Legaltech New York Startups Showcase a Diverse Crowd with Some Common Themes
February 16, 2016 - David Curle
Legaltech New York is one of the world’s largest events devoted to legal technology, but it has traditionally been dominated by the eDiscovery vendors and practitioners. In an attempt to widen the conference’s focus, conference organizer ALM has partnered with CodeX, Stanford University’s Center for Legal Informatics, to help enliven the event with some of the new technologies and new business models that are represented among the legal tech startups that are in the CodeX orbit. For the second year in a row, Legaltech conference organizer ALM invited CodeX center to host a pavilion of newer legal tech startups on the exhibit floor at the big Legaltech conference in New York.
The CodeX invitees also participated in two rounds of a “shark tank”-like set of quick presentations followed by question from a panel of judges and experts. Due to the friendliness and collegiality on display, this was quickly re-dubbed the “dolphin tank,” and the event proceeded without too much naked competition or aggression.
The judges, who offered feedback on both the presentations and on the underlying businesses, were:
Monica Bay, fellow at CodeX and former editor of ALM’s Legaltech News
Ralph Baxter, ex-Orrick chair and frequent writer and speaker on the legal industry
Jason Baronof Drinker Biddle, and expert on eDiscovery, Information Governance and the preservation of electronic documents
Joe Borsteinfrom Thomson Reuters Legal Managed Services business (and frequent contributor to Above the Law)
I think it’s fair to say that these two shark tank rounds, spread out over two sessions on the last day of Legaltech, were a good antidote to the typically dry conference sessions that tend to focus on eDiscovery and the nuts and bolts of IT implementation in law firms and in-house legal departments.
To be fair, the regular conference sessions do the heavy lifting – lots of practitioners try to find and share the best practices around integration of technology in their work. But those sessions are grounded in the way law is practiced in real life today; the startups are free to wander off from the established legal industry and are coming up with all kinds of new stuff, much of which is novel and exciting to many of the traditional practitioners in attendance.
That said, however, it’s also fair to say that the leaders of the 10 companies represented here had widely different styles and levels of skill in presenting their businesses in short five minute presentations. A few made their businesses sound more exciting than they really are; a few accomplished the opposite, not really eliciting the excitement that perhaps they should.
So what are these companies up to? I think it’s useful to group them together in a few clusters, although some were just a cluster of one. The companies represented a pretty diverse group in terms of who they serve, what technologies they are applying, and the extent to which they are coming up with new products and services entirely versus attempting to replace existing parts of the industry.
Legal Marketplaces and Delivery Platforms
This is a crowded space, as entrepreneurs look at online markets in other parts of our consumer and business world – think Yelp, Uber, Airbnb, etc. Richard Granat has an overview of some of the many players in his article The Uberization of Legal Services from his eLawyering Blog.
It’s also fair to say that this is a very diverse space, with some platforms targeting consumers, others lawyers; some focusing on low-cost answers to quick legal questions and others providing a platform for longer, more involved legal representation. The three on display here represent some of that diversity:
Legal.io started out as LawGives.com, a legal marketplace where clients can get quotes for legal work and consultations from lawyers in 100+ cities. But founder Tony Lai saw a bigger opportunity in creating a marketplace platform that can leverage the network idea in multiple contexts. Legal.io now provides a technology backbone not only to LawGives.com, but to such diverse communities as Justice Bridge (legal services for modest-means clients who do not qualify for legal aid) and Fair Shake (Environmental Legal Services for modest means clients in Pennsylvania and Ohio). The platform allows organizations serving those types of clients to streamline their intake processes, and to track outcomes data and manage workflow. Legal.io is part of a large number of organizations and initiatives working to improve access to justice through the application of technology.
Hire an Esquire is an online labor marketplace targeting the more conventional law firm market. It maintains a stable of 5000+ skilled attorneys who want to work more flexibly, and provides a network of firms and and in-house legal departments with a just-in-time workforce. Temp and contract lawyer agencies have been around for a long time, of course, but the secret here is in the technology platform that lies behind the effort. It manages the entire process, from attorney selection on the front end, to billing on the back. In a crowded field, success in this space will depend on the ability of that platform to take friction out of this $21 billion contract labor market. Hire an Esquire’s COO Jules Miller noted the company’s positioning – in a sweet spot between a B2C constellation of players such as Lawdingo, Avvo, LawGives and Legal Hero, on the one hand, and a cluster of more well established high-volume traditionals such as Robert Half and Kelly and newer specialized models such as Axiom, on the other.
Frag-Einen-Anwalt.de is a Germany-based “ask a lawyer” service. Users post legal questions and set a price for an answer; lawyers respond quickly, often within two hours. Answers are posted publicly. The company takes a “technology fee” of 1.5 percent of the value of the inquiry, but claims to have a path to bringing that up to 20-25 percent. The Q&A service is supplemented by legal forms, like a LegalZoom. Lawyers participate in this model, as in other marketplaces, in the hopes of building their reputations and of upselling to larger engagements. According to founder Michael Friedmann, the company is currently profitable and looking for additional funding, with expansion plans in Europe and the U.S. This Q&A model is one that has been tried in many flavors in the U.S. and elsewhere, and one challenge these solutions face is that few legal inquiries are really so simple that they can be answered in short bursts like this. At best, these services function as lead generation services, and that’s a crowded field.
