The future is hard to predict in the combustible world of law tech start-ups. But recent big funding rounds for some of the industry’s darlings signal an increasing maturity in the space with Kira, Apperio, Eigen Technologies and Legatics all receiving hefty funding rounds in recent months.
Kira further secured its spot as the leading AI platform for law firms after landing a record $50m of private equity backing from New York-based Insight Venture Partners in September. The investment was the first external backing for the company since its inception, with the machine-learning contract analysis platform now primed for continued growth.
With a year-on-year revenue growth of more than 100% for 2017 and the team more than doubling from 55 to 115 employees, the investment came off the back of a strong showing for the company. The significance of the investment is that Kira already enjoys a strong majority market share, with competitors such as Luminance less established among elite law firms, while capital remains perhaps the best metric for maturity.
Kira chief executive Noah Waisberg told Legal Business: ‘There is a massive opportunity around two things: lawyers should be using Kira in every single relevant transaction and corporates which have a lot of contracts don’t really have any idea what they say: the only practical way for that to change is through automation.’
‘To some extent the validation is where the money is going,’ David Halliwell, director of knowledge and innovation at Pinsent Masons told Legal Business. ‘The $50m for Kira shows people they may well be getting it right.’
Kira was not the only major recent winner in the start-up scene, with highly-rated Eigen securing its own lucrative funding round. Headed by former Linklaters adviser Lewis Liu, Eigen has strong legal roots, and the £13m investment in June managed to outstrip the previous market-leading $10m raised by Luminance in 2017.
One legal technologist told Legal Business they were unsurprised by the inroads being made by Eigen: ‘It is doing interesting stuff – its AI tool seems to need less training than the others.’
Other significant funding rounds include the $10m secured by in-house legal fees and matter tracking tool Apperio, which will enable the company to double in size to 40 staff and make further inroads in the US. Meanwhile, deal platform Legatics and property transaction platform Thirdfort received £500,000 and £400,000 respectively.
The investment round will also see two non-executive directors join the Legatics board, former Allen & Overy (A&O) board member Simon Black and former head of investment banking for EMEA at MUFG, Andrew Jameson. Legatics also became one of the first start-ups to enter banking giant Barclays’ legal tech lab in August.
Like Legatics, Thirdfort has featured in a legal tech programme, namely the second cohort of Mishcon de Reya’s MDR LAB.
Meanwhile, flexible lawyering start-up Lexoo (chief executive Daniel van Binsbergen pictured above) secured $4.4m in financing in October, which will be used to overhaul its global business development. The backing has been led by investment house Earlybird with additional financing from Forward Partners and Zoopla general counsel (GC) Ned Staple. Elsewhere, email security AI tool Tessian raised £9m over the summer.
Also significant, in September the US New Law operator UnitedLex secured one of the largest ever investments in the legal sector with private equity leader CVC Capital Partners acquiring a majority stake. The business, which combines consultancy to major companies with providing ‘digital solutions’, said the deal would make a $500m war chest available to back a ‘multibillion-dollar opportunity’.
This recent injection of cash into the legal start-up market also demonstrates the advantage for tech companies in being corporate incubator alumni, which provides potential investors with a sense of validation. Indeed, more details are emerging of Slaughter and May’s symbolic second – and exclusively legal tech – incubator arriving in early 2019.
However for the established legal players the significance of these developments is unclear, with no firms yet (with the exception of Slaughters and Luminance) capitalising on increasingly valuable start-ups to create a meaningful long-term advantage. As one legal technologist put it: ‘No-one is head and shoulders above the others. Everyone is a bit bored of hearing what law firms are using or doing with tech. Obviously if a law firm announces it’s doing something great by combining Neota Logic and Kira in some new way it’s going to be very replicable, as those start-ups are always eager to sell to everyone.’
For more on the rise of start-ups and the adoption of AI by the largest UK firms, see our technology special ‘Turning the lights on’