Introduction to LegalTech

What is LegalTech?   

As can be seen from the Venn diagram below, LegalTech is at the intersection of Law and Technology.

The increased importance of the legal function, along with the burgeoning supply of technology, points to imminent growth in legal technology adoption. Established applications are proven to help legal teams manage matters, offer visibility and control of legal spend, sort through large masses of variously structured data to find pertinent information, and streamline the creation, negotiation and monitoring of contracts. Digital technology promises to ease and automate cumbersome workflows. Emerging technologies like AI, robotic process automation (RPA) and predictive analytics are poised to alter and redistribute the burden of work among corporate lawyers, outside counsel and the legal value chain. Corporate legal and compliance leaders can use a fertile landscape of applications to aid and automate due diligence, while assessing and monitoring third-party risk. (Murphy, 2019, p. 3)

Legal technology is evolving rapidly, and in-house legal departments are understandably overwhelmed with choices. Increasingly overburdened with the pace of digital business, they have little time to explore its potential and adopt it. The legal technology landscape is in constant flux. In the midst of a dynamic legal technology landscape, corporate general counsel and related legal leaders must find and deploy the applications that are available, viable and likely to garner a return on investment. Application leaders supporting legal departments must devise a purposeful technology strategy that starts with identifying desired business outcomes, such as reducing outside counsel spend or speeding up contract review processes. They must identify technical capabilities required to achieve the outcomes and match them to dependable and proven products. They must then build roadmaps that establish a long-term vision and chart a course to achieve it. (Murphy, 2019, p. 4)

Market Sizing

The size of the legal services market is expected to cross over $1 trillion by 2021, as can be seen in the chart below. For such a large total addressable market (TAM), one would expect that entrepreneurs and investors would be jumping to be a part of this sector, similar to the rush seen in Fintech and other sectors. However, there has been a muted response so far and only in the last two to three years have we started seeing more traction and increase in terms of demand and supply.

Source: (Dossier on Legal services in the U.S., 2019, p. 6)

Legaltech segmentation

There is no easy way to make an important purchase in legal tech. It is spread across almost every aspect of the in-house legal department’s functions. From managing law firm engagements or analyzing documents, to sharing information or reviewing invoices, there is automation for just about every touch point. (The Legal Tech Buyer’s Guide, 2019, p. 17)

 Stanford Law’s CodeX Techindex was launched by Stanford Law School in 2015 and is the largest crowdsourced database of the world’s LegalTech firms. There is a clear inflection point in 2010, with over 692 LegalTech firms listed on CodeXTechindex as of February 2018. The segments that had the largest representation were Legal Document Automation (184 firms), Legal Marketplace (153 firms) and Legal Practice Management (138 firms). While there seemed to be only 5 firms focused on Legal Compliance. (Chin, 2018)

 Source: (Chin, 2018)

 The AL100 is another legal tech directory that has been created by Artificial Lawyer, UK to showcase the best and most progressive legal technology from around the world. It is focused on applications that use automation and AI technology, as well as those systems that are designed to integrate with and support these applications. (Artificial Lawyer, 2019)

 A representative list of the LegalTech landscape across segments (and countries) is shown below.

Source: TNW X and Deloitte Legal study

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