Differing Perspectives on the Prospects of Today’s Legal Tech Startups

light-bulb-376924_1280[This post was originally uploaded on August 18, 2014. It has been updated below with new information on January 12, 2015.]

The title of a report on TechCrunch.com on August 5, 2014, The Jury Is Out On Legal Startups , appears to say it all. As it describes the current state of this specialized market for technology aimed at supporting law offices as well as benefiting consumers, investments by venture capital investment firms in this sector has fallen rather dramatically thus far in 2014. With just a few exceptions that have received substantial rounds of funding, many other have not fared well in raising money for their operations. I recommend a click-through and full read of this for the full details of this slump including some informative charts and accompanying quotes by experts in this field explaining the difficult dynamics currently affecting this market.

This turn of events and dollars seems to run contra to all of the five far more optimistic and enthusiast posts I have grouped here under the category of Law Practice and Legal Education. These cover different aspects of ongoing innovations in the marketplace for legal services as well as legal education.

Notwithstanding this situation, I continue to remain optimistic about the ongoing prospects for legal startups. There is a vast under-served market for people who need legal services but do not have the funds to engage them. I think it is nearly inevitable that some of these developing systems, services and apps will find a place in this market segment out of pure necessity and the economics of getting things done faster and cheaper. Continuing to monitor this situation will thus likely prove interesting during the next several years. Perhaps there is a legal app yet to be developed that will prove to be so helpful to lawyers and their clients, as has happened in so many other consumer markets, which will act as a genuine tipping point.

January 12, 2015 Update:

Less than four months after TechCrunch.com posted the article described above, the site followed up with a much more upbeat assessment of the legal startup environment in a most interesting post on December 6, 2014 entitled Legal Tech Startups Have A Short History And A Bright Future by Basha Rubin. I will sum this up and add a few additional links in order to present the author’s contrasting point of view. (I previously saw Ms. Rubin give a very informative presentation at a legal industry program called Reinvent Law NYC in February 2014.)

The author is much more sanguine about the prospects of startups in the legal services market, even while acknowledging the combined effects of the lag in venture funding, regulatory environment and the “rick-averse, disaggregated stakeholders”. Nonetheless, she identifies three significant trends to track during 2015 in a market she believes is right on the cusp of being disrupted.*

First, do-it-yourself (DIY) legal services will continue to gain momentum. An important element in this trend will be an increased focus upon which transactions and processes do or do not require the services of an attorney. Rubin cites the successes in this space such as LegalZoom and RocketLawyer.  Even DIY mobile legal apps such as Shake that “create, sign and send” contracts have begun to appear and provide new value to consumers who might otherwise either not have sought to engage a lawyer for certain types of  private agreement. However, she further emphasizes that the role of a lawyer still remains quite important when strategic decisions are involved.

Second, the marketplace for alternative arrangements of legal services provided by startups will see continued growth. This includes startups providing new online conduits for locating and engaging lawyers.   Cited as examples are Priori Legal (where Rubin is a co-founder and CEO), and UpCounsel, among others.

Third, is the appearance of more versatile and affordable new websites and applications that meaningfully improve attorneys’ efficiency and, in turn, clients’ convenience and satisfaction. These include offerings for legal research, document review, project management, document generation and billing.

I completely agree with Rubin’s assessment these market forces and look forward with great anticipation to additional legal startups launching and shaking up the profession.


*  For a very insightful and enlightening analysis of whether the legal profession is actually being “disrupted”, I highly recommend reading Ron Friedmann’s July 31, 2014 post on his Prism Legal Blog entitled Big Law Changing or Being Disrupted?


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