quarter, as reported by Bloomberg Law.
One of the reasons for the step change is rooted in a lynchpin of the legal industry’s business model: the billable hour.
“Customers have become much more demanding of their law firms and cost-conscious, that’s shifting,” said Rivera. “And even more, the speed of which business moves has accelerated so much with the Internet, and that has required greater efficiency in order for law firms to maintain per-partner profitability.”
Read more:Law firms are pulling the trigger on pay cuts and layoffs — and they’re already rethinking tech, office space, and recruiting for the long term
Paralegals and junior associates at law firms are typically tasked with rote, often mind-numbing tasks, like poring through lengthy legal documents and spreadsheets.
“Law has always been dominated by firms with credentialed lawyers, with lots of manual processes. All the workflows were very human-intensive,” explained Natarajan. “Over time — and we’re just starting to see this — the workflows and the processes behind lawyers is actually ripe for automation.”
Business Insider spoke with six VC investors who’ve been looking at the legal tech sector to see what they think are the most promising startups, and why.
Here are the legal tech startups deemed “ones to watch” by the top VC investors:
Apperio: Real-time legal spend tracker
Cited by:Draper Esprit (lead investor)
Total raised:$12.9 million
What it does:British startup Apperio is an analytics platform that tracks and manages legal spend. It expanded into the US market in June 2020, with an initial focus on large enterprises and private equity firms.
Why it works:“It gives law firms and their customers a real-time view of their legal spend. The problem they’re trying to solve is the unexpected legal bill,” explained Philip O’Reilly, principal at Draper Esprit. “Imagine you complete a transaction and three months later, your lawyer finally gets around to billing you and an invoice comes through the door and gets a really nasty shock. I worked in a firm where this happened, the client picked up the phone immediately to the partner and said, ‘Why are you sending this invoice, this deal? Because months ago we closed off our budget and I literally do not have any of the budget to pay any of this off.’ And that’s a horrific situation. It really helps build client-lawyer relations.”
Bryter: Code-free automation of expert knowledge
Cited by:Index Ventures
Total raised:$23 million
What it does:German startup Bryter provides a no-coding platform to automate decision making by corporate regulatory departments, law firms and administration. It’s used by firms like Baker McKenzie and companies like Deloitte and PwC, and announced plans to expand to the US, as previously reported by Business Insider.
Why it works:“Bryter was set up by former lawyers, which gives them an edge,” said Hannah Seal, principal at Index Ventures. “They know how to speak the language of lawyers. They know what part of a lawyer’s work to replace and what not to, and what can be automated.”
Ironclad: A digital contracts platform
Cited by:Accel (lead investor), Bain Capital
Total raised:$84 million
What it does:Founded by a former attorney at tech-focused law firm Fenwick & West and a software engineer at Palantir, Ironclad digitizes and automates contracts to streamline the entire contract process.
Why it works:“Contracts are kind of this horizontal subatomic unit that powers businesses,” said Vas Natarajan, partner at Accel. “It’s such an unstructured workflow, so bespoke, so it genuinely requires a lot of manual application of insights. It requires, somewhat, a law degree. I think the interesting thing about what Ironclad is doing is they realized that, hey, there’s this object behind legal workflows (i.e., the contract that actually is kind of a structured document). For most companies, their contracts mostly look and feel the same. Ironclad helps extract and helps lawyers more easily understand the intent and meaning behind contracts.”
Juro: A contract collaboration platform
Cited by:Draper Esprit
Total raised:$8 million
What it does:Juro is a contract collaboration platform that aims to replace old-school Word-and-email processes at law firms.
Why it works:“Juro was started by a very, very impressive team who came out of a large circle of law firms in London,” said Draper Esprit’s O’Reilly. “It’s an extremely user-friendly life cycle management tool, which hopefully lots of law firms and legal customers will use in the future.”
Kira Systems: Contracts analysis software
Cited by:Index Ventures, Draper Esprit
Total raised:$65 million CAD ($50 million USD)
What it does:Canadian-based Kira uses machine learning to identify, extract, and analyze text in contracts and other documents.
Why it works:“Businesses like Kira in some ways replace the work that is often done by paralegals or junior lawyers: reading through contracts and just finding the one or two things they need to find,” said Index Ventures’ Seal. “There are billions of contracts in the world, so it’s not just law firms, but also professional services and in-house counsel, who need this sort of thing. They will want this sort of efficiencies.”
Legl: B2B software connecting attorneys with consumers
Cited by:Draper Esprit
What it does:Legl was built by the same people behind legal startup CrowdJustice, a platform that helps users raise money for legal needs. The new startup provides a cloud-based software platform that helps digitizes firms’ onboarding and compliance processes to improve end-to-end client experience.
Why it works:“It’s modernizing the litigation process,” said Draper’s O’Reilly. “It’s a B2B software provider specifically to small legal firms that moves some of the human work that is more administrative. You’re doing an awful lot of easy work, but there’s no value to you.”
Lexoo: An online marketplace for one-off legal services
Cited by:Draper Esprit (investor)
Total raised:$6.7 million
What it does:Based in the UK, Lexoo is a tech-enabled, outsourced legal counsel marketplace that helps people get information about specialized lawyers.
Why it works:“For GCs or in-house councils, the difficulty is finding the right talent, and also needing talent for a transaction that’s going to complete in six months’ time,” said O’Reilly from Draper. “They don’t necessarily want to bring onboard someone full time and equally they don’t want to employ a very expensive law firm. [Lexoo provides] an on-and-off legal counsel service.”
SeedLegals: The legal services one-stop shop for startups
Cited by:Index Ventures (lead investor)
Total raised:$5.3 million
What it does:SeedLegals connects legal startups and investors through its online platform, and automates the process behind funding rounds for the startups.
Why it works:“It automates all of the standard legal documents that you need when you’re a young company, things like NDAs, employment contracts, shareholder agreements,” said Seal of Index Ventures. “These are things that startups need and don’t necessarily need or want to go to a lawyer and pay thousands of dollars every time. It’s empowering consumers to access legal services… They’re not replacing lawyers, but partnering with them.”
Time by Ping: Automating time and billing
Startup:Time by Ping
VC:Ulu Ventures (investor)
Total raised:$17.2 million
What it does:Time by Ping, Inc. uses AI to collect billable hours in real-time across devices.
Why it works:“People are often working through various devices, often in various places,” said Miriam Rivera, co-founder and managing partner of Ulu Ventures. “I read legal documents on my phone while I’m at my daughter’s games, for example, and sometimes I’m working on a matter on my email while I’m waiting to get my coffee. So there’s been a difficulty of tabulating hours, since you’re not in a place where that’s easy to do. It’s easier and more accurate for computer software to see what you’re working on and be able to automatically fill that in for you.”