RegTech

RiskTech: Will This Save The Legal Industry?

RiskTech: Will This Save The Legal Industry? 1920 975 Raymond Blyd

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:

SectorMarketAnd they do?
LegalLegalTechdoes legal work
 Lawfind legal work
RegTechRiskTechavoid legal work
 FinTechcomply with regulations
 WealthTecha (rich) FinTech subset
 Tax..obviously..
 CivicTechinfluence 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.

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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.

RegTech Charts

RegTech Charts 1920 975 Raymond Blyd

Updated: October 20, 2019

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New Hires And Buyers While Technology Fires The Legal Industry

New Hires And Buyers While Technology Fires The Legal Industry 2048 952 Raymond Blyd

Will automation take away our jobs? Eventually, according to this Ted Talk. The more interesting question is who are the new hires and buyers in the sector formerly known as Legal?

Fires ?

As this recent CNBC story poignantly states: Lawyers could be the next profession to be replaced by computers. Meanwhile, new possibilities are bound to open up and to find out what these may be I had to reason from first principles.

1. What is Legal Tech? Essentially it is whatever technology supports a Fair Society. For example, the algorithms behind rating your Uber drivers is Legal Tech. They practically replace the vetting and licensing of taxi drivers. Since autonomous vehicles can predict and prevent accidents, they effectively supersede traffic laws and driving licenses. eDiscovery platforms find legal in millions of documents. AI does legal research and can draft contracts. Legal Tech is as ubiquitous as the buttons you see everywhere to report spam and abuse by Internet trolls. Yet it is still as complex as the privacy settings on all your devices and services. Legal Tech is to protect the vulnerable and to provide transparency in business and government.

2. How will Tech replace Legal? Actually, you won’t need to know legal nor understand it’s logic to practice it. Just like you don’t need to learn the drums to create a beat. Heck, most DJ’s can’t even read music notes or play instruments. Same goes for Legal as this video explains how a non-tax expert passed a university tax exam with the use of AI. It’s a sign that robots are set to fire the traditional legal industry. Still, just like music will never go away, legal is here to stay.

Hires ??‍?

3. What will happen to Legal Professionals? Basically, they’ll need to learn a different tune. Here are the main players in the new band:

  1. Legal Engineers: they create Legal Tech by ‘teaching’ legal logic to machines;
  2. Collision Detectors: they use Legal Tech to smooth out the differences between humans and businesses.
  3. Fair Defenders: they need Legal Tech to sustain the checks and balances in our society.

The Legal Industry Roadmap reasoned how Legal Engineers will be building the backbone for fair technologies. Now I’ll highlight the front-office of The Practice.

4. What is the new Practice of Law? Fundamentally, legal knowledge is a social map of humanity’s past, present, and future. Navigating your way thru this universe, one has to match the right skills with the right tools to be able to avoid collisions. That is the underline principle driving the practice of legal professionals. Another way to see this: the Titanic didn’t need a stronger hull, it needed sonar. If you are as mystified as I am when you hear legal professionals talk about “quality” or “higher value work”. They are talking about Sonar and here are three functional narratives to explain this skill:

1.Is Airbnb’s Top Lawyer the New Archetype for the Legal Profession?

This article explains how AirBnB’s top counsel helps maneuver their business model through interpretation of justice. She operates as a Regulatory Sonar within the business to help it achieve its goals. These new archetypes will use legal tech to observe legislators, customers and competitors to strategically move the company forward.

2.Meet the China ‘whisperers’ who get the big deals done in Silicon Valley

Another function of in-house counsel is assisting the entrepreneur in capturing opportunities. These new legal hires aren’t just adept at detecting collisions as potential threats to the business. They have the strategies to turn them into opportunities. A Business Sonar monitors mergers, acquisitions, deals & patents with legal tech to connect the right people and opportunities.

3.Trump fires attorney general after copy of constitution is found on her computer

All kidding aside, perhaps the toughest job is having the courage to stand up and speak out. The world isn’t black or white but many shades. No one has a monopoly on justice and there aren’t any alternative facts. That is why we need a failsafe: checks & balances. Fair Defenders act like a Social Sonar and signal erosions of our liberties and act to redeem us.

Buyers ?

5. What is the new Business of Law? Initially, while entire industries even democracies operate outside the law, we’ll witness a rise in regulations to win power back. The 2 biggest sectors that will be impacted first are FinTech and Artificial Intelligence, consecutively the flow of wealth and knowledge.

At the opposing end, Governments will evaluate their role and ability to influence populations. They’ll need to integrate legal frameworks into tech platforms to help stabilize their communities. They’ll slowly come to realize that it will be meaningless to carpet bomb with legislation or executive orders.

Here’s a surreal approach from Bill Gates to illustrate: robots that replace human labor should pay taxes. How will governments agree upon taxing all computers in existence if these are just a software upgrade away from replacing us?  In short: in this war for wealth & power, #RegTech will dominate the near future.

Conclusion ✉️

Ultimately, while businesses regulate more of our lives through technology, governments increasingly lose the ability to do so as well. In this battle for our individuality and to restore the imbalance in society, we’ll have to rely on this force called Humanity.

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