What Type of Legaltech Startups Will Power the Future?

For the entrepreneur looking to make a mark in the legal vertical or someone from the legal profession who wants to build the Next Big Thing, the threshold question is “What should I build?”

From a business model perspective, we don’t think that your primary areas of focus should be selling into law firms, as we really don’t, generally, love B2B in the legaltech space. B2C is an exciting legaltech business model as consumers will be able to do an increasing amount of things by themselves without the necessity of lawyers. In the B2B space, we think that B2B2C (business-to-business-to-consumer) will be a growth area. Imagine curated, hybrid service offerings. While there will be many more Legal Zooms and Rocket Lawyers, there will also be things that fill the in-between spaces.

Here’s where we think you should build.

1. In the transaction between lawyer and client.

A great example is LawGives (full disclosure: Aron has been a LawGives advisor from the very beginning, when the founders were visiting scholars and graduate students at Stanford Law). This is a reimagining of the space. Think about the process of finding a lawyer today?  You wouldn’t use the yellow pages, we would hope. Probably not even internet, as SEO optimization doesn’t result in the best rising to the top. The end result is that the buyer is left in the dark.

When you buy a car, you see the car. The wheels and engine are attached. In the legal transaction, you don’t necessarily know what you’re buying, in part because you don’t know what you need. If the car costs $30k, you pay and it’s yours. With legal services, you could pay $50k for a $30k dispute and you still end up with pieces of an unassembled car. If you knew the cost upfront, you might not buy what you bought.

2. In the communications space.

Think about how a lawyer and their client currently communicates. There’s a ton here to be built around transparency and updates, things that get us away from email ping pong and phone tag, which still marks the primary methods of communication today. Build something where you get a pop up on your phone that lets you know that your lawyer, Jason, is reviewing your file.  A couple of hours later you get a message that Jason is now at the courthouse. No need to reply. This could dramatically cut down on billing for giving and receiving client updates.

A good starting point is the client service tool built by the Australian law firm Mallesons (Mallesons Connect). This is a good example of a client portal where you can go in and see the status of your matter. Build something like that but better on every level and different.

As an aside, most lawyers are afraid of this, as innovation in this space will demand instant accountability and will allow the client to see their bread being baked in real time. Historically, lawyers could barely stand having to account for their billable hours, even pre-billing software.

3. Speaking of which, build something for billing.

Lawyers are among the worst professionals for accurately recording their time. You still see bills laden with “Research. 7.0 hours @ $350.00/hour.” Have we really gone far from the 1950’s “$x. For services rendered.” Do you trust this?

And now, with six-minute billing increments, is this any better? There’s a movement afoot to get away from the billable hour because it creates and drives inefficiency. If you can build something in this space that captures value, this could be very useful.

4. In legal education, which is so badly broken.

The monopoly that is legal education and law schools has carried on for some time. It remains the considered opinion of your authors that law school is ridiculously unpleasant, borderline nonsensical, and a path to nowhere other than how to write law school exams effectively.

There is a huge gap to be filled by education providers who can disseminate the information that is doled out in law school, the vast majority of which is theory rather than practice. Imagine building something akin to Josh Kaufmann’s Personal MBA, but perfectly tailored to help a student understand legal theory (essential) and even how to become a neophyte in the practice of law (huge bonus). This said, understand that law schools are a massive industry that won’t go down without a fight. But so are universities and we now have (for better and worse) a plethora of MOOCs.

5. For document automation.

This is where you should be looking at B2B sales to law firms. Attack specific line items in law firm budgets and save them money with what you’ve build, as Backsheet does, as one Canadian example.

In an EdTech parallel, explain to law firms (as education entrepreneurs explain to school boards) that this product will save you $x/year on what you currently spend on x. Traditionally, law firms could get away with passing on a multiplicity of costs to their clients, but now less so than ever.

6. In the new offshore legal services space.

In 2014, much more legal work than you can imagine is completed in other countries where the costs are infinitely lower. Innovate in this space to find a way to save law firms money and get clients better work less expensively, faster, and more transparently. There’s huge work still to be done in this space, and, done well, it will help make the entire experience for the client a better one.

That’s a wrap for today. We hope we’ve given you a lot to consider as you you imagine the difference you can make in the future of law.

Lawyer Jason Moyse contributed to writing this article.