Noory Bechor, CEO, and co-founder of LawGeex
In 2018, LegalTech investments are rapidly closing in on the $1billion mark, with three months of the year still remaining.
Investments currently stand at $926million, based on 26 LegalTech deals. Interestingly, $355million of this has been invested in legal solutions utilizing AI. This AI-focused funding represents a bigger sum than the investment across all legal technology solutions in 2017.
By contrast, in 2017 we saw only $233million in investments in companies, across 61 deals with funding of legal AI companies representing a marginal amount of this total.
The rise of AI in legal funding
Over the past few months, investors have poured $65million into Atrium, a law firm tech company founded by Justin Kan (the co-founder of Twitch). The Silicon Valley-based startup also acquired the technology and team from Tetra, an AI company helping Atrium’s mission to transform legal documents into structured data. This was preceded by $50million raised by Kira Systems, which provides contract due to diligence solutions using AI. Other big legal AI investment included Seal, a contract discovery player ($30 million); eDiscovery leader Everlaw ($25million); IP specialist Incopro which raised $20 million; and Eigen Technologies in contract due diligence ($17.5 million). Each has earmarked funding to boost their AI capabilities and meet a growing demand among legal professionals to do high-volume and mundane legal work faster and more accurately.
In this vein, LawGeex successfully raised $12 million in April this year. In reporting the LawGeex funding, Crunchbase News pointed out that the round was a wider indication of “the increased focus on AI-powered tools across industries which are redefining work at a basic level. In any case, individuals in the legal field are probably happy to benefit from this trend.”
In addition to the vast funding, acquisitions have also been making headlines in this space including Big Four professional services firm, EY snapping up Riverview Law (an acquisition which included the use of Riverview’s AI Kim contract Technologies).
Contracts: an untapped market
Some sectors of legal technology have been in place for decades (think eDiscovery, digital signatures, and legal databases). However, the implementation of contract automation by organizations has only just started, fuelled by advances in AI, and this influx of funding. The technology requires significant investment to get right. This is why the growth funding is so crucial for the legal profession. For instance, in the case of LawGeex, our AI was trained initially over three years on tens of thousands of legal documents, using custom-built machine learning and deep learning technologies.
The advance in contract technology is allowing businesses to revolutionize their efficiencies across each contract process (outlined below). This is making automation possible whether you are creating a contract, deciding whether to sign it, executing it, storing it, or seeking to find and use information from the thousands of stored legal documents in an organization.
This diagram also demonstrates the potential for one vendor to continue to expand their place in the contract cycle from one of these stages to the next one along.
Funding and contracts
The centrality of contracts and lack of change for decades in core business and legal processes makes this a particularly ripe area for disruption. Contracts are fundamental. A typical Fortune 1000 company maintains 20,000 to 40,000 active contracts at any given time. Yet at the same time, contracts have become more complex and their volume is increasing, causing approval rates for internal contract management procedures to hit rock bottom. The International Association for Contract & Commercial Management (IACCM) finds that 83% of businesses are dissatisfied with their organization’s contracting process.
Investment to Drive Innovation
Technology providers that have recently secured investment to tackle this problem, including Kira, Seal, and Atrium, must be recognized for their leading role in showing the legal profession, investors and wider business, the significance of legal technology. These AI-driven solutions are here to stay and are already driving commercially-successful businesses that rely on such technology to enhance their legal processes, and stay ahead of competitors.
Each of the contract stages outlined above can bring time and cost reductions of at least 50%. This is being realized as strategic companies are addressing the problem of spending time and effort in understanding their shortfalls. They are researching and tackling the challenge head-on with technology. (For a full review of all solutions we have produced a free 85-page guide to in-house legal technology).
We need to use the rise in investment as an opportunity to present new technology opportunities for any organization (that, is, all organizations) that have contracts. LegalTech adoption and further investment is required to enhance every stage of these unique and vital business processes.
The investment and building up of world-class technologies has only just begun, and the rewards will come over the next decade. There is an equally important message for GCs, CFOs, and CIOs. This new technology is helping lawyers across the world required to do “more with less”. It is a way to demonstrate efficiency and speed and meet KPIs. It is also a way to do deals faster and remove inefficiencies that are holding up business and giving competitors an advantage.
There are no longer any excuses not to plug efficiency gaps when it comes to legal processes, especially as far as contracts are concerned. This is made clear by leaders in the field, as they gain every new dollar in investment and sweep up dozens of new customers each month.
More money will ensure the fast-evolving LegalTech solutions become even more resilient and battle-tested, making protests against its widespread use even less credible. This widespread disruption comes at a time when the technology behind the software improves every day and game-changing updates continue across each part of the contract puzzle. What is clear is that this technology will bring huge change to the everyday lives of lawyers and usher in a new era of contracting for businesses.