Legalcomplex

  • Raymond Blyd

Debt and the Difficult conversation we should have in Legal
Debt and the Difficult conversation we should have in Legal 1039 502 Raymond Blyd

Just like the rest of the economy, legal tech is now loaded with debt. Let’s have a calm conversation about it.

We analyze the numbers and match them with conversations we have with our friends. First the numbers: we registered an increase in funding and acquisitions during 2021. On the surface, this looks encouraging for everyone in the legal industry. We ran a poll on LinkedIn and 91% voted that growth is real. The public views private capital injections as proof of a healthy industry.

Honestly, so do we. We collect, and clean data to calculate the numbers that measure growth. During this process, we discover many financing variations. And some of these discoveries have us concerned. One is the type of funding, and the financial engineering underlying them. For instance, there’s an uptick in debt financing [paywall] of legal tech startups, as mentioned in Law360. Also, note the increase of private equity financing of acquisitions by Legal IT Insider. Other signs are down rounds, bridge rounds, or current investors passing on later rounds. It is especially worrying when this happens in crowded areas.

Fuel ?

What concerns us is that all this money isn’t chasing demand for legal products or services. You make money by selling, you fake money by funding. Because funding is debt. Don’t panic. Almost every government has plunged into debt during the pandemic, and it has not spelled the end of the world. Banks printing money is a temporary measure to stave of worse. That ‘money’ is being channeled into companies as loans. However, perhaps we should spur demand for products rather than serve as a crutch to companies. Something akin to the US infrastructure plan. Let’s call it a ‘Liberty Bill’.

The companies, we track, offer support to lawyers. Most support the law by helping companies and citizens play by the rules. They all impact the demand for legal services in various ways. One boost the pandemic gave the legal industry is the increased focus on financial security (FinSec) and ESG. Companies and citizens alike were making sure that investments were secure, money’s in the bank, or in a bit of Bitcoin. Seriously, everyone wanted their contracts signed, invoices cleared and their affairs in order. Generally, these transactions go through lawyers. But since the pandemic forced remote work, they all went through legal technology. That’s one narrative that has fueled funding this year.

Burn ☄️

Remember the conversation we had? Most companies aren’t run by the CEOs alone, CFO’s and especially accountants play a huge part. They run the numbers on your company as well as many others. This provides them with a pretty broad perspective on profitability. Their influence grows when debt accumulates. At some point, the accountant will pull you aside to talk about the numbers. Usually, the moment arrives around three to four months before the company is about to burn out of existence.

I admire entrepreneurs because they combine commercial savvy with financial smarts to make profits. Occasionally, it takes a technological tweak to ensure the cost to produce is lower than the price you pay. Yet, this isn’t necessary if demand for your product keeps growing. This last point is key: demand drives down costs. Automation drives down cost, but automating in legal is really expensive. Getting attention in legal is really expensive. That’s why many companies in legal need funding to stay afloat on their way to sustainable revenue.

Like a supernova, we see the surges of growth throughout the legal galaxy. That’s why we can also pinpoint the black holes in that same galaxy we mention in the video below. We support entrepreneurs in legal because they take a risk on an industry that doesn’t take kindly to disruption. They bet on a surge and, with a bit of luck, the gamble pays off. With a bit of data analytics, the payoff is huge.

Remember, there is no such thing as free money. The world is in a “buy now and pay later” phase, and so is legal. At some point, we should expect to get a Margin Call just like the 2011 movie. If you haven’t seen it, I recommend The Big Short: same story, fewer suits, more spreadsheets, and humor. A bit like us.

  • Raymond Blyd

How Big is the Addressable Market for the Legal Industry?
How Big is the Addressable Market for the Legal Industry? 3750 2188 Raymond Blyd

The total addressable market for the global legal industry is $3 Trillion, according to page 8 of the Intapp SEC S-1 filing. Does it add up?

Statista puts the size of the legal services market worldwide by 2025 at $908.26 Billion. Both estimates target mainly consultancy-based services. What is the total addressable market (TAM) for legal technology? Here is a list of reported TAM or serviceable addressable market (SAM) in S-1 type filings from various legal technology providers:

Law Society reported the mix of GRC and Law Tech markets in the UK to be $22 Billion (p8). Also note the image below: DocuSign’s estimate of the contract space is $17 Billion.

DocuSign Total addressable market TAM

Why addressable market size matters

The size of a market determines how much money you can earn when investing in a player in that market. Let’s say you have one dollar, and you want to turn it into ten dollars. One realistic option is to give it to a public or private company. Disclosure: I did invest in a Legal Tech company and did enjoy a similar return. So, if many customers buy the product, then the number of customers multiplied by product price determines your returns.

Example: if you had one dollar on May 10 in 2011, and you wanted ten dollars within 15 months or 130 dollars within ten years. Your most likely avenue was to give your dollar to Apple to get a 10x return within two years and roughly 130x return within 10 years. Or buy Bitcoin, but I’ll get into trouble for saying that. A good explanation I overheard between the 02:20 and 05:00 minute mark in this podcast by Motley Fool.

