Venture Capitalists Open Their Wallets for LegalTech
First published in the Australian Financial Review on 5 July 2016
In May Stanford University played host to a conference of zealots – legal technology zealots, to be specific. While almost all areas of human endeavour have felt the sharp edge of disruption’s ruthless sword, the world of law has remained largely untouched.
But things are changing and changing fast – evidenced by the standing-room only Stanford conference.
The lead indicator of change is when the world’s smartest technology investors, the US venture capitalists, begin to move and, in the last year, move they have.
Legal marketplaces are popular. Technology Crossover Ventures led a $US71 million ($94 million) round into Avvo, valuing it at $US650 million ($865 million) and Metamorphic Ventures completed a $US10 million ($13 million) investment into Upcounsel.
The eDiscovery software market is valued at $US2 billion ($2.7 billion) globally.
Tech offerings in this area are attracting attention, with Iconiq Capital fronting a $US125 million ($166 million) investment into Kcura, Spire Capital putting $US30 million ($39 million) into Lighthouse and Silicon Valley success factory, Andreessen Horowitz, closing an $US8 million ($10.6 million) Series A round into Everlaw.
Thomson Reuters, LexisNexis and a handful of other players dominate the $US15 billion-plus ($19 billion-plus) global legal research market. This sector is being significantly disrupted by big data players such as Ravellaw, Judicarta and Lex Machina.
The latter company, incubated at Stanford, was acquired late last year by LexisNexis for an undisclosed sum. Meanwhile, the research crowdsourcer Casetext received a $US7 million funding round from a consortium including Union Square Ventures.
Artificial intelligence and machine learning
The next generation of legal research using artificial intelligence and machine learning is being developed by players such as Ross Intelligence (powered by IBM’s Watson), Beagle and Legal Robot. The offerings from these companies appear to be somewhat limited, but it is definitely an area to watch.
The fever has spread to Australia. The Macquarie-backed, Sydney-based eDiscovery player Nuix Technologies is set to list on the ASX next year for an estimated $1 billion.
Our very own Leap Software is a global leader in practice management software for small firms. Enterprise contract management player Exari raised $10 million from Boston-based Beacon Equity Partners.
Contract lawyer provider, Advent Balance merged with Lawyers on Demand and Gilbert & Tobin has invested in new law firm, LegalVision.
Australia’s version of Avvo, LawPath, has raised over $2.5 million and recently announced a strategic alliance with major law firm, Norton Rose Fulbright with the aim of using LawPath’s technology and distribution platform to provide premium legal services to small and medium businesses.
Data and processes a logical extension
Much of legal practice consists of data and processes. It makes sense that technology should be able to provide great efficiencies in the provision of legal services.
The tide appears be turning. As stated by the founder of LegalZoom, Eddie Hartman, in a stirring call to action at the Stanford conference (paraphrasing a famous quote from renowned legal professor, Lawrence Friedman): “The law is too important to be left to lawyers alone.”