6 LegalTech Startups Disrupting the Legal Industry
Table of contents
“Lawyers are the only persons in whom ignorance of the law is not punished.” Those were the words of Jeremy Bentham, an English philosopher from the 1700s who thought that knowledge was rapidly advancing towards perfection. Were he alive today, Mr. Bentham might be truly amazed at how technology is being used to make the legal system more efficient than ever. As for the perfection part, he may be a bit underwhelmed.
In our recent piece on global financial technology companies, we noted that a subset of fintech is legal tech (most commonly spelled legaltech), a domain where technology is used to manage and make sense of the vast amount of legal information out there so that it can be transformed into exorbitant invoices. In past articles, we looked at how artificial intelligence is being used in law along with other technologies such as legal chatbots. Since then, investments in legaltech startups have soared, clearing one billion dollars in 2018, and even more in 2019. Today, we want to look at some of the startups emerging as leaders in using technology to transform today’s legal sector.
Practice Management in The Cloud
According to HG.org, 70% of attorneys in private practice work in a law firm with ten or fewer attorneys while a solo practice is the career and lifestyle choice of almost half (48%) of private legal practitioners. While the information is a bit dated, the takeaway is that all these small law firms need an affordable one-size-fits-all software solution to run all aspects of their practices. That’s where Clio comes in.
Founded in 2008, Canadian startup Clio closed a $250 million Series D funding found in Fall of 2019 bringing their total disclosed funding to $276 million. All that coin will be used to further expand the reach of Clio’s complete law practice management system that helps law firms manage day-to-day workflows and business operations. More than 150,000 legal professionals in 90 countries use Clio’s solution, and it’s been adopted by more than 150 law schools, so up-and-coming lawyers will see it as the norm.
Another service Clio provides the legal industry is research around trends, like who is dominating what niche. A few years back, they conducted a survey to identify the leading legal research providers, one of whom is Fastcase.
Disrupting Legal Research
According to Cornell Law School, “Precedent refers to a court decision that is considered as authority for deciding subsequent cases involving identical or similar facts, or similar legal issues.” If you’re defending a client whose infraction falls in some grey area, you may want to research the outcome of every single case involving a similar set of circumstances, then filter the results even further by jurisdiction and such.
Lawyers conduct a great amount of legal research, and the leading providers of this service include Westlaw from Thomson Reuters, LexisNexis from RELX Group, and a newcomer – Fastcase.
Founded more than 20 years ago, it’s hard to refer to Fastcase as a startup. However, we have made exceptions in the past (it’s called precedent), so we’ll include them because they’ve been consistently acquiring startups over the past several years. Just this month, Fastcase acquired Judicata, a startup that turns unstructured case law into structured data. That technology stack, described as being “a generation ahead of even the largest legal research platforms,” will soon be available to the 900,000 lawyers who have access to Fastcase. That functionality will certainly come in handy during the discovery process.
eDiscovery as a Service
To begin preparing for trial, both sides will engage in a process called discovery during which information is requested and exchanged so that – ideally – there are no surprises in the courtroom. For example, witnesses may give a sworn out-of-court testimony called a deposition. As you can imagine, discovery produces lots of artifacts in various forms – audio, video, images, letters, reports – that need to be managed. That’s where ediscovery comes into the picture.
Founded in 2012, Texan startup DISCO has taken in $133.6 million in disclosed funding to “use AI and cloud computing to help lawyers and legal teams improve legal outcomes.” Their end-to-end ediscovery solution gives law firms, corporations, and government agencies total control over their data, workflows, and costs with a flat-rate per gig pricing model. Their latest product, Case Builder, helps manage witnesses and depositions, using automation to reduce menial tasks – like some natural language processing (NLP) for video transcription.
Used by 75 of the top AM Law 200, more than 900 terabytes of data have been uploaded to the platform. (For those of you with low nerd cred, that’s equivalent to 90 years’ worth of data from the Hubble Space Telescope.)
Update 10/16/2020: Disco has raised $60 million in funding to ramp up sales and marketing, and to expand its presence internationally with a focus on Europe and Asia. This brings the company’s total funding to $193.6 million to date.