However, the question remains: will customers keep buying?

How to measure growth

To estimate any future growth, we need a history of numbers. Specifically, numbers indicating a sustained demand for products. One popular method is compound annual growth rate (CAGR). It provides a percentage for year-over-year growth. Most use CAGR to keep track and project future growth. According to the S-1 filing by CS Disco, their revenue grew 43% CAGR. This means their income almost doubled every two years. In keeping with our example: they would give us about five dollars in ten years.

Disco CAGR

DocuSign reported revenues translated to a CAGR of 26%. They had exactly the same growth rate when they initially filed to go public. By comparison, Apple’s CAGR in the past three years was 0.83%. Yet, Apple’s CAGR did jump to 90% and climbed to almost 82%. Respectively, the year after the iPhone launched and once it was revealed they had more cash than the US Government. The chart below also displays a curious jump in 2021. Perhaps this increase was a panic …ahum… pandemic driven reaction.

Apple revenue's 2006-2021

Measure more meaningful

Here’s our take: we already commented on market size estimates in the CAT™ analysis. Before the launch of the iPhone, there was no measurable market for it. This prospect also doomed the early electric cars before Tesla. Market size analysis can never account for changing behaviors or technology breakthroughs.

Likewise, CAGR is handy if we consider the various underlying factors. Crafty accounting, job cuts or price inflation achieve higher revenues as well. So do company acquisitions and mergers. The CAGR method works best on stock price incremental swings. When implied to data points with big differences, it provides weird outcomes.

For the legal sector, we generate graphs to quantify the growth and stability of legal technology using industry-specific data. In Stability & Endurance, we talked through two metrics using numbers from legal tech companies. Despite wild swings in every area, we were able to show how Legal is more stable compared to sectors like FinTech. One reason is that legal relies on laws to sustain demand.

A more realistic market size estimation is one that is able to anticipate new or changing markets. As of July 17, 2021, we registered $89.84 Billion of venture capital allocated to Legal & GRC technologies (CAT™). This is the one-dollar investors hope to get back in tenfold. So an expected return is at least $890 Billion within ten years. Once we established this, we carve out areas, themes, and countries. Like the $5.22 Billion Access to Justice theme we were able to extract.

Legal & Regulatory CAT™

We are coming out of a pandemic and entering a new world. A world where ESG equates to growth. A movement that stood at the brink of fading after the US ‘ghosted’ the Paris Climate Accords. ESG supports Environment, Social, and Governance awareness in every industry. So far, the $890 Billion only represents Governance and a bit of Social.

To summarize: it looks like sunshine in the long term. But we’ll have to deal with inflation in the short term.

  • Raymond Blyd

What Is The Right Valuation Of Any Legal Tech Startup?
What Is The Right Valuation Of Any Legal Tech Startup? 1800 1050 Raymond Blyd

We recently received several cries on how hard it is to raise venture capital for a startup in law, why? Valuation

Valuation

One of our most-read analyses is about the acquisition value of legal tech startups. Only recently we discovered why that is: it helps founders convince investors. Recent exits of SignRequest and Clocktimizer have largely confirmed the thesis: the value of a startup depends on the type of customer. Does your product work for consumers (B2C) or businesses (B2B)? As for the type of businesses: is it small or big? If so, are you selling to corporates or law firms?

Based on the recent exit values, our numbers show that the exit value declines when we travel along this spectrum. Small businesses represent a higher value and usually faster exits. The opposite is true for providers selling strictly to legal professionals. We speculate that the underlying reason is pure supply and demand. Perhaps in some popular areas, there is less demand and an oversupply of solutions offered to the legal service sector. So a startup valuation is largely determined by the customer and not necessarily the product itself.

Frequency

Why is your target customer such a factor? Well, you can get a large cheque from a few customers or get a small one from many. Both strategies have their challenges but the law sector has an ace: getting paid is almost guaranteed by the legal events. Case in point: without a signed contract it’s difficult to claim. If you do have a claim, you usually have to run it by a judge or arbitrator. If you have to appear in court, you’ll need representation. We explored the Legal Roadmap and identified Contracts and Claims as two of over 10 areas with high-frequency legal events. And BTW, don’t forget to pay your taxes.

However, there’s one decisive variable we only explored in the roadmap: frequency. When a startup latches on to a high-frequency event, the more likely its valuation will increase. Let’s address the elephant: signing a contract happens more often than reviewing or drafting one. Therefore, e-Sign companies sit on top of the food chain. The addition of DocuSign to the NASDAQ-100 means it is one of the 100 fastest-growing ‘tech‘ companies in the world. That’s just for signing sales contracts and before they decided to go after high-value \ high-frequency contracts like mortgages, and estates. Nope, we won’t discuss Ethereum, smart contracts, and zero-proof. We’re saving that for a special Facebook-Tesla edition.

