The Difficult but Necessary Challenge Ahead of Building a Legaltech Startup Ecosystem

There is little doubt today that we need an emerging legaltech startup vertical.

But where will it come from?

Any startup ecosystem needs inputs, energy, and direction in order to grow and thrive. In 2014 and beyond, these won’t simply self-create, but are rather a product of identifying a need and building, with purpose and intentionality, from there.

There are several structural and practical facts, perhaps obstacles, that come into play in the legaltech space. The first is that legaltech startups often need to build in stealth because they are founded by practicing lawyers. These lawyers can’t yet leave/risk losing their full-time law jobs for their startup but at the same time, almost always have issues launching fully and well with the ability to focus and devote as much effort as is needed.

Sure, this isn’t a problem limited to legal tech startups, but it is absolutely a fact that has kept highly-trained professionals with a lot of skin in their career-track game from being founders. Medtech is similar area where this rings true, with doctors loath to leave their practice or university teaching appointments.

So what about law students? They must be well-positioned to build legaltech startups, given that university students often build generic tech startups while still in school. We’re going to drop some heavy knowledge on you, let you in on a secret. There is absolutely no profession that does anything close to as worse a job in preparing students for practice as the legal profession.

Law students are, on the whole, totally and frighteningly unprepared to be lawyers. Depending upon the philosophical orientation of the law school, students may be learning a bit more or less theory, from one or another angle. But law schools, especially in the early years, do an embarrassingly bad job of preparing students to be practicing lawyers.

This fact is not really debatable, and sophisticated purchasers have caught on by refusing to pay for the training of BigLaw associates when partners attempt to “junior” out work (or ship it off to Mumbai, Jakarta, or anywhere in the range of the new world of overnight legal research and client hour billing). While some will argue that preparing students for the practice of law isn’t really the goal of law school (and this fine point has always eluded both of us) it doesn’t change the reality that law students are not ideally situated to identify critical pain points in the practice of law and to then build the winning solutions.

There are some promising developments among more enlightened law schools including Michigan State University and its Reinvent Law Laboratory program which fuses law, technology, design and delivery. The problem is that with a significant student debt crisis, fresh graduates can be forgiven if they would prefer to work in traditional lucrative law firm associate positions (even if it, as some argue, it will eventually eat away at their soul – and thank you all for the creative license here). Sprinting down the path of innovation and entrepreneurship is tough anytime, but in this situation, it seems impossible to many.

Okay. So then what about people outside the legal industry altogether? Isn’t it possible for people not involved in the law to be founders of a legal tech startup?

Yes, but look at the situation in another vertical: Education Technology. Two years ago, over 90% of edtech startups had no one on the founding team who had been a practicing educator. What this meant in edtech – and the ensuing present and future danger here for legaltech – is that mercenaries flock to the vertical when it begins to heat up. In edtech, this meant often well-funded startups (because of the founding team’s prior track record of non-edtech successes) that has little to no positive impact upon either the education system or teaching and learning.

All of this said, we’re actually wildly optimistic about the legaltech space (“Yeah. Thanks for leaving this for the end of your piece, guys.”). One of us (Aron) has worked with many startups in the space, in Canada, Silicon Valley and elsewhere, dating back to 2010. The tie that binds the successful ones is a strong desire to make some part of the legal system better. Notice that we said “some part.”

One of the potential pitfalls here is that there is so much that needs to be changed in the legal system, from access to transparency to how the actual transaction takes place between lawyer and layperson. The best part about legaltech is that it may sometimes serve lawyers to perform their work more efficiently and effectively—but the downside is a lack of incentive if there is continued insistence on billing services by the hour. Lawyers tend to forget that the legal system and law itself are not actually meant to serve lawyers (though, in 2014, it’s pretty obvious that it was designed and implemented that way).

The other certainty of legaltech is that it has and will continue to change the actual “what” of what a lawyer does. In fact, there could be less need for lawyers generally as often postulated by Richard Susskind, who is widely-regarded as the Clay Christensen of the legal world. Wary of being caught up in “solutionism,” we think that at minimum, legaltech will change and create new permeations of legal services whether delivered by lawyers or savvy entrepreneurs from other forward thinking disciplines.

We really hope that you’re enjoying our ongoing legaltech series in Techvibes. You can now follow us on Twitter.

Lawyer Jason Moyse contributed to writing this article.