Financing Justice Everywhere
We’ve covered some pretty interesting alternative assets before such as wine and art, but financing litigation might take the cake. In the past few decades, we’ve seen the emergence of litigation finance firms that provide funding to plaintiffs, law firms, and companies for legal disputes with high probability outcomes. When you throw some predictive analytics into the mix, the certainty increases even more.
Founded in 2016 by Harvard dropouts, Legalist has taken in a single round of disclosed funding – a $100 million round that closed about a year ago. The startup tries to put an altruistic spin on their offering by describing it as “funding justice.” And maybe that’s true. They claim to be the leading funder for breach of contract cases having worked with 80% of Am Law 100 law firms. As the world’s first artificial intelligence-powered litigation funder, the firm scours data from millions of court records, using their AI algorithms to find
the low hanging fruit opportunities to enforce justice. They’re positioning themselves as an asset manager that will deploy up to a billion dollars in capital for asset owners over the next several years.
Cloud-Based Contract Management
If you’ve ever worked for a firm that sells enterprise software, you’ll know the importance of contracts. Before the salesperson can close that opportunity in Salesforce, they need legal to have a back-and-forth with the potential client until everyone’s happy. It’s a necessary evil in today’s litigious society, and plenty of startups are offering contract management solutions – like Icertis.
Founded in 2009, Seattle startup Icertis has taken in $211 million in disclosed funding with their latest round – a $115 million Series C – closing this past July. The Icertis Contract Intelligence (ICI) platform is an easy-to-use cloud-based enterprise contract management solution that streamlines everything with a healthy dose of AI. For example, they’re able to take those blurry PDF documents you have laying around and digitize them so your contracts become “valuable corporate assets.” All you CTOs out there will be stoked to hear the ICI platform uses blockchain. Doesn’t really matter how they’re using it, the important thing is you can now say your firm is “using a blockchain.”
There are also plenty of other firms out there we’ve looked at before that are Using Artificial Intelligence for Legal Contracts.
Update 03/11/2021: Icertis has raised $80 million in new funding at a post-money valuation of $2.8 billion to invest in accelerating AI and blockchain development, and build out its global partner network. This brings the company’s total funding to $291 million to date.
Free Legal Services = Leads
A cursory search of Crunchbase for the most funded legaltech startups lists one name prominently at the top – LegalZoom – with $811 million in disclosed funding. It’s a firm we first encountered back when we were paying the bills with affiliate programs, and subsequently needed to publish clickbait pieces like “The Cheapest Way to Get a Divorce Online.” LegalZoom is the leading provider of online legal document services and legal plans to families and small businesses, also providing affordable legal services and access to experienced attorneys. More than 4 million people rely on LegalZoom for the personal and business legal needs, and they’ve initiated over 500,000 lawyer consultations in all 50 states.
While there are hundreds of legaltech startups disrupting the legal industry, we’ve reached our word limit here, which means it’s beer-thirty. If you think we “missed” your sacred cow, drop us a line, and we’ll try to sell you our content marketing services.
Several billion dollars of venture capital funding has poured into legal innovation over the past few years as technologies like NLP help lawyers digest all the legal big data out there, and machine learning algorithms help them make sense of it all. The law practice of today needs to embrace technologies just to stay competitive.
Although the United States has more attorneys per capita than nearly any other country, there’s also opportunity to be had abroad. As businesses increasingly transact across borders, there’s a need for cross-border solutions. Given how antiquated the legal industry is in many countries across the globe, there’s plenty of opportunities to
grow revenues sow the seeds of justice everywhere.
LegalTech is just one segment of a much larger domain – fintech. We’re presently invested in more than a dozen exciting global fintech companies. If you’re a Nanalyze Premium annual subscriber, you’ll know which ones.
Become a premium member and get access to hundreds of premium articles, reports and additional content.
Nanalyze Premium is your comprehensive guide to investing in disruptive technologies. Read by the top investment banks, management consultancies, VCs, and research houses. Trusted by over 100,000 institutional and retail investors. Covering disruptive technologies for nearly two decades.