Did the legal industry grow in the last decade? Yes & No, depending on which continent and which metric we measure. Here’s a new interactive map to explain.
Numbers before Names
If you are new to this site, here’s what we do: since 2014 we have been collecting data on companies aligned to the legal industry and producing monthly analysis. In July 2015 our analysis showed that 2010 had only 2 startups while 2015 had 337. The question: did the 2009 recession inspired the growth of legal? The answer was inconclusive. In July 2016 we noticed new companies popping out like popcorn. We’ve been recording records being set and broken all through 2017. And then those records stood, and they could not be broken.
In July 2018 there were new records being set in terms of venture capital invested. In our latest video, we showcase the investment numbers from 2019. Along with the capital came a startling number of investors interested in legal. We’ve witnessed amazing early exits but also unexpected endings and spectacular pivots. According to our calculations, it takes about five years for a typical legal tech company to hit market fit. It takes five more to hit profitability. Nevertheless, the CAT scans did uncover niches and sectors that produce hockey stick growth as seen in this video. Funny enough, these examples aren’t grabbing headlines or getting chatter on the channels.
Overall, our industry is in a better shape with more companies getting created and more capital available than in 2009. We have more experts and events cheering the entrepreneurs. Yet, there’s a tendency to dwell on the names and not the numbers that drive our future. That’s why we’re very selective in our examples, and avoid making subjective claims like “Best” or “First”. We stick to more measurable qualities like “Most” or “Average”.
Method in Madness
To gain a better understanding of the past decade, we aggregated 6,590 companies founded between January 2010 and December 2019. These are companies in LegalTech, RiskTech, Tax, Law, and CivicTech. Here’s a primer on each:
- LegalTech & Tax: tools used by legal and tax professionals to manage their practice, research and process laws;
- Law: marketplaces which help boost the volume of valuable work for professionals;
- RiskTech: tools companies build to evaluate and secure data in order to comply with the law;
- CivicTech: tools to create and protect citizen’s rights and privileges.
These markets impact the way society handles conflicts and manage safety. Basically, they supplement or replace the role of legal in many facets of our lives.
In order to wrap our head around the question of growth, we elected to split the decade into two parts: First and Second and use three dimensions:
- Total number of companies in a given market and region;
- Sum of total capital raised by all ventures in any given market and region;
- Average Valuation: the number of companies divided by the sum of all capital.
Average Valuation (AV) has some drawbacks as a marker. If one company raised a lot and similar companies raised zero, they all get the same valuation. However, we use AV because it’s the closest proximity to an exact amount of cash needed to mount an offense against your challengers.
Not only does AV provide a reality check, but it also offers some indication of growth. For example, the valuation for Law ventures globally reached $5.3 Million in the first part of the decade. This occurred when everyone was madly chasing the ‘Uber’ model in every sector. In the past five years, the valuation dropped to just around $350K.
Sharing is Caring
You can look up and compare over 870 cities..for free. Now you can zoom in from a global scale all the way down to a local level and measure a decade of growth in each locale. If you find something, please do share it with the community #legaldecade.
We’ll go first.
Here are some of our most notables of the decade:
- London only rose to the top in the last five years, before it was 3rd behind San Francisco and New York;
- Paris & Chicago seem to be declining giants overall;
- Tel Aviv is top in Asia but second to Sydney if we add Oceania as a continent;
- Singapore jumps to second and Tel Aviv drops to 3rd in Asia and Oceania combined for the final five years;
- Beijing had the most prolific growth in both numbers and valuation;
- Africa: while Kenya rules, South Africa has the most companies able to raise capital.
How did we uncover these? Check out the clip below
Want to try it yourself? Here’s Decade. We’ll keep it fresh all through February so enjoy and share.
Personal note: we lost two inspiring souls in innovation and basketball last week. Decade is our way of honoring their spirit.