Methodology

explanation of methodology

raised in 2018
RiskTech: Will This Save The Legal Industry?
RiskTech: Will This Save The Legal Industry? 1024 465 Raymond Blijd

Since 2016, the only sector impacting the legal industry which showed measurable growth of new ventures and funding is RiskTech. So is this the new “LegalTech”?

What is RiskTech?

RiskTech is technology that is helping you avoid prosecution from the government, litigation from anyone or bankruptcy by stupidity. We’ll get to the stupidity in a bit.

Originally the term RiskTech is derived from the more broad sector term RegTech which stands for Regulation Technology. RegTech was used to describe the companies and technologies that assisted FinTech companies in implementing financial regulations. How did RegTech become an industry in itself? I once studied the number of laws per sector in the Netherlands and the financial sector was a clear winner with the most number of rules.

We quickly realized that RegTech wasn’t limited to the financial sector during the analysis of profiles. We discovered a breed of technology companies managing risk and regulations in heavily scrutinized areas like Cannabis and Health. Recently Snoop Dogg backed Metrc raised $50 million to track weed. Other popular topics companies are tackling are Identity, KYC (Know Your Customer), Fraud and Privacy.

Not only the companies that prevent risk but also the ones that are insuring against it are considered RiskTech. While a lawyer may offer a legal product, like a contract, to cover a defined set of risks. Insurance companies use complex calculations on data to issue you a blanket coverage on the same set. Therefore almost everyone regularly pays for some kind of insurance policy but few have a legal counsel on speed dial.

Last but probably the first RegTech in human history is Tax. Everyone needs to pay taxes and not paying them puts you on a likely path towards bankruptcy.

There are over 170 unique labels we managed to put on RegTech companies in the Legalpioneer dataset. Here’s how we aim to make sense of the landscape:

Sector Market And they do?
Legal LegalTech does legal work
Law find legal work
RegTech RiskTech avoid legal work
FinTech comply with regulations
WealthTech a (rich) FinTech subset
Tax ..obviously..
CivicTech influence the law

Why is RiskTech growing?

First, we were digging for gold, then we were drilling for oil, now its hoarding Data. Tim Cook’s blistering attack on the ‘data industrial complex’ wasn’t just an indictment of “free” services such as Google and Facebook. It actually was the best marketing for the RiskTech industry.

This simple dynamic of danger in data has driven the growth and there is a metric that revealed this: Valuation. The average valuation based on our data set is calculated by taking the total number of companies in each sector and dividing them by total dollars raised in their sector. The horizontal ax shows the year a company was founded. By this measure, RegTech companies started in 2010-11 are now hitting full stride and for “as little as 14 million dollars in the bank, you have a fair shot in this market.

How does RiskTech work?

Just like your email spam filter, RiskTech uses smart technologies to filter risk in data. A straightforward way to achieve risk-free data is to anonymize it. The latest 2018 funding dashboard featured two FinTech companies that offer to process payments anonymously in crypto or cash transactions.

Another approach to minimizing risk in data is to lock it up cryptographically with Blockchain. In our analysis of Initial Coin Offerings (ICO’s), we discovered that the second most popular use case for Blockchain was securing user data to monetize it. Ventures like ONO Social and Yours collectively raised 61.7 million dollars this year alone which is part of 133 million dollars raised in this area.

Finally, as an individual, you would like to avoid having a lapse in judgment send you to jail. It took Elon Musk a single tweet with two specific words (“Private” and “Secured”) and one $ amount (“$420”) to almost accomplish this.

If tech could have stripped any of these terms from the tweet before it hit the net, the Tesla board would have been very happy. This tech is already in use but, unfortunately, not for this purpose.

Saving A Fair Society

This post started as another RiskTech love story since the numbers showed more money sits in RegTech as opposed to Legal. However this year, all markets have been receiving a firm handshake from investors.