Of these three models, Hire an Esquire has the advantage of going after a large existing quantity of legal spending. Legal.io’s end client targets have no money; the market here is the cash-strapped government and nonprofit services that serve the poor. Frag-Einen-Anwalt.de is going after the pocketbooks of ordinary consumers, but with traditional lawyers and their traditional lawyer expectations of income. Expect to see a lot of development in legal marketplaces of all kinds, but this is one space where you can also expect to see a lot of churn.
Contract Management and Analytics
Another area that is red-hot these days is technologies related to drafting, analyzing, automating or analyzing contracts. Contracts data is a perfect storm: agreements are unstructured data yet with a sort of structure or internal logic that can be analyzed; they are everywhere, in both B2B and B2C environments; they can be high-stakes, containing as they do both risks and protections for parties. It’s no wonder that there are many tech companies working on various aspects of contracts.
Concord is a cloud-based contract management platform that handles e-signatures, negotiation, and management of contracts. CEO Matt Lhomeau described the platform as an end-to-end alternative to sending Word documents back and forth through email. In the drafting and negotiation stages, it allows the capture of comments and changes. It provides e-signature capability once agreement is reached. And its management features allow users to store contracts, with quick-view summary sheets and altering based on renewal and termination dates, and an overview of all agreements for quick analysis, comparison, or export for further work. The basic service is free, with additional charges for advanced services.
Legal Robot provides an automated contract reviews that will help. A consumer-facing offering is currently in beta. For $15 per document, it will analyze an agreement by evaluating its language with scoring and analysis, recommending alternative clauses, and provides backup in the form of access to legal professionals with discounted rates. Future “LegalPro” and “enterprise” versions will include additional contract management features. Founder Dan Rubins says the company has no real competition in the consumer space, but others like kira, eBrevia and Beagle are applying this kind of analytics in the B2B market.
LitIQ is a drafting platform that helps lawyers spot logical inconsistencies in their agreements and minimize human error in contract drafting. Features include ambiguity detection, a style guide and advance proofreading capabilities. LitIQ Data Scientist Shipra Dingare noted that the company is focused on contracts for now, but that the technology could also be applied to litigation data as well.
Smart Contract, the most future-oriented in this cluster of startups, has a platform for making contracts machine readable, so that execution of an obligation can trigger instant payment, for example. Founder Sergey Nazarov noted that smart contracts will work best in vertical markets where fraud is rampant; embedding contract terms in clear if-then statements removes some of the ambiguity or fraud in determining whether contract terms has been met. Smart contracts will have to integrated with various data feeds for verification of the satisfaction of terms without verification by third parties.
Here again, there is a lot of diversity of these companies, but they are all dealing with the same data: contracts. These four are only the tip of the iceberg of the extensive work that is going on in this space today by dozens of companies. At the very least, these presentations reaffirmed the sense that contracts practice and management is going to be radically transformed by technology in the next few years.
IP Search and Analytics
ClearstoneIP wants to bring clarity to actual patent coverage as a tool for freedom to operate (FTO) analysis by mapping products to actual patents. The tool, which has only been built out and tested for a small subset of patents, answers the question: “what is the risk of infringing on a specific patent?” The system is built on a new kind of analysis that extracts and analyzes specific claims in patents. Can then search for patents they might be infringing on using an intuitive filter and process of elimination. COO Gabe Sukman shared test results that showed a search process completed in minutes rather than the weeks it takes to run patent searches with other tools and manual processes, and with better results. Clearstone is early-stage, however, and the full index of patents has yet to be built out.
Casetext CEO Jake Heller showed off Casetext, which is a cross between a legal research platform and a publishing platform for lawyers. In addition to a core legal research database, Casetext allows users to publish commentaries and annotations within the text of cases, as a way to draw attention to particular areas of expertise. In a sense, Casetext is trying to re-integrate secondary commentary into the search process. Other features include a crowd-sourced citation service called WeCite, automatically generated case summaries, and a “heatmap” feature that highlights often-cited portions of texts. Basic search and annotations will always be free, but Heller said that other advanced features including heatmaps and summaries will be charged for.
Alternative Dispute Resolution
ArbiClaims represented another hot field, alternative or online dispute resolution. In a way, this represents the flip side of the access to justice problem served by some of the lawyer marketplaces highlighted above. Instead of making it easier and cheaper to find a lawyer, this class of solutions makes it easier for people to resolve differences without consulting a lawyer in the first place, in cases where only a small amount is in dispute. CEO Stephen Kane calls ArbiClaims an alternative to traditional small claims courts. Currently in beta, ArbiClaims is a platform that handles the process of filing and defending claims, and brings them before an arbitrator for a decision within three weeks, for $79-159 per party. ArbiClaims will also, for an extra fee, prepare an actual small claims filing as an incentive for the defendant to adopt the ArbiClaims platform. ArbiClaims is working with retailers and others to have contract terms ArbiClaims as the required method of dispute resolution, as a way to ensure a stream of business. Small claims resolution would seem to be a major area where technology can make a difference; in fact in the UK an advisory panel has called for a nationwide online alternative to traditional small claims tribunals.
None of these startups is entirely unique, and none of them, certainly, is guaranteed success. But they are all working on some of the key problems in legal services that technology can help to address. Some operate on the fringes of legal practice today, building business in latent markets that are not well served at all by the existing legal infrastructure or service providers. Others on the other hand, represent alternatives or improvements to existing practices or workflows that are now carried out by today’s lawyers, often with low-tech solutions. Together, these and the many other legal tech startups out there are functioning as the legal services industry’s R&D department, testing new approaches and business models for delivering legal services.
This post was written by David Curle, director, Market Intelligence with Thomson Reuters.