Technology

Notes From A Legal Industry Binge (Part I)

Legal technology has gone from something that no one cared about to #AI, #legaltech, and #unicornlawyers -- and the conversation continues to mature.

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For the last three weeks, I have been binging on legal.

It all started just over three weeks ago on a Sunday night redeye to New York where, on Monday evening, I moderated two panels at NYU Law’s inaugural innovation and tech event, put together by my friends PacerPro COO Anna McGrane and Christian Lang from NY Legal Tech Meetup; early Tuesday morning, I flew to Austin to cover the ACC Annual Meeting; Wednesday afternoon, I flew to Chicago for dinner with Casey Flaherty and Jae Um followed by an early Thursday morning breakfast with Relativity founder and CEO Andrew Sieja before flying to Tel Aviv just in time to make it back for the weekend. And then, just a few days later, I reboarded a United flight, this time to Salt Lake City for ndElevate, NetDocuments’ annual user conference where I spent the last week roughing it in the Stein Eriksen Lodge.

See what I mean when I say legal binge?

But, like any good TV binge, it takes me a week or so until the information forms in my brain and I begin to have any meaningful epiphanies. So, without further ado, here are my takeaways from the first half of my legal industry binge (Part II of my takeaways to follow next Tuesday).

Legal Capital

Burford Capital is not a litigation finance firm — it’s not even dispute finance — it’s “legal capital.” That’s what David Perla, who joined Burford earlier this year, explained to me over an early morning coffee (after my red eye, I needed caffeine and a lot of it). “Burford invests in more than just straight litigation,” says Perla. “For instance, we buy judgments where permissible, we finance law firm receivables, we monetize patents and other legal assets, we fund spin offs of law firm back offices and we fund direct to corporate legal departments. So litigation finance is narrow.  But fundamentally, people still know the industry as litigation finance.”

Litigation finance is already one of the most disruptive forces in legal, but some funders see disputes the same way they see receivables and back offices: opportunities to invest in legal without actually investing in a law firm. To date, most of the mainstream coverage of litigation finance has focused, understandably, on how it empowers downtrodden plaintiffs like Hulk Hogan, but legal capital is having just as significant an impact on the business of law. As an example, later that same Monday (again over coffee), I spoke with a named partner of a 15-lawyer boutique litigation firm in the city who has many cases financed by litigation funders. In a world without legal capital, this attorney might otherwise have been forced to build a practice out of an Am Law 200 firm. But legal capital — a space I will be writing about extensively in 2019 — is not just allowing plaintiffs with strong cases to get their day in court; it’s enabling a different kind of law firm to exist. As Jae put it at dinner on Wednesday night, litigation finance is another force facilitating the unbundling of Biglaw. I followed up with Jae by email and she elaborated:

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Why and how?  Because the way the partnership model is capitalized creates second- and third-order constraints on law firm decision-making, particularly around long-term investments into the firm’s platform.  Litigation finance represents a new channel for outside capital, which expands the solution space for the firm and could shift decision parameters for equity partners. The firms that take advantage of growth capital to make smart investments into infrastructure as well as business talent could create the necessary edge in the war for legal talent.  When the better-managed firms separate themselves from the pack, it will drive the rationalization of the lateral market, which I think will likely accelerate the sorting and matching that needs to occur in the provider market.

On a separate note of interest, I think litigation finance has the potential to influence and incentivize more rapid innovation around legal data handling and predictive analytics.  Those multiples have to come from somewhere and funders like Burford are much closer to traditional financial sponsors in their thinking. Probabilistic models require inputs and so that represents a different type of appetite and demand for practice analytics that should inform the product design for players in the legal information and analytics spaces.   

Legal capital funds now have incentive to quantify which firms are winners so that they can then bet on the firm’s success and growth. And as Jae noted, legal capital is not just for lean “startup firms,” it can also be utilized by big global firms that now have access to growth capital.

The Maturing Conversation Around Legal Tech

I’ve been writing about legal technology since 2014, and during that time, legal technology has gone from something that no one cared about to #AI, #legaltech, and #unicornlawyers. As I said when I introduced the panel at NYU Law, the traffic numbers on my legal technology posts on Above the Law have grown over 10x since I began posting four years ago. While I hope the traffic stays healthy, I am also happy to report that the conversation around tech seems to becoming more grounded in reality. Chris Martin, who is the Lead Innovation and Technology Solutions from Latham & Watkins, talked about his firm’s implementation of Kira. But rather than use it as an opportunity for a “look how innovative we are” styled press release or launch a fear-mongering diatribe on how “automation is taking our jobs,” Chris outlined in detail the challenges of implementation, in particular getting attorneys to stop doing things the familiar way, especially in the heat of an active deal. Kira CEO Noah Waisberg, who was sitting front row and speaking on the next panel, seemed comfortable with the detailed description, and led off his panel talking about keys to a successful implementation.