We all enjoy free but it comes at a price and giants like Facebook are slowly coming around to regulation. Therefore, RiskTech is making Legal great again.

So when you need to diffuse a bomb or clean up the damage, you hire a lawyer like Elon or testify before Congress like Mark.

But if you like to avoid the hassle or contain the drama, you build or buy RiskTech.

How To Find New Legal Technology
How To Find New Legal Technology 1024 406 Raymond Blijd

Since January the Legal Industry has seen a flurry of maps, meetups, hackathons, awards, and conferences. All these activities are aimed at sizing the market and finding the next big hit. But what are we really looking for? And are we looking in the right place?

What is legal technology? More then Core

Before we can answer the question where and how to find Legal Technology, we have to address what it is. In general, there are two schools of thought on defining legal technology. First is the technology that makes legal work more efficient for experts or non-experts alike. At its core, it is the technology that infuses lawyers with superpowers. Software such as eDiscovery, Draft- and Research Assistants enable professionals to process more legal work with fewer experts. For consumers, there are marketplaces and Do-It-Yourself (DIY) services that provide exclusive legal support at fixed or lower costs.

Second is a broader view of Legal Tech which looks at whatever technology impacts the law in a meaningful way. Looking at areas where engineers develop smarter ways of protecting legal rights. The same protections previously provided by law experts using contracts, litigation, and regulation can now be resolved with technology such as Blockchain. Here are 11 examples out of 209 we found, ranging from protecting ownership of personal data to securing transactions for anything of value. If we could digitally own our personal data by locking it on the Blockchain, we wouldn’t need the EU General Data Protection Regulation (GDPR).

Data revealed how this trend slowly emerged in the areas that face the most regulatory scrutinies like Finance or Health. Better yet if you measure by either institutional investment, acquisition or initial coin offering (ICO), the most lucrative Legal Tech sector is managing Intellectual Property rights with technology. If we want to effectively document this displacement of the legal industry, we have to take a broad view of what legal technology is.

Where is legal technology? Beyond the Beacons

The quickest way to get up to speed with core legal tech companies is to follow the industry beacons. Here’s what we use to follow new tech:

  • Newsletters;
  • Bloggers (and their Twitter streams);
  • Legal Tech Maps & Country lists;
  • Accelerators & Incubators;
  • Awards;
  • Hackathons & Tournaments;
  • Conferences.

We previously shared some samples from the list above. This year we joined the Global Legal Hackathon in Warsaw, Poland and we were the unexpected keynote speaker. Another highlight is our Dutch Legal Tech map collaboration which garnered over 15,000 views on LinkedIn. It also provided inspiration for this monster collection of Legal Tech maps.

Yet, if the news and announcements zip by too fast, you can always stop and search company directories like Angellist, Crunchbase, or Producthunt. Most databases include a tag for Legal or Legal Tech. If you like to dial back the noise, there are a couple of legal industry lists like Stanford or Robert J. Ambrogi. The Germans even went as far as to locate Legal Tech companies on a map by address. Something we also twice experimented with in Barcelona (video) and in New York (video).

However, one challenge most databases face is how to classify the different types of companies. Something we uncovered while hunting for legal apps is that fixating on categories may limit us from finding more. There is a risk of creating an echo chamber of Legal Tech because protecting our rights goes beyond technology. It isn’t driven by one specific business model or destined to be practice by one profession. You’ll find it in many places and in the weirdest forms.

How to find legal technology? Robots & Reason

Once you sailed past the beacons, you’ll discover the sea of Facebook, Linkedin, and Twitter. Especially Twitter is a pretty rewarding space to find new Legal Tech so we partnered with Orhan Yalcin to build a special machine to find Legal Tech. We dubbed our bot Legalpioneer Recon and ran it a couple of times for it to reveal the other challenge databases encounter: duplicates. The first time we unleashed our baby on Twitter it was like drinking from a fire hydrant. But once you start filtering out the duplicates, the subsequent passes become nothing more than just a drip. Recon now processes between 300 to 400 startups each month to sniff out at best 22 or at worse 6 Legal Tech startups.