Network Effects

Since we did bring up the blockchain, we may as well talk about the actual force behind frequency: network effects. The network effect is the mesh of human interactions that multiplies the use of technology. Google and Facebook are the biggest examples of tapping into a network of commerce. Even though most legal events are enforced by law and don’t require networks, they can leverage networks like finance. Financial security is the network that propelled DocuSign into unicorn stratosphere.

Now buried within the network of financial transactions reside numerous legal events. The pandemic accelerated mergers and acquisitions which reportedly boosted many law firm earnings. We’re also waiting on a barrage of bankruptcies that need legal handholding. In our latest Legal IT Insider chart, we debut an overview of areas using advanced tech. The biggest area to capture capital was fraud detection and a notable round in geo-analytics. One reason we keep nudging Geo is that it directly underpins some high-frequency legal claims. Case in point: real estate disputes are arguably the single largest source of legal conflicts in the world. This is a vibrant area we recently explored in our access to justice breakdown.

Legal Events

Now that we’re talking about Geo, here is where it gets tricky: when is a solution part of a legal event? Moreover, since we’re determining valuations: do we want it to be a legal event? A legal event can be the result of regulation like fraud detection or be a monopoly such as court proceedings. Both RiskTech and LegalTech markets look attractive since they are difficult to enter. However, due to their closed nature, legal events aren’t easily fueled by outside forces. A state we described in The Fall of Legal Tech and our most popular “Will lawyers be replaced by GPT-3?” And unfortunately, this is where the crying starts.

And perhaps we can offer a tissue. Not all legal events originate from the same universe of rules. Some even spontaneously appear based on cultural shifts due to societal events. Covid made us value CivicTech and privacy, even more, when we largely rejected contact tracing apps. #MeToo was a catalyst for HR apps to consider using virtual reality as a solution to help us behave. And the biggest growth engine is the ESG movement we discussed in our previous analysis. None of these insights come from anecdotes or experience, they are directly derived from metrics in the Spark dashboard. We are not the experts, our data is.

Funding

Enough prognosis, let’s be practical. Here is a StartUp Fundraising Checklist we stumbled upon with a great set of tasks to undertake to get funded. When you run through the list, you’ll notice that there is some tedious research you need:

  1. What’s my market size? We use the CAT™ model for an instant and exact calculation ;
  2. Who are my competitors? Check out our Challengers analysis;
  3. What’s my valuation? Start reading from the top;
  4. Setting up an investor CRM? Our Investor dashboard with FOMO filter is just 5 clicks

But yes, we agree. All of the above is too long, didn’t read (TLDR). So we are announcing the launch of a one-click platform to provide all four answers instantly on a single page.

stay tuned..

  • Raymond Blyd

ESG: Growth Engine for Legal & Regulatory or Human Prosperity?
ESG: Growth Engine for Legal & Regulatory or Human Prosperity? 1800 1050 Raymond Blyd

Environment, Social, and Governance (ESG) seems like nitro for investors but capitalizing on this trend starts with lawyers and startups.

TLDR: ESG is aligning wealth creation with nature and decency. Lawyers are excellent guides navigating this process and accelerating the growth of RiskTech. But the jury is still out.

ESG

Deliveroo, the food delivery startup, recently offered new stock to the public, but there wasn’t much ‘appetite’. At the moment of writing, shares in Deliveroo traded at 30% below their proposed value. The analyst blamed the failed initial public offering (IPO) mainly on their advisers, the Banks. While the pandemic has benefitted everyone in logistics, the public remembered how Deliveroo treated their workers. Now Goldman Sachs is reportedly forced to buy $103 million in Deliveroo stock to boost the IPO price. An action described in this podcast: as buying all of your own kid’s scout cookies.

The reason we bring up workers’ rights is that this is now playing out on a much grander scale at Amazon: one of the biggest employers in the USA. We’re curious if attempts to block employees unionizing will impact Amazon’s stock price. While managing human capital makes financial sense, it’s still bad for business if you’re ignoring the S in ESG. Both companies aren’t breaking any laws, but they’re drifting close to the edge of human decency. Looking strictly at the numbers, you can’t blame accountants for not identifying these risks. Yet, your general counsel would be doing cartwheels to get your attention.

What is ESG? As human beings, we should take care of our environment, be socially conscious and fair in order to create sustainable prosperity. ESG aims to create a level playing field for all by emphasizing rules on emissions, security, diversity, and inclusion. It is an investment thesis to identify long-term wealth opportunities by going beyond the numbers to find companies that practice ESG. If you feel fluffy and flustered by this, talk to your local legal professional. They can best explain the vast array of rules surrounding ESG. Or you can swing by EcoVadis, one of the biggest in Civic Tech, and OneTrust, the biggest in Legal Tech, to see what they offer.

Surge

Q1 2021 ESG

This brings us to the nitro. On March 16 we released the Top 11 Legal Tech companies of all time. By March 23, the list was outdated when OneTrust acquired a couple of Legal Tech companies. In the first quarter of 2021, we experienced a surge in venture funding we haven’t seen since 2014. We debuted an exclusive chart in issue 340 of Legal IT Insider by Caroline Hill. The chart featured venture funding of private companies operating in Legal & Regulatory. How we define the Regulatory space is key to understanding the impact of ESG.

