It says an awful lot about the legal tech startup market that businesses which have been involved in the scene since 2010 or before are gobsmacked that the sector is now being described as ‘frothy’ or ‘overhyped’.
What was once for startups a painful, slow and conservative market to interact with is, well, it is still a painful, slow and conservative market to interact with. In our new startup directory, you just have to look at the ‘challenges’ listed to see that legal sector conservatism and reluctance to change are still very much alive and well. But where once law firms stuck their fingers in their ears and whistled Dixie in the presence of blue-faced innovators, many are now listening hard.
In our new startup directory (which, by the way, we will continuously update and add to and will soon be available to download as a PDF but for now you can download in the April newsletter), we ask each startup to identify key market opportunities, and many identify the significant shift in attitude among law firms and increased appetite for change.
It is a complete myth perpetrated not least by legal magazine column inches and panicking partners that all law firms are engaging with and excited by new technology. In a recent know-how session in New York attended by Legal IT Insider, in a room of 80 chief knowledge officers and IT directors from major law firms, less than 10 said they are experimenting with new tech.
In the UK, one IT director recently told us: “We want to work with AI just so we can say we are doing it.” The herd mentality means there are currently a few doers, a few followers, and the majority wondering where the hell this is all this is going.
But it would be a massive mistake to assume that many of the best resourced or innovative law firms are not making progress in the way they experiment with and incubate new ideas – and that is already beginning to cascade down. Allen & Overy recently announced it is to open tech hub Fuse in its City office; Baker McKenzie is adopting design thinking to work on an ad hoc ‘no fear of failure’ basis with clients; and Dentons, on top of the work its doing through investment arm NextLaw Labs, recently partnered with Startupbootcamp and will invest in 20 startups through the programme. That is to say nothing for the work that the likes of LexisNexis and Thomson Reuters are doing in the legal tech startup space, including, in the case of the former, a Silicon Valley-based accelerator that will no doubt form the basis of future collaboration or acquisitions.
The startup directory gives an insight into the scale of change taking place and where the investment is happening, but it also speaks to the immaturity of the market. The majority of startups have literally no idea what a growth strategy really is. Here’s a clue: it’s not getting more clients.
Therein lies another problem: for a hugely conservative profession there are no guaranteed metrics for firms to rely on when deciding to work with a startup – be that buying their product or investing, or both. Firms that are ahead in the game are simply identifying a problem (be it their own or the client’s); finding the tech that fits the problem; putting in place the people and processes needed (not necessarily in that order); and then the rest is a bit like throwing spaghetti up against a wall.
At the end of the directory are comments and tips from leading innovation heads to investors as to how law firms and startups can work together better, (which we’ll serialise on the website in the coming days). Yes, it’s sort of frothy. No, the pricing isn’t right in many cases. Yes, it’s going to get more crowded with the additional VC funding entering the space. No, we’re not yet catching up with FinTech, not even close and probably never will.
At the end of the day, the real question for law firms, backers, and tech developers is, does or will the product ultimately add to a law firm’s bottom line? If not, hold the froth.
This article first appeared in the April newsletter.