There is a growing sentiment that the AI hype, while good for clicks and book sales, is bad for business. Earlier this summer, I attended Heretik’s customer summit (Heretik competes with Kira) and their team seemed to embrace what their software currently cannot do as much as what it can do. Heretik CEO Charlie Connor told me, “Realistic expectations are the key to driving adoption.” It is worth noting that the idea of a panel conversation that would separate myth from reality was proposed by PacerPro COO Anna McGrane, another indication that unhinged hype almost certainly hurts the tech companies.

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The Real Reason Behind Efficient Workflows

Designing workflows for corporate clients is about more than saving on legal fees. That was my main takeaway from a conversation I had at the ACC Annual Meeting with Seyfarth partner Lisa Damon and Kristen Cook, Senior Counsel at 7-Eleven, whose collaboration with with a team at Seyfarth led by Eric Greenberg and Andrew Shure had earned them recognition as Value Champions. 7-Eleven has more than 10,000 stores across the U.S. and Canada (which Kristen and Lisa both confirmed is a LOT of Slurpees) and is constantly opening new locations, so it was a hardly a surprise when data from their eBilling solution revealed that real estate work comprised a third of the company’s outside legal spend. After a thorough mapping of their current process, Kristen and the team at Seyfarth streamlined a workflow that reduced their outside counsel spend for opening new stores by 13 percent. But, to hear Lisa and Kristen tell it, the real impact of the new workflow was felt, not on fee reduction, but on the business side where the number of real estate deals that fell through dropped from 25 percent all the way to 1 percent. Internally, 7-Eleven knows just how much money they lose every day a new planned store location does not open, so a process that gets leases executed earlier and mitigates deal fall-thru is critical to 7-Eleven revenues; reduced legal fees is like the cherry on top of the Slurpee.

Three Companies That Appear to be Doing Quite Well

I was as surprised as anyone when Lawgeex raised their most recent round of growth capital from Tel Aviv-based Aleph VC, one of Israel’s premiere VC funds. Lawgeex’s revenues at the time may not have justified the raise, but the technology — and the fact that their technology addresses pre-signing review — was promising enough to attract top-tier capital. Now, there are multiple indications that Lawgeex is doing quite well (I’ve heard good things about competitor LegalSifter as well), and not just because I’m hearing it from Lawgeex management and employees, but because I’m hearing it from corporate customers and legal department consultants who are seeing Lawgeex utilized inside more and more legal departments. Some of the marketing Lawgeex has done falls into the unhinged hype category, but (1) their marketing team has built a strong, recognizable brand (i.e., their hype worked) and (2) their customer traction appears to be anything but hype.

Brainspace is another one that keeps coming up in conversations I have with customers. I had a chance to catch up with eDiscovery vet and Brainspace Director Michael Griffin over beers in Austin (the water in Austin was undrinkable making beer our only option) where he explained why I am hearing more Brainspace buzz lately, despite the fact that the company has been around since 2005 (a 2017 acquisition rolled up Brainspace into a larger cybersecurity company, Cyxtera). “Companies use to buy Brainspace,” explained Griffin, “but now they’re actually using it because we’ve created a playbook and we’re doing much more hand holding.”

The last company that continues to generate rave reviews is Novus Law, a global professional services firm that is using lean methodology to reinvent the processes for collecting information relevant to a litigation (more on this definition in an upcoming post). Walking the hall with Rachel Zahorsky, a rising star in the industry who seems to know EVERYONE, leaves you with the impression that every in-house counsel at the ACC is working with Novus Law.     

Relativity Platformization Requires Uniformity of Experience

A major theme at this year’s Relativity Fest was platformization. For years now, Relativity, which just last week launched Trace, has fostered an ecosystem of channel partners who have been building custom applications to differentiate their services (full disclosure: Relativity has been a ReplyAll sponsor each of the last two years). For example, I spoke recently with Tricia Johnson at QDiscovery, a solution provider that has had custom applications on display each of the last two year’s at Relativity Fest. Gravity Stack has taken things a step further over the past year and is taking software they built to address pain points internally and licensing those solutions to other solution providers, corporate departments and, yes, other law firms (disclosure: I provided strategic advice to Gravity Stack on the development of Periscope). Channel partners are not the only ones taking advantage of Relativity’s platform play, independent software companies like the aforementioned Heretik, is built on top of and has investment from Relativity. But, at breakfast, when I brought up the idea of Relativity aspiring to be the “Salesforce of legal,” CEO Andrew Sieja insisted that his focus remains on the successful adoption of their cloud product RelativityOne, and creating uniformity of experience across all of Relativity’s users, some of whom are on old versions.

Now, even though I am just back from ndElevate, and there was plenty of fodder for takeaways including NetDocuments’ own platform play, their acquisition of a technology developed by a law firm and their implementation of blockchain technology, as I said at the beginning of my post, it takes me a week or so to form post-binge opinions. To get notified when Part II of my takeaways go live or when I start conversations with industry insiders — including some of the folks mentioned in this article — drop in your email below and click follow!

Zach Abramowitz is a former Biglaw associate and currently CEO and co-founder of ReplyAll. You can follow Zach on Twitter (@zachabramowitz) or reach him by email at zach@replyall.me.

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