We mentioned the surprises, like PatSnap ($300M) and Fadada ($138M) who listed respectively 4th and 9th overall in round sizes for Q1. PatSnap patent research we classify as ‘Legal’ because it’s a job traditionally done by lawyers. Fadada is an e-Signature provider and listed in Regulatory which is a collection of Governance, Risk & Compliance (GRC) tools. GRC are mechanisms, like e-Signatures, created by lawyers to be used by companies to manage risk. These mechanisms help to avoid the risk of litigation or fines by the government. Fines like the record $2.75 billion for anti-trust violations leveled at Alibaba by China.

That is why GRC is twice the size of Legal based on our numbers. In Q1, GRC raised $4.01 billion while Legal managed half with $2.11 billion. Both broke the previous record for a single quarter. Legal’s previous record was set back in Q1 2019 with $1.29 Billion. As for GRC, the surge wasn’t just pushed by the urge to manage risk. Risk management actually was the smallest of the big three. Governance and Compliance took the bulk of fresh funding with notables in Fraud Detection and Tax. However, most rankings only look at the size of the rounds or the amount raised. And that’s where many get it wrong.

Signal

Do you really want to know the future? Then ignore dollars but look at deals. Big funding rounds usually signal the end of a cycle rather than the beginning of a trend. We’ve seen this pattern play out in venture funding of legal marketplaces, practice management, and contract tech. Case in point: in the first quarter of 2021, Tax shot to the number three spot with 12 deals. This is more deals than Contract Tech could muster in the same quarter. This discovery was so powerful that it inspired the unique setup of the Spark™ dashboard.

Counting the number of deals within various niches of Legal and Regulatory reveals where the action is. Deal numbers not only show areas warming up but also the ones cooling off. We indicated Legal Tech slowing down because legal doesn’t need that much tech to explain the risk. However, by explaining risk, it has propelled the use of Risk Tech. Especially the risks to people and our planet.

With ESG, we’ve decided to invest in long-term prosperity as opposed to profiting from the apocalypse. This has driven companies to install more security on their platforms and checks in their balance sheets. They are looking at accounting and supply chains to measure their impact on nature and communities. Companies can even check if their banks are green or fix their toxic culture with virtual reality. At least, that is the thesis so let us all follow the ticker symbol AMZN closely.

  • Raymond Blyd

Gaslight: Three Conditions Essential Technology In Our Society Needs
Gaslight: Three Conditions Essential Technology In Our Society Needs 2048 952 Raymond Blyd

We’ll give three reasons why the legal profession doesn’t buy tech. Stop the gaslighting because all three are legit.

TLDR: providing the legal industry with secure easy to use systems is essential for any democracy. Compromised lawyers and overloaded judges can’t pursue justice.

Gaslight

While cruising the clubhouses, we noticed a tendency to sow fear, uncertainty and doubt (FUD) among lawyers. The basic message: there is so much brilliant legal tech so lawyers should adopt or die. In ‘World of Robots‘ we provided numbers and examples of the speed at which they adopted technologies like the pager, Blackberry, and iPad. The first digital case law search engine was created and used in the early seventies. Correct, lawyers went ‘online’ to retrieve case law before the internet was even invented.

The last decade of legal tech didn’t live up to the hype, but we’re at the dawn of a new one. This decade we start with smart technologies like GPT-3 and a pandemic accelerating tech adoption. However, major legal obstacles remain and the industry is perhaps in the worst shape it’s ever been. Here’s why.

Security

Legal professionals traditionally practiced security by obscurity, an approach rejected as far back as 1851. Then the Panama papers exposed law firms as the weakest link and quickest route to sensitive information. Now the Solarwinds hack reminded us that digital systems can be jeopardized at many junctures. A perfect illustration is the recent hack of 7th ranked global law firm Jones Day. It’s simple: a law firm with many tech vendors just increases their risk profile and exposure to attacks. If you’re shocked at a $2 Billion law firm being a soft target, imagine how our government-hosted courts and judges feel.

If financial and health records get exposed, we can hit the perpetrators with a lawsuit. But how do we prosecute when judges and lawyers are also compromised? When both digital and legal defenses go down, we don’t have a fair society. If many do not trust their legal system, they’ll march on the Capitol. A secure legal industry is the safety net for our society. Its participants must be able to use systems securely to reach a fair judgment.

Continuity

Security doesn’t only mean impenetrable but also means continuity. It’s one of the reasons some professionals still prefer paper. The law states that judges are nominated for life and lawyers enjoy confidentiality no matter what. In practice, no system can offer confidentiality for life.

The reality is that new technologies offer an ephemeral solution. Systems are flexible and update frequently to stay secure and competitive. They save data encrypted in proprietary formats in many places at once. These formats are only supported until the next release, the company runs out of money, gets acquired, or the developer disappears.

Here’s where the legal industry struggles to live up to its ethical duty while considering innovating. At some point, lawyers moved from stone to paper and from paper to email. Nothing lasts forever and change is inevitable. However, when legal commits, they are required by law to make it last.

