Imagine a world without tech startups. There would be no Google, no Apple, no Amazon, none of the social media companies, no Uber, no online challenger banks, and the list goes on. An entire segment of our daily lives would not exist – or if it had come into being another way, i.e. provided by incumbents that didn’t really want to change, things perhaps would be very different, perhaps not so…..innovative.
The need for tech-led startups is even more important in the legal sector. Why? Primarily because unlike in the consumer market examples given above most lawyers are not actively demanding change, that in turn allows large legal tech incumbents to merrily maintain the status quo – and that’s precisely what was happening until around 2015/2016.
The New Wave of Legal Tech
Artificial Lawyer and many other organisations were born out of the New Wave of Legal Tech – a startup led surge of creativity and innovation that sought – and still is seeking – to improve the way the legal market works and how legal work is produced. And, let’s face it, the sustaining parties of the status quo were not all overjoyed at our arrival.
Take one area of technology, natural language processing (NLP) and machine learning. Although companies such as Kira Systems and Seal Software pre-date the moment the wave really got noticed, they and a host of others ‘arrived’ at that time in the minds of the wider commercial legal market.
This provided, and still provides in ever better iterations, a fundamental change in how the legal world worked – or at least a chance for it to change if lawyers embraced it.
Documents now, at least in part, could be ‘read’ by software with a level of accuracy that was enough for a lawyer to base their work product on. This has now been deployed across a broad range of use cases, from due diligence, to contract markup and negotiation, to case law research and litigation analytics, to enterprise search and Knowledge Management, to extracting key business information from contracts to give businesses true visibility of their contractual obligations, and the list goes on.
But, would any of that have come to pass without startups?
Startups As A Force For Good
Over the long, long-term large companies such as Thomson Reuters and LexisNexis, and others, would have embraced such technology to improve access to their massive case law libraries, for example, (rather than just tinkering with it in the background). But again, let’s face facts, would such dominant market players have rapidly invested in buying startups (e.g. Lex Machina and Ravel in the case of LexisNexis), or building their own NLP tools entirely inhouse and deploying them across Westlaw in Thomson Reuters’ case, if it had not been for that surge in creativity that arrived just a few years ago and that had won so much interest?
This site doesn’t think so. But, there is a difference between the legal tech world and the wider consumer market.
Take Uber, for example, if someone came up with a better system, it could spread from just a handful of users to millions in just a few weeks. Consumer-focused software applications are able to scale up at incredible speed – look at the recent growth of social media platform Clubhouse for example, which has gone from a handful of users to around six million users in just a few months (and that’s using an invitation model as well, which is designed to taper uptake in the short-term).
Now, take legal tech. Lawyers – even now – still need to be constantly reminded of the benefits of using automation and templates to improve doc production, or to invest in NLP tools to make their KM system better and more valuable.
And here’s another point, do you think global law firms would have legal tech incubators, Heads of Innovation, and turn up to conferences with the title ‘Legal Innovators’, if it were not for the New Wave of Legal Tech and the startups that formed most of its momentum and brought (and are still bringing) so many new ideas to the market? It seems doubtful.
In many ways the incumbents, i.e. those that were large companies before this new wave, have adapted and have evolved not because they wanted to, but because there was a small – and it was small – chance that if they sat on their hands too long they would lose some of their business.
In short, legal tech startups keep the market alive, fresh…rejuvenated – even if sometimes it may not realise it’s falling asleep. And that is to the great benefit of the legal market as a whole, even if when stepping back a bit one can see that we are still in the initial phase of real change.
Or to be more precise, while in the consumer tech world a startup could overturn the status quo very rapidly, in the legal tech world it’s more a question of constantly pressing forward against a status quo that is not seeking to embrace rapid change, and perhaps will even start pressing back against change in some cases. And that’s just a market reality that we have to contend with.
Big Companies Can Innovate
Does that mean that large companies cannot innovate? Nope. They can. In fact, once a large company that had perhaps ‘fallen asleep’ starts to innovate again, and to invest in tech that disrupts their own business model (see Clayton Christensen’s books), then they can keep doing it.
Also, you can create very effective companies by stitching together startups and scaleups along with larger and more mature applications. Take Litera, for example: part old school, part new school, and still on the hunt for more acquisitions. You can see a similar phenomenon with Onit and BigHand, and others.
The key point is that the market needs the startups (and scaleups) to keep pressing ahead, as otherwise we would slow down again. The legal world is not like the consumer market for software applications. Most lawyers are not demanding something totally new and exciting that makes their lives so much better. In part this is because doing the same thing as you did yesterday still works well and makes a lot of dough.
They end up using innovative tools after many presentations, demos, reading articles in Artificial Lawyer, going to conferences and also seeing what their rivals are doing. (And there’s another home truth – the reality is that a lot of legal tech adoption is about keeping pace with rivals in the eyes of clients).
But why is it different? The answer is simple: law firms, which still dominate the sell side of the market, and also produce the people who go on to become the buyers, i.e. inhouse lawyers, are fairly pleased with how things are. Most are not crying out for rapid change. Some are, and kudos to them, but as said most are not. That in turn sustains larger players that are keen to also support the status quo.
(And we could now go on a closely linked journey into the world of legal process providers, but that will have to be for another day).
Multiple Versions of the Same Startup
So does this mean that all startups are a good thing? Nope. But some of the criticisms levelled at them are unfair. Take doc automation systems – there must be about 20 of them (and probably more) dotted all over the world. But, the global legal market is vast and highly atomised. There is room for multiple versions of the same startup – and perhaps a need for them – to reach that market.
Understandably, if you are a global law firm you may not enjoy multiple approaches from similar companies, but that’s a side effect of the wider market actually needing so many companies to service their potential needs.
The reality is that even in an area like doc automation – (one example of where Thomson Reuters was ahead of the curve, albeit via Contract Express which was …..of course….a startup that the giant bought rather than built itself) – there is so much to play for. The total addressable market presents huge long-term opportunities even with so many well-known brands already here. It will keep evolving, and that’s a good thing.
The same huge market potential is true for other forms of legal tech. It’s still such early days.
Sometimes we can take all the innovation and creativity of the last few years for granted. Some may even moan: ‘But there’s too many legal tech companies……!’ Well, there are a lot, it’s true. However, without them the legal world and its legal tech market would be a very dull place, desperately in need of rejuvenation.
And, it’s worth also saying, we still need new startups and those already in the market that came through during the heady days of the New Wave of Legal Tech that are now scaleups, to keep embracing change and innovation. Otherwise we will eventually end up back in a sleepy, pre-2015 world.
But, this site is always amazed at the energy out there, and at the number of new companies still coming to market with great ideas and approaches. So, a big thank you to all the legal tech startups, young and old, which have had – and are having – such a positive impact. Without your rejuvenating energy and ideas the legal tech world would be a very different place.
Richard Tromans, Founder, Artificial Lawyer (Feb 2021)
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