What number would indicate growth for the legal industry? Well, there are several ways to measure this, but we’ll boil it down to one.
First, some unfounded fear is making the rounds about a recession. Relax, every crisis brings new opportunities. Legal services are usually required by law and therefore recession-proof. Legal technology, aimed at lawyers, is mostly a luxury. They may have a real fight on their hands. To survive, here are some tips:
- Lower your burn and pricing, it’s your superpower;
- It’s a great time to restructure your debt;
- Make friends with your customers;
These are the updates to our Recession guide. Now, if you came here to thrive, you are in for a treat. Especially now, new ways are opening up to grow. How do you track them? Keep reading.
Trends & Traction
What trackers? Economists watch one metric to measure the economy, they watch jobs. More precisely, the number of jobless claims every week. Adding jobs is a significant sign of growth. Another way to follow growth is by checking stock prices for industry-leading companies. Specifically, check the percentage of a stock price increase or decrease over a six-month period. Also mentioned more often are reports of earning misses, profit warnings, hiring freezes, and layoffs. A new dashboard destination is layoffs.fyi, they track layoffs in the tech sector.
Why track these? Tracking helps to see where to focus energy in terms of business development. You may like to know which customers will grow and the ones that won’t take your calls. It helps us identify which areas are about to pop or drop. Example: during lockdowns, travel drops and tech pops. Cruise ship stocks fell hard, while Zoom meetings made record gains. After lockdown, these trends seem to reverse. If you were investing in Crypto and NFTs, you’ll know exactly how this feels.
Will this last? No one can predict the future. Speculating drops and pops, one can only plot data from the past and imagine the next dot. The pandemic was a pressure cooker that was stewing data on customer behaviors. This provided us with an important lesson on the difference between discovering trends and finding traction. We reported on legal trends like claims and estate. Checking these areas now, we see slowdowns or a return to pre-pandemic levels. In short, trends are a sign of growth and traction lets us know if trends are sustainable.
Capital & Conflict
What grows Legal? Companies and citizens buy legal services to operate within the economy. They buy contracts from lawyers to onboard employees, secure loans, and complete deals. They hire a counselor when these events don’t work out and there is a conflict. Contracts secure cash and courts resolve conflicts. Ultimately, regulating relationships is why we need legal. This need drives demand for different types of legal services and technology.
What grows Legal Tech? Law.com did an excellent analysis of May earnings reports for some public legal tech companies. Most legal stocks bounced back slightly after the reports. Yet, the public companies only cover a few areas of legal technology. The majority of trends we can track come from private investments. Where venture investors allocate capital show a trend and a glimpse of traction.
Where is traction? Contrary to popular belief, we can not directly correlate major investments with traction. Tiger Global and Softbank poured huge sums into startups and now respectively lost $17 Billion and $27 Billion. To understand how this happened, check E80 and E81 of the All-In podcast. If you can’t spare two hours, then just jump to minute 21:10 of E81 on YouTube and listen for two minutes. Now we made a layout of the land in two charts: one on legal and one in general. Each explains why the public rewarded legal for its stability and private investors gave more capital to fewer players.
Growth & Geo
What’s the one metric? For now, we’re using the total raised per area as a measurement for growth. To illustrate, we developed a special interactive board called Spark Map. You’ll see the top 3 companies in over 130 countries for the first time ever. And it’s free. Since the US is so huge, we made a special USA version with a state-level ranking. We hope it sparks debate on how and what to measure. As noted above, more money doesn’t always matter. Measuring something as elusive as market growth perhaps needs more nuance.
What’s the better metric? We’re adding growth in full-time employees (FTE) in Spark Max. This will be a version of jobless claims for legal tech. Can we measure all employees exactly? Yes, we can, and we do, however it may actually be imprecise. Kinda like counting every raindrop across an entire landmass. You can better measure this by the square inch. The key is to measure each downpour and compare them.
Wait, there is more! Legal is a niche, so may not get mentioned on layoff.fyi. That’s why legal deserves its own lay-off tracker to keep tabs and alert our customers. As noted in our legal tech unicorn analysis on Law.com, we’re checking burn and growth of every profile. We’re watching you. Now, go grow!
Editor’s note: This update completes stage 3 of 5 on Legalcomplex.com, and I hope you’ll enjoy the many…many tweaks we made to the site.