Data

Whenever the next big investment announcement rolls around just be sure to check if there were any law firms mentioned as investors? Another hint: when a tech vendor lands a large contract with a Tax or Justice department or a Law institution. Besides the essentials like email security or eDiscovery, legal seems most intrigued by technologies that already have the data they need. Legal doesn’t invest in populating your software with their data or training your algorithm. Spoiler: legal actually doesn’t have that much data. On the contrary: they seek more data to make better decisions.

How did we uncover the pattern of security, continuity, and data investments? We used Spark+ to analyze investments by Corporates and Law Firms to break them down by type of company. Two samples, typical of what we’ve seen, are Palantir and Spark Beyond: both have fascinating deals with law firms.

As the last line of defense, legal does have some special considerations when it comes to choosing tech. There is data to prove legal professionals are quick to adopt when it’s right for them.

  • Raymond Blyd

Investor Dashboard to Grow Your Capital, and Compete
Investor Dashboard to Grow Your Capital, and Compete 150 150 Raymond Blyd

You need capital to build a better product or broadcast to a wider audience. In order to capture customers and compete, start here.

Pitch: The Investor Dashboard (aka Grow) provides everyone unique leverage to connect to your ideal investor. Btw, clever ones use the dashboard to check the competition or capture leads.

Compete

During Spark demos, we were often asked: do you also have the investors? Yes, we did, and it was the second product on our roadmap. Yet, what surprised us how much interest participants had to see the companies which have already raised capital. Where Spark delves deep into the numbers underlying the markets, we decided to create a light-weight version to focus on the names of the players with capital.

The initial design was to show the names of investors and, for context, to include the number and names of companies. This feature was an instant hit with the service providers of marketing, IT, and staffing. This list offered them a unique source of qualified leads: companies with targets and a budget. Subsequently, these companies will aggressively attack the market so need to be watched closely.

Especially in the contract space, those who raised early are spending on traffic and attention. Astute observers may argue that all this activity contributes to a bubbly atmosphere. Whatever the case, entrepreneurs should seize the moment to literally ‘capitalize’. In the Investor Dashboard, you can specifically exclude investors that have already invested in Contract Tech. This allows you leverage to approach only the investors that have the fear of missing out. So we dubbed this the FOMO filter.

Conscience

In our first Investor analysis in April 2019, we found that the average number of investors for a typical legal tech startup is between 5 – 6 investors. That number in the mega-infographic also made us realize that we have more investors chasing good startups than good companies seeking cash. When the pandemic first hit, we collaborated with Legaltechstartupfocus.com, Charlie Uniman to create a global list of the top 106 investors.

Despite all these efforts, it’s extremely hard for young ventures to find funding outside of friends and family. Especially, if entrepreneurs aren’t well-connected or have a social disadvantage. Luckily, science explored and sadly explained why in these two articles. “How Venture Capitalists Make Decisions” by Harvard Business Review and “Entrepreneurs don’t have a special gene for risk—they come from families with money” by Quartz.

Legalcomplex is currently supporting several companies pro bono to level the playing field. We also have actively reached out to investors to collaborate. The Investor Dashboard is a platform to rebalance the process of funding innovation without using data on ethnicity and gender. If history should teach us one lesson, is that equality starts at the data entry.

See pricing

  • Raymond Blyd

Spark: Unique Dashboard on Demand for Legal & Regulatory Tech
Spark: Unique Dashboard on Demand for Legal & Regulatory Tech 150 150 Raymond Blyd

Ever dreamed of a Bloomberg Terminal for the legal market? Instantly identify shifting demands for Legal or Regulatory solutions?

Spark? Identify Demand

There are several signals to indicate demand for products. Who’s getting venture funded is a direct sign of the desire for certain services. Capturing these cues helped us identify growth areas in the 2020 ‘Rebound‘ analysis. However, those were just snapshots without context. Like any static PDF report or survey, these findings are observations that immediately depreciate in value after release. Especially in volatile times, real-time data in a historical context is crucial.

For example one of the few areas of identifiable growth was Tax. Why? Well, 134 payment tech providers collectively raised $6.6 billion in 2020 alone. Consider that each payment transaction they process needs the appropriate tax rate in accounting which none of them is able to provide. How do we uncover this fact with Spark? Tax Tech received 200% more seed capital year over year. Meanwhile, Contract Tech seed funding dipped 60% every year since 2018. Move the slider below from left to right and back to experience this dramatic effect.

Spark Dashboard Specs

What does the Spark dashboard offer?

Content

  • 2x Dashboards: 
    • Venture Capital
    • Mergers & Acquisitions
  • Scope: Legal and Regulatory Technologies
  • Range: 2018 -2021 (updates all through 2021)
  • Profiles: 1440+ in Venture and 510+ in M&A
  • Updates:  23.1 per day
Venture Capital
Spark

Spark Venture 2020

..a new data-rich dashboard that provides detailed information on M&A and investment activity..

