The stirring of the start ups: from Chicago to London

Back in London from the ABA LegalTech conference, it is spring. The Inns of Court (The picture is Lincoln’s Inn taken this afternoon) look as beautiful as they have done over the centuries – as if little might have changed. But, as the ABA ’s presence in a Chicago – famous for its rather more modern skyscrapers – was very much a reminder, technology has awoken new forces from outside the legal profession. Their goal is to disrupt and transform time-honoured patterns of practice. The momentum behind technology-oriented firms is palpable. And, as one of the sessions entitled ‘The startups are coming’ indicates, this is not without its threatening aspect for existing providers not willing or able to adapt. The ABA conference was sponsored by over two dozen technology-oriented firms, all hoping for a greater share of the market. Inside the exhibition halls, there were over 150 vying for trade.

The total number of legal startups is unknown. One US list has 1504 names: up from 412 in 2014. Bob Ambrogi  suggests that this is an overestimation and contains considerable deadwood. He maintains his own list which he has personally checked and currently has 632 names on it. This may be smaller but it amounts to quite a sizeable gaggle of businesses seeking a share of the action.

David Curle, Director of Market Intelligence for Thomson Reuters estimates the current market in the US for start ups as worth $458m (though this includes a massive $200m for one company, LegalZoom). He has drafted a graphic (which, alas, reproduces rather poorly and merits examination in the original) showing the various areas in which the start ups are operating. He explains:

The map is derived from the Discover Legal Technology database hosted by CodeX, the Stanford Center for Legal Informatics. That database currently tracks 558 legal tech startups from around the world, and there are probably dozens if not hundreds that haven’t been added yet …  [the ecosystem] is extremely fragmented and diverse.

The chart arranges start ups into eleven categories: business development/marketplaces; litigation funding; legal education; e-discovery; practice management; legal research; case management/analytics; document automation; contract management/analysis; consumer; online dispute resolution.

Thomson Reuters also collaborated with Legal Geek in London to produce a map of specifically UK start ups. These were rather cleverly divided up as if different subject areas were on a tube (the London subway) map. This has around 60 companies shown on it organised in five main categories: market places, crowd funding, operations, document automation and machine intelligence. There are subcategories: collaboration and security; case and workflow management; cognitive computing; analytics and search; risk and compliance, practice and financial management.  That again is eleven in total though organised in a rather different way.

All the numbers and categorisations are probably dodgy. There are issues of definition and, of course, death – a common fate of many start ups is, alas, failure. But, the overall point is clear. There is a large push from a significant number of companies to introduce technology into the provision of legal services over widely different areas. Most of these businesses do not aim actually to disrupt the market in the sense of threatening to take work away from existing providers – though there are exceptions to that, notably in firms like RocketLawyer, LegalZoom and Avvo. Most firms are hoping to their products will be used and absorbed by existing providers to reduce price or increase profit.

Start ups are just one way to measure interest in innovation and technology. A LexisNexis blogger noted that much is being done in-house by the larger companies:

Established multinationals are already using artificial intelligence-enabled systems to automate aspects of due diligence, contract management, and contract review. Pinsent Masons, for instance, has developed its TermFrame system; Dentons has set up NextLaw Labs (which provides legal tech start-ups with access to IBM Cloud and the IBM Global Entrepreneur Program for Cloud Start ups); and Riverview Law has developed virtual assistant, KIM, which is run as a ‘stand-alone business’ and is expected to eventually launch its own products.

Indeed, many of the large commercial firms in London have their own direct investment in technology, particularly aspects of AI.

Thomson Reuters estimate the overall US legal services market at $437bn (including in-house provision), with revenue to legal firms is $276bn. The legal services market for legal firms in the UK has been estimated in 2015 at £32.1bn – a third of that relating to business and commercial affairs. So, let’s estimate the UK/US legal market for stand alone legal services at a bit over $300bn or £250bn. Add in the rest of the world and it gets even larger. The size of the market expands too if you believe that offers of low cost legal services can extend the ‘latent legal market’ and offset, for countries like the US and UK, likely cuts in public funding.

With markets like that to aim at, you can see why the hallowed cloisters of the Inns of Court might be threatened by the noisy bustle of Hoxton and the scruffy environs of Silicon Roundabout – let alone Silicon Valley and every other location for legal start ups. For those concerned with access to justice, the issue is how much of this burgeoning activity can be directed at low income clients. That will be much harder work than the commercial ‘low hanging fruit’ but it is what we need for the forward march of technology to be allied with an increase in access to justice.

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