Michael Brown of Bowery Capital and Kelli Fontaine of Cendana Capital discuss trends and themes using Cendana Capital manager data.
We at Bowery Capital released the 2016 edition of Opportunities In Vertical Software in November, which laid out our point of view on ten specific verticals and the potential for various software solutions to dominate each of these ten verticals in the coming years. For ten weeks, we are releasing content focused around the impact of software on these ten industries. We covered the Restaurant vertical last week. For our fourth week, we feature the Legal vertical. Yesterday we released an Interview with Itai Gurari discussing the case law research space. In our third post for the Legal Software Deep Dive we follow up with an analysis of Legal market themes, players, & investors.
Legal Market Themes:
(1) E-Discovery has become a mature and competitive space over the years – Vendors have developed core competencies for a specific stage of eDiscovery Reference Models and buyers tend to only use a vendor’s best capabilities and complete their e-discovery toolbox with different solutions from various other vendors.
(2) SaaS tools to provide litigation and research support see strong adoption – Adoption of tools to ease the workload of lawyers is expected to increase. A 2015 survey by the American Bar Associations shows more than half of law firms with more than 500 attorneys have used predictive coding. Natural language processing (NLP) software will also garner interest from law firms, by assisting in information retrieval, extraction, and speech recognition.
(3) Cyber security – As data and document management systems continue to grow, law firms will become large targets for hackers looking to gain access to information. Law firms have a legal responsibility to protect their client’s information. Data protection regulations will pressure law firms to continue to update their security systems, which creates opportunities for founders focusing on the cyber-security space.
(4) Moving into the Cloud- Another one of the major legal market themes is that cloud downward price pressure from clients, excessive competition in the market, the rise of alternative billing methods, and other market factors will force law firms to lower their overhead and drive them towards more cost effective software solutions. Therefore creating a significant opportunity for software solutions with proven ROI.
Legal Industry Major Players:
LexisNexis, a subsidiary of RELX group, has been a key player in the space with their legal solutions software. While known as a data analytics company LexisNexis, was the pioneer of legal software, giving lawyers access to search documents online. Guidance Software also has a presence in this space and remains relevant to a large portion of the ecosystem. In addition, with the focus on cyber-security, Symantec corporation has been a large player with $3.6B in revenue and employing over 11,000 employees.
Legal Industry Emerging Players:
As the legal technology industry begins to gain momentum, we are seeing new emerging software players in the space. To highlight a few, there is UpCounsel, which allows businesses to efficiently access and manage a high quality and on demand-legal workforce. Another player is Everlaw, which is a cloud-based eDiscovery platform. Everlaw has served 9 of the top 10 class action law firms and more than 65% of State Attorney Generals use their platform. We have also seen startups leveraging the power of data and artificial intelligence to better serve lawyers. Legal Sifter uses natural language processing and machine learning to turn unstructured terms, conditions, and words into structured data and insights. The software is able to scan a user’s documents and assign scores based on how favorable the terms are for the user, while explaining the clauses and provisions of the document. Focused on the case law research space, there is Judicata, a new Legal Research Engine marrying advanced semantic analysis technologies with high quality lawyer curated content.
Most Active Investors Focused On Legal Technology:
Because the legal technology space is still fairly new we have yet to see investors with a core focus on legal software. Some notable investors who have funded legal software startups include Benchmark (Avvo), ULU Ventures (Ravel, Everlaw), and Homebrew (UpCounsel). It should be noted that startup accelerator, Y- Combinator has shown interest in the legal technology environment and has incubated and invested in several legal startups (CaseText, SimpleLegal, Willing).
Legal Market Themes Link Roundup For Emerging Software Founders:
CB Insights: https://www.cbinsights.com/blog/legal-tech-market-map-company-list/
Legal Talk Network Podcast: http://legaltalknetwork.com/podcasts/
Thank you for reading our analysis on Restaurant Market Themes, Players, & Investors. Make sure to check out the 2016 edition of Opportunities In Vertical Software for the full report and we will be back in the new year with our next series of industry deep dives.
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