Featured on Artificial Lawyer

Spark Filters

Features

  • Functions: Filter, Sort and export to PDF
  • Filter: Date, Type, Market, Stage (Seed – Growth) and Country
  • Sorting: Name, Source, Type, Market, Round Size, Total Raised
  • Tool: Percentage (%) compare to previous periods

..identify trends and emerging sectors in the funding patterns of the legal tech and GRC (Governance, Risk & Compliance) industry, and to discover the consolidation trends within M&A activity..

Featured on Artificial Lawyer

Unique Insights

  • $9.72 Billion for 2020 in Legal & GRC
  • $27.94 Billion for 2020 in M&A
  • Geo Analytics on funding trends
  • Seed funding across markets & types
Merger & Acquisitions
Spark

Spark M&A 2020

Trendlines

Roadmap

  • Dashboard: New Companies (founded between 2018-2021)
  • Trendlines
  • Emerging markets
  • Geo Analytics
  • Theme browser e.g. Automation, Contracts (inc. e-Sign)  
  • Search by keyword
  • Export: CSV, API

Would you like to see more?

Schedule your demo

  • Raymond Blyd

2020: The 7 Parts We Should Keep
2020: The 7 Parts We Should Keep 811 402 Raymond Blyd

I suspect we all want to forget this year ever happened. However, I do want to savor a few precious pills of wisdom.

2020

Covid–19: good data is hard to capture and to validate. It’s even harder to parse and convert into good decisions. Good decisions originate from a willingness to seek the truth. We needed fast and accurate data on infections and hospitalization. But ‘spreadsheeting’ COVID-19 data didn’t inspire any confidence. Solve: it starts with investing in tech and talent for health and government.

CHECK: FinSec and The Path To Become A Unicorn

CivicTech: only a select set of prominent figures focused on CivicTech until the pandemic hit. Now, most have probably forgotten about contact tracing failures or the Uber ambulance success for domestic abuse. That’s until we get a government issue COVID-19 passport to allow us to move around. Solve: government should not build CivicTech but rather stimulate citizens & private enterprises to do so. One example is the groundbreaking collaboration between Google and Apple on a privacy-first contact-tracing approach. Yes, the one that some governments did not want to use because..ahum..it did not break privacy.

CHECK: CivicTech vs COVID-19: The Use And Abuse Of The Power To Heal

LegalTech: The fallen icons – like Ross and Atrium LTS- should have our sympathy but also need our scrutiny. The reality is that there is a decade of data to suggest that many businesses serving lawyers aren’t profitable. While some do manage to break even, they usually aren’t rocket ships with major returns. Still, investments poured in and investor’s appetite remained stable. Solve: focus on legal problems of companies and citizens and not the ‘lawyer’s’ problem. Especially if those legal problems impact the balance sheet.

CHECK: The Fall of Legal Tech And How To Pivot Out

Nature: we are fragile in mind and body. Not being able to hug our loved ones for almost a year leaves an immeasurable imprint on everyone. Solve: We’re not only supporting FemTech but also partnering with companies on mental health solutions. We have identified some pretty sound models that are scalable, profitable, and thus sustainable businesses.

HELP! If you like to contribute or need help, please reach out to me at the email below

2021

Stimulus: to stimulate the economy, funds will be flooding society coming in from private and public sectors. Blockchain, Bitcoin, and the means to raise cash with coins (ICO) will return. Especially ICO’s revealed wondrous ideas for legal tech companies. Yes, there will be fraud and greed, but now we’ll also have better checks and balances when we engineer our laws into our tech. A process better-known as RegTech.

CHECK: Rebound: 10 Growth Areas In Our New Perimeter Prosperity 

Productivity: We discovered that traveling should only be for essential work or leisure. Without all the travel we will be more productive. Courts have been able to clear backlogs due to virtual hearings. The mindset and IT infrastructure are still catching up but -like the vaccine- the digital transformation is now at warp speed. However, beware that special interest and business models will try and slow this down

CHECK:  Will lawyers be replaced by GPT-3? Yes, and here’s when

Creativity: chaos breeds diversity and creativity. We’ve witness diversity efforts being front and center in the streets and sports arenas. Diversity means we’ll have to look for alternatives to fix the ills in our society. This will bring about more creativity and invite a healthier balance of what it means to be human.

Now, we have a -once in a millennium- opportunity to reboot society. If you like to prosper, you will have to value nature and nurture our coherence. You, Coinbase, and Google…I hope you are listening.

United we stand – Divided we fall

  • Raymond Blyd

FinSec and The Path To Become A Unicorn
FinSec and The Path To Become A Unicorn 150 150 Raymond Blyd

Forter became the 500th unicorn and Nuix wants to raise $705 million by offering shares to the public via an IPO. What do they have in common?

TLDR: securely processing data at scale drives the information security trend (InfoSec). Investment in reliable data offers financial security (FinSec) …and a path to unicorn status.