If you noticed some dark spots on the Legalpioneer Where map and wondered why that is. It is because our bot learned from us and we only taught it English. When we started Legalpioneer, our mission was to be a global community. One reason is that locals have a much better shot at discovering gems. Something we call the Holger Effect. This strategy resulted in us doubling the size of startups in Russia and Eastern Europe this May. And there was an additional side-effect: Telegram bots doing legal work. We found 9 of this new species of Legal Tech running wild in the Caucasus.

We’re still tweaking the algorithm on what to include in the Legalpioneer dataset. We started with private companies founded after 2010 which should at least have a unique domain name. With CivicTech and Hackathons, we have extended this to communities and projects on Twitter, Facebook, WordPress.org, and Github. We are contemplating incorporating App Store and Google Play apps just as Slack, Messenger, and Telegram bots.

Why look for legal technology? Rather be Safe, than Sorry

Legal Technology is actually an answer to a human riddle: what is fair? At some point in the future, we may trust Google Duplex to give us the best answer. Legalpioneer aims to estimate when we’ll reach that point, calculate our ETA and plot the safest route.

Course set, buckle up!

Legalpioneer - Where
Where are Legalpioneers?
Where are Legalpioneers? 1024 640 Raymond Blijd

March 8th 2017 Legalpioneer celebrated its one year anniversary with a bang 💥 and launched the second phase of our mission: Legalpioneer Where 📍. The first in our ‘W’ trilogy.

Our Community

Our mission was to find and celebrate Legalpioneers everywhere. We wanted to cultivate a community of genuinely passionate people in pursuit of the stories, startups, and stars who support a Fair Society. Then the unexpected happened: it worked! We started with 7 pioneers and aimed to have 250 followers on Twitter within one year. Our community almost hit 500 followers, found over 200 startups, products, and pioneers across the globe and had to pause onboarding after 13 Legalpioneers to focus on the future.

Where📍

We set to find legal and regulatory startups and we did:  2500+ spread over 91 countries with over $3 billion in funding in 7 categories. We’re adding about 100 startups a month in both the Legal (60+) and Regtech (40+) sectors.

We don’t aim to be the largest database but our goal is to simply be uniquely insightful. That is why we are approaching this project from an inquisitive angle: Where is the activity?

The 3 criteria for inclusion:

  1. Do startups provide a service that has Legal implications or help you comply with regulations (Regtech);
  2. Are they private companies;
  3. Were they founded or funded after 2010,

We track about 37 individual sources ranging from Angellist and CrunchBase. But also Linkedin, Twitter and especially the dedicated trackers from fellow pioneers.

Who 👥 Next

We’ll launch 2 more projects in the W series: Who 👥 and Why 👁. The first 2 will be regular LegalTech, the last is slated to use machine learning and incorporate deep neural networks. Yes, we’re building for pure AI.

The approach: before feeding the machine massive amounts of unstructured data, we are cooking it a carefully curated dataset. In this way, we aim to ensure our robot gets a well-balanced diet of fairness and empathy.

The intent is to “teach” our robot to locate and categorize companies. We’re test driving algorithms that check if a startup is still operational and plan to extend these to ‘calculate’ which startups will succeed. Eventually, we want our robot to monitor and predict the legal evolution on a global scale. We’ll widen our scope by adding LegalTech products from Law Firms, the Epic list from ProductHunt, CivicTech and Tweets.

So to all Legalpioneers everywhere, please check if your location is added to your Twitter profile and include hashtags: #LegalTech, #LawTech, #RegTech, #TaxTech. We’ll also be on the lookout out for #BrexitTech 😉. Mention @Legalpioneer in your tweet and we’ll find you.

Show your support for a Fair Society and give Where a try

Originally posted on Medium@Legalpioneer