eDiscovery vendor Disco on 21 July floated on the New York Stock Exchange with the trading symbol ‘LAW’ and with a fairly extraordinary market value of over $2bn. Its plans, now it has floated, include expanding its routes to market (including law firms becoming resellers); scaling up the markets it operates in; and widening the use cases for its software, with it looking very likely to morph into transactional matters.
Disco is a cloud-first, ‘all-in-one’ eDiscovery software solution that runs on Amazon Web Services (AWS). The majority of its team (known internally as ‘Discovians’) are based in Austin, Texas, where most of its product development and R&D takes place. Its current European data centre is in Ireland.
There has been a significant amount of focus in the press on the above expectation price at which Disco listed. While the legal tech sector isn’t necessarily interested in share prices per se, what is interesting is that the price is indicative of recent behind-the-scenes successes. Speaking to Legal IT Insider, Disco’s general manager for EMEA, Stephen Dearing said:
“Without going into specifics, the first two quarters of 2021 have been very successful for Disco globally and that has given investors confidence in our business. The other significant factor is some of the talent acquisitions we’ve made recently – we’ve been hiring an awful lot of people globally.”
One of those hires is Dearing himself, who joined in April from SaaS customer communications management provider Quadient.
With regard to Disco’s ambitions post-IPO, the S-1 (IPO registration form), is very clear that Disco’s revenue growth depends in part on the success of new strategic relationships with law firms and other legal services providers. That is likely to be through reseller arrangements, in which law firms become competent in Disco’s software and recommend it to their own clients. Such an arrangement would be likely to be around the likes of leveraging Disco’s software in order to process data at the front end of a case and apply its AI to reduce and streamline the amount of material for review.
One of the reasons behind the IPO is to help Disco expand the markets it operates in, and Disco’s founder Kiwi Camara told Reuters on 21 July that with the IPO under its belt, the company plans to invest in and scale up its go-to-market organization in the United States, Europe, Canada and eventually elsewhere.
Dearing said: “Speaking more locally around EMEA, ultimately we are trying to build a degree of confidence in the market in the UK. Legal technology has become more trendy, but from a brand awareness point of view, Disco is still trying to tap into the market, and law firms tend to be risk averse when investing in new technology. For us the IPO has established a degree of credibility and confidence that we are taking the time to list and grow our business. So hopefully that puts some our customers mind at rest – they see us as a larger operation.”
Disco will also be looking to expand its product suite and go to market strategy, Dearing says: “The eDiscovery platform is stage one, and we will look to automate other processes.” We can almost certainly see Disco look to apply its software to due diligence for M&A, and the platform could lend itself to conducting M&A virtually.
The IPO follows a significant amount of investment in Disco – it raised $60m in October 2020, bringing the total figure to $161m. It has a notoriously expensive product development cycle and there are some in the market that question why it needs to IPO so soon. While Dearing won’t be drawn on numbers, as a more general observation he says:
“The functionality and product development goes through legal review and anything that gets developed is going to benefit lawyers. Yes, that probably adds costs to the outset, but our unique differentiator is that we are designed by lawyers for lawyers and it’s worth it because you get far greater benefit for the people using the tool. It’s worth investing to make it a more robust tool and more beneficial to the people using it.”
The statistics certainly suggest that Disco’s one platform strategy is working. It generated revenue of $48.6m in 2019 and $68.4m in 2020, representing year-on-year growth of 41%. As of March 2021, it held more than 10 billion files and 2.5 petabytes of data.
Perhaps most interestingly, Disco estimates its market opportunity to be an eye watering $42bn globally. Dearing says: “Everyone is creating data in so many different formats and the volume that needs to be sifted through is only ever going to increase.”