InfoSec = Trust

Let’s recap: the Fall of Legal Tech was published before Atrium LTS went puff and the financials of legal industry darlings revealed no profits in sight. How? After analyzing a decade of startups, we noticed that selling to the practice of law is not a shortcut to a $100 million annual recurring revenue. We’ve yet to find definite evidence that marketplaces or case management are able to reach this within five years after being founded. Why? As summarized in our only analysis on AI, the legal industry is designed by law to operate without tech. Moreover, it is the only industry with the legal firepower to repel any innovation that threatens its financial security.

The legal industry can reach into and regulate any market. The Cannabis compliance market caved after regulation and lawyer rates choked their momentum. However, because Risk Tech operates at the fringes of the legal industry, some markets can slip through the cracks of regulation and bloom. Case in point: electronic signature has seen its fair share of court battles for legitimacy. That didn’t stop e-signatures from making DocuSign a Nasdaq index fund and Taichiro Motoe a billionaire. The reason is that Risk Tech is more about ensuring everyone’s financial security.

e-Signatures are just one of the many mountain tops on the Risk Tech horizon. Privacy, security, and compliance harbor much smaller volcanoes with similar potential. The challenge is not only making information tamper-free but also making it error-free. Any process that ensures we can trust information could achieve unicorn status. We know the information to be valid when we get it from a Notary. We can always turn to any Judge if we suspect fraud in, say, elections (*wink*). However, neither institution is designed to handle the scale in demand for secure information. We just have to trust, that the technology we use, can do the trick.

Trust = Wealth

Remember Mark Zuckerberg famously made Facebook’s prime directive: “move fast and break stuff“. We now learned that we can move fast, but we should never break trust. Credit to Mark to change course after 2014 and I personally thanked him for making progress in general. Facebook made an effort to pick truth over growth [paywall] in its news feed during the elections.

Yet, we are nowhere near safe. As a matter of fact, things have gotten worse. After COVID-19, the stock markets embraced tech stocks as the only crutch for the world’s economy. In the third quarter of 2020, YouTube and Facebook reported record-breaking returns in a combined total of $26 Billion.

Now, what do these numbers have to do with information security? The world trust tech companies to handle personal information securely. In return, we permit them to use our information to recommend how we run our lives. These recommendations only work at scale if they are automated. The recommendation algorithms are optimized to give us what we want but not necessarily what we need. Here’s a video explainer by NBC on what happens when algorithms optimize for our emotions. Especially now in the midst of a pandemic, society needs honest answers based on facts and science.

Wealth = FinSec

While society at large must fend for themselves when it comes to information exchange, the business sector has more guard rails. Six months ago, we broke that NS8 first raised $123 million amount as a fraud detection service. Three months ago we shared the news that they themselves were under a fraud investigation. Both stories embody the value of data security, and, of course, due diligence. Each story exemplifies how much we should value the truth.

This trend has been slowly building up in the shadows of the legal industry. Now these companies suddenly surfaced with massive valuations. Here’s how we discovered this. In November, we started combining Risk Tech and Legal Tech numbers and compared those to previous periods. We noticed a 44% increase over September mostly driven by e-signatures. That is the chart on the left in the image below.

Then we dug deeper and generated a list of the last three years. We combined Risk Tech and Legal Tech and ranked the top 20 categories. This revealed that most of the capitals were invested in technologies that register, analyze, identify, and regulate human behaviors. Especially behaviors impacting financial transactions. The actions usually designed and regulated by law. When we translate this to technology, it looks like this:

  • Register with eSign & Contracts;
  • Analyze with eDiscovery & Data Analytics;
  • Recognize with Identity, KYC, Fraud Detection & AML;
  • Regulate with Privacy, Governance Risk & Compliance (GRC).

To reveal the entire list, you can drag the slider to the right in the image below.

Ultimately, the deal we want with data is that it tells us the truth. If we can’t trust our information companies collapse, economies crumble and citizens suffer.

Wonder which companies are on track to become the next DocuSign or Forter? Would you like to see the pitch deck used by one to raise $6+ Million series A? Just email me.

  • Raymond Blyd

Legalpioneer.org is Live with over 4900+ Pioneers but Why?
Legalpioneer.org is Live with over 4900+ Pioneers but Why? 150 150 Raymond Blyd

We could attract more talent to help build better technology than in the last decade. And we hope these pioneers start on Legalpioneer.org.

TLDR: Despite a decade with thousands of companies and billions in capital, we failed to bring meaningful change to the process of law. No matter the reasons, we should do better by providing an encyclopedia on the different ideas and businesses created globally in support of the law.

The Past

We do data, so we’re very careful making claims like ‘most complete collection of companies ever assembled in the legal tech space’. Why? While it makes sense from a marketing perspective, it practically doesn’t. Any collection can only be measured if we agree on a definition of ‘legal tech’. And by the time we agree on a standard, the demands from society have changed. Therefore, we humbly bring you the numbers with Legalcomplex.com, and now, the names with Legalpioneer.org.

