Investment into UK legal technology startups reached £61m in 2018, more than doubling the £22m invested in the previous 12 months, according to the Legaltech Startup Report 2019, a report by Thomson Reuters and Legal Geek, which also says that startups have received more than that sum already in 2019.
The report shows that investment in UK legaltech startups has risen dramatically over the last five years – less than £1.5m was invested in 2014 according to the report’s findings.
Legaltech startups received at least £62m through the first nine months of 2019, surpassing the 2018 total.
The UK is the hub of European legal technology, with UK legaltech startups making up 44 percent of all legaltech startups in the EU. This is far higher than the UK’s share of the European legal services market (23%) – see the report for further details on those stats.
The report suggests the rapid development of the legaltech sector in the UK is the result of an extensive network of incubator programmes and tech labs created by law firms, corporates and universities. We’d include the increasingly competitive private equity interest in the sector and, not going for any popularity votes, have previously reported that this level of startup investment, particularly when you look at it on a global scale, is at times like ‘throwing spaghetti against a wall’.
There is no doubt that UK legaltech businesses are benefitting from access to UK law firms themselves, which is essential if they are to understand how their products can be used in practice, and tailor products accordingly.
Private equity firms singled out in the report include Sequoia and Talis Capital and it highlights fundraisings such as LegalZoom, a US company which offers document templates and legal advice, raising $500m in 2018 with a company valuation of $2bn.
Thomson Reuters and Legal Geek research tracks and analyses investment into 34 of the UK’s fastest-growing startups in the legal technology industry where reliable investment data is available. These businesses have received more than £175m over the last five years with 70 percent, or £122.5 million, invested since the beginning of 2018.
Jim Leason, vice president, customer markets at Thomson Reuters, said: “The UK benefits from a unique mix of a large tech and data science talent pool and world-leading law firms as well as easy access to capital through financial markets. This has enabled the fast-growing legaltech sector to thrive.
“Legaltech is now attracting funding from a variety of sources, including law firms themselves, private equity and venture capital funds. This interest has given startups the crucial leg-up they needed to take their products quickly through to the next stage of development and testing.
“The speed at which the legaltech market is maturing is evidence both of demand for these products and the quality of the support infrastructure in place for startups. Investors from across the world have clearly spotted the growth potential.”