If legal tech tools cost so little that price was never a barrier would adoption rates go exponential? After all, many of the leading software products in the world are either free to use or the costs are easily affordable for a multi-million dollar business.
Would the legal tech market become as large as it really should be if price wasn’t throttling demand? Could we not then stop much of the economic discussion and focus on the end value to the lawyers and clients? Moreover, would this not then lead to the creation of legal tech businesses many times larger than we have today? And let’s face it – the vast majority of legal tech companies are minnows. There are plenty of great legal tech businesses out there that have been going for years that generate well below $10m a year, and that has always struck this site as a fundamental challenge.
So, would bringing pricing radically down help? Would $1 per user per day (or a lot less), for example, change everything? Would making most legal tech tools the same cost as a Microsoft Office licence allow legal tech to reach its full market potential? And as noted, maybe it needs to be even lower than that? After all, it’s easy to get a lawyer to buy a licence for Word as they know they’ll need it. Getting someone to buy something they are not even certain they need, perhaps needs a much lower price point?
And before we dig in, let’s consider some of the numbers: there are over 1 million lawyers in the US, and roughly about 200,000 in the UK, of these only a small percentage use anything other than Word, an email provider, Google, some billing software, and maybe one of the big legal research providers for case law needs. The same picture is repeated all over the globe. That’s a massively untapped and undeveloped market for legal tech.
So, maybe if legal tech is ever to become the massive industry it could be, it needs to address pricing in a radical way?
Price, ROI and Adoption
There are many barriers to lawyers buying and adopting legal tech tools and the economic arguments often get quoted. One legal tech founder once told this site about how they got turned away after a lawyer told them ‘Your software costs the same as a paralegal’s salary!’, to which the startup boss replied: ‘True, but this software will be 10 times more productive at the same task.’ This argument didn’t succeed.
But, even if you can get over the initial value challenge you still face the reality that many law firms and inhouse legal teams – in fact the vast majority on the face of this planet – have limited funds when it comes to buying software. While some global giants are apparently happy to buy legal tech like a billionaire on a champagne and platinum credit card-fuelled shopping binge, often leaving the tools they buy unloved and unused, that is not the norm.
Moreover, even some of the largest firms are strict about showing a Return on Investment (ROI). While part of that ‘investment’ is the time and energy put into implementing a solution in a certain practice area, the cost of the tool itself does form part of the equation.
So, what if the ROI argument – at least as far as the product itself was concerned – was a slam dunk? What if it was almost impossible to object to something on the basis of cost?
Then the firm (or inhouse team) would have to really think about outputs, about positive effects whether human-centric with indirect economic benefits, or immediate and directly economically positive. So much effort could be focused on what mattered: actually deploying something that made the delivery of legal services better, which improved the client experience, that enabled the lawyers to focus on higher value matters, that reduced burnout, that allowed the firm to do more with the same resources.
Would that remove the time vs money debate? No. Some lawyers may still object to using tech that appeared to undermine the time = money system. But, just as happened with Word and email, once you get mass adoption, then arguments even about time fall away. Imagine a law firm arguing against using email because it made them more efficient.
Once tech becomes commonplace it becomes very hard to argue against, because it is then the market norm to use it and all ROI calculations are moot.
Is $1 Legal Tech Viable?
But would it be viable? Let’s look at some examples of free or ‘cheap’ software:
- Google is free to use, so too many other browsers. They can do this because of advertising / SEO income. Many small apps also use this free + ads model. But, that doesn’t seem like a model that legal tech tools can use. A lawyer doesn’t want to see an advert for a toaster when they are using a doc analysis tool……..(although….it would be very interesting to see if anyone could pull this approach off….!)
- Some companies have tried the freemium model, where initially it’s free then converts to paid, or they give away one part of the product for free to drive demand. The problem there is that eventually you need to pay the full price for the full tool, and that could still be a lot, so that approach doesn’t solve the challenge.
- Then we have software that really does cost so little that most businesses would not make a big deal about it. Most law firms and corporates will buy ‘utilities’ and basic productivity tools for all staff because they are just the way you do business. But, is this a chicken and egg scenario? If MS Word cost $10,000 a year per user would it have ever taken off?….And if it doesn’t take off, it doesn’t become the norm because there is no ‘network effect’ with everyone else using it, so the pricing is key. I.e. by pricing to scale you ‘win the market’ and so make a ton of money because you get adoption.
To this site, this third one – pricing for scale – seems to be the way to go. Legal tech that is priced for maximum adoption can then get real use across the market. With scale comes plenty of revenue.
What would you rather be? A company that has been going for seven years and still makes under $10m a year and charges lawyers $10,000 a pop just to get started – i.e. like a number of legal tech startups, or a company that after seven years and with pricing that starts at $365 per year per user (with unlimited use of the product and perhaps with a lot lower price than that….) now has thousands and thousands of legal users across the planet?
The next question is: would this be viable?
First, there are some legal tech companies that already offer products priced very low. So, the short answer is: yes. Of course, why they have not taken over the market in turn raises some interesting questions……such as do people really like these products, is it easy to implement them, and even if the initial cost is low what are the other costs associated with using this product to a level that delivers value? Low price doesn’t always mean a great product. But, if you can make a great product and sell at a low price, surely this is a winner in any sector…?
But, either way, some may say: the upfront development cost is millions of dollars, we need to charge a lot to get this back! Perhaps, but then, what is VC investment for if not to help software companies develop products that initially need a lot of work, but can eventually scale up rapidly?
With legal tech we still have a lot of great companies that are growing at the rate of a tree above the snowline, starved of warmth and light. Why not move the product into pricing climes that will allow more rapid growth?
Isn’t the fundamental problem that many legal tech companies are so focused on selling to what is a tiny group of very wealthy commercial firms and enormous corporates that they have trapped themselves in an economic impasse, and so have limited their growth?
I often wonder if this happens because many legal tech startup founders come from top law firms and also engage with them initially for paid POCs and pilots. They gain just enough VC cash to keep going and the big firms pay just enough to keep everyone happy, and so things tick over, but in turn they lose out to what could be real scaling.
Because the goals are to primarily build a high-price beachhead among a group of high revenue legal businesses they create companies that can survive – as long as they stay small. And so this becomes a self-fulfilling prophecy. Some might say these are ‘zombie companies’. I wouldn’t say that. Instead these are perhaps better described as companies that have unknowingly got themselves trapped in an environmental niche they will find it hard to break out of, because their pricing model has forced them into too narrow a market, and/or they have made actual use of the tool prohibitive.
Let’s leave it there for now. But, it has to be said that legal tech is way smaller as a sector than it could be, and pricing may well be a key factor in this lack of growth.
Richard Tromans, Founder, Artificial Lawyer, Nov 2022.