The birth of the Legalpioneer dataset started in 2015 with a question: “Who will beat Law Firms? The analysis contained our first chart on new legal tech companies created every month. The goal then and now remains the same: “track the evolution of the law through the creation of technology”. In 2016, we first signaled a surge of new companies coming into the legal space. That trend topped off in 2017 and continues dropping to this day. Closing out the last decade we had returned to levels pre-2014 with less than 50 new companies registered per month globally.

Legal tech companies have captured more venture capital between 2018 and 2019 combined than at any previous period in history. Yet, this hasn’t spurred the growth of new ventures. The Legalpioneer dashboard is a constant reminder of this reality. We aren’t the only one tracking this decline. Major directories like Angellist, CB Insights, and Crunchbase haven’t covered our niche for quite some time. The last time one of these major repositories reported growth in legal tech was by Crunchbase in February 2018.

A 2010-2020 snapshot found 6500+ companies with $57 billion invested. None managed to disrupt and beat law firms. The Fall of LegalTech, breaks down why disrupting lawyers is legally impossible. Shortly after the release of The Fall, the shutdown of Atrium LTS was announced. On paper, the most well-capitalized startup to attempt disrupting the status quo. The mini-movie “AI: the Struggle” encapsulates the problem we face with a look at the numbers and news. Slide 6 shows $1.7 billion invested in ‘AI’ technologies dedicated to helping legal professionals make the right decision. Even so, there is almost $60 billion invested in ‘AI’ to influence the decision-making abilities of legal professionals.


The Pioneers

Meanwhile, we kept collecting the numbers, calculating the impact, and reporting the outcomes on Legalcomplex.com every month for the past five years. One thing became obvious over time: the numbers only tell part of the story, the names are what really drives home the point. Fact: our Maps page consistently beats out most of the other pages in terms of traffic.

While other pages were crafted with a purpose, the maps started on a whim. Designing the Dutch Legal Tech landscape, we sought inspiration from other maps. Most countries want an overview of companies operating around the law. So we collaborated on an Italian landscape since it was one of the few main EU countries without one. Locating businesses across the globe also reveals that innovation isn’t limited to a certain geography but can happen anywhere. Case in point: Japan houses two pioneers with a billionaire and highest-seeded in the legal space. Click the Google explore link under ‘Detail’ on the profile page and follow the Google News tab. There you can explore their journey, albeit using Google Translate.

Japan and Russia are part of an Asian growth spurt first observed in the second half of the last decade. Singapore measured a jump in new ventures (video) and Beijing experience a rise in value (video). Therefore, we not only need a more diverse but also more modern look at the legal sector. The top 20 of 2020 reports showed that traditional players collectively raised $1,29 billion. But including the new entrants, we see this number jump to $7.16 billion. Companies like DocuSign weren’t considered legal tech until they became the only company to first successfully IPO and subsequently replace United Airlines in the Nasdaq 100. OneTrust, 3rd in the top 20 Modern list, is on a similar trajectory.

A sector breakdown with business models is presented in “Starting in Legal Tech“. On slide 4 you’ll find samples of the Legal, Law, Risk, Tax, and Civic Tech market. In hindsight, we probably should have included the most important one: Smart Tech. Recently more large firms are closing deals with smart tech companies instead of looking at legal tech. We tipped robotic process automation (RPA) in our ‘Rebound‘ analysis as one of the top growth areas post-Covid. We now also feature an ‘AI’ and ML map on the maps page. So it’s a safe bet you’ll be seeing more smart tech as pioneers in law.


The Path

Looking at the path forward, the FAQ on Legalpioneer states the basic principles: the platform is free. It’s designed with a goal to be sustainable over time. And we’ll be liberal in our submission policy. To remain sustainable and cover the hosting and domain costs, we’ve opened a shop via Spreadshirt.com. There is the most beautiful gender-neutral collectible to dress the part as an original Legalpioneer. So go ahead and place your order and support us in keeping the platform free.

In the Stats & Parameters section on the FAQ page, we list some trade-offs we had to make due to our scale. The very first request we received was to add an address to a profile. The platform technically supports any Google map feature available, yet we decided to not support individual profile addresses yet. Reason: now we maintain 770+ locations across 4900+ profiles. With support for addresses, we have to monitor as many locations in as many profiles. To support this feature, we need more bots to store multiple unique addresses for each profile and keep them in sync across datasets.

Notwithstanding privacy concerns for home offices, addresses also add complexity to the search experience. Improving the search along with building some unique features are now the focus for the future. Along with these new features are the tutorials on how to get the most out of the Legalpioneer platform. For instance, it is the best place to name-check your new idea. Or find fellow pioneers near you to partner or hire. A keyword search instantly reveals the global concentration on a topic. Is the map search overwhelming, use the mobile search box at the bottom instead.

After each crisis, the world starts to rebuild. The 2008-09 crisis gave birth to unicorns like Docusign and OneTrust. The decacorns of this decade are being created now, and they probably won’t look like anything we expect. Like GPT-3, we probably won’t even feel the impact until we lift the monopoly on the law. Therefore, there is a need for a data-driven and diverse view on the true pioneers…and where to locate them.


Visit: Legalpioneer.org

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