How Legal Tech Can Help Us Unlock the Power of Data
We recently hosted a webinar on the subject of “legal tech”, the technologies that empower a wide array of legal services and products. The past decade has been one of transformation from a world where the data of legal documents was locked in PDFs, or worse a physical file cabinet, to one where we now have a plethora of information quickly accessible to inform decisions. The industry has evolved beyond document archiving, billing automation, or client management to providing meaningful legal insights to the non-attorney business user. The question at hand is this: what happens when we start thinking of our legal docs as more than a set of PDFs and start looking at them as a set of valuable data?
Zach Posner, Managing Director at The LegalTech Fund, put our legal world in perspective: “Everything that we do, either personally or professionally, it all starts with a legal agreement and that really holds the source data.” An example Zach gave of the power of data at work is LeasePilot, a platform which enables companies to build and manage commercial real estate leases with everything stored on their platform in a structured way. They help real estate managers and real estate owners save time and money by unlocking the data within their leases. This means they can avoid having to look back through the lease, and, instead, easily search the database and leverage AI to create new documents, such as abstracts. He also pointed out a valuable by-product of the database -- exhaust data:
For the first time ever, we actually know what market rent per square foot is in every city across the globe. That alone can be extraordinarily valuable because there are huge companies that are trying to get that data right now and they do it via surveys. Here, again, you can quickly go back to the source data. Another example: if everything is locked up and if everything is within a database, you can look at who is liable for what within a lease and maybe that means one day we can sell you a cheaper insurance policy because of that. We think that the possibilities are really endless. It's all about unlocking the data within those legal agreements.
Charlie Moore, CEO and Founder of RocketLawyer, shared some valuable insights about what’s coming next, which he believes is machine learning, AI, blockchain and payments:
We're just starting to unlock the potential now for AI, [which] is going to be, for the next decade, really important and, of course, everybody knows you need… structured data in order to train an AI and to really go to the next level as far as machine learning. We announced a year ago a pilot that's been running that we're going to now start to open up for payments, for things that are important enough to put in a contract. It's called Rocket Wallet. Again, that's heavily dependent on data. The fact that we know what the payment terms are in contracts and then we can connect that to a payment solution that scales and that is integrated with that contract has been something we've worked a lot on. Lastly, blockchain -- [it] has a tremendous amount of potential as far as contract related data and that's another area for development and a big part of our strategy.
How can data strategy help you succeed?
Utilizing technology to make decisions has the power to improve processes and the quality or value of your product or service. In the legal tech space, this ability to improve your end product or service for your customer gives you the ability to better execute and address the needs of the market. Mitch Zuklie, CEO and Chairman at Orrick put it this way:
First thing I'd say is that from a pattern recognition standpoint as a start-up lawyer there are always four risks that every company faces. Those are: technology risk -- meaning, you have tech that works well and can you keep others away from it; Finance risk -- can you raise sufficient capital when you need to on terms that are reasonable? Execution risk -- can you bring a team together that can actually execute on your business plan? Then, market risk -- can you make a product that's selling dog food the dogs need to have and are willing to eat? I would say that, in general, the legal tech space is not very complicated when it comes to tech or finance risk. Obviously, tech can make a difference and finance risk is always there but I don't think those are unique elements. These are not particularly capital intensive or tech intensive businesses. It really comes down, in my view, to market risk and execution risk: making sure that your user experience is unique and making sure that the product you're making is really solving an acute pain for customers.
Even for legal firms there is a desire to let go of the tasks that aren’t allowing them to focus on their core value, or strengthening client relationships. We want to hang on to high value in a high margin business but if there are things… that are not high margin for us or just aren't good from a quality perspective and are a pebble in the shoe of our relationships with our customers, we don't want to deal with them. We're delighted to have someone do them better, more cost-effectively, and adopt that technology to someone who can do it.
Mitch has also observed companies taking a windmill approach to providing these services: “It's almost as if they've done a case study but they haven't actually walked the walk of being a service provider to companies as a legal service provider.”
Yet the domain experience of who is running the firm really matters when it comes to legal tech. Mitch cautions investors and others to pay attention to the domain experience of the founders. His advice is to make sure that you talk with someone who is experienced and knows the landscape and can really dive into the question of whether this is a need to have for the customer. According to him, “This is the single most important [element] that's overlooked in some of the companies we've seen today.”
Deal-making transactions: are these becoming commoditized and standardized?
With the innovation in legal tech, a fair question emerges: will all this commoditize the investor and the legal docs that the legal community is traditionally used to burning many hours in crafting? In short, yes. The forms can now be standardized. But the more interesting part of the roles that legal professionals play is not related to document formation or agreements. There are other ways to provide value. Mitch Zuklie explains:
My sense is that that's already happened and there's definitely more that can be done. I'm more interested perhaps in squeezing out the quality and making it a little bit better and more uniformed. An awful lot of what we do and the more interesting part of what we do is not document production or crafting agreements. So, absolutely, that will happen. It will happen more quickly than we, who practice imagine it will but I don't think it's the end of the world in terms of there being an important legal function and I'm not particularly dreading that. Now, I think the single biggest trend in the law right now is the following one: the pace of client's business innovation. Their business model innovation is outstripping the ability for regulations to keep up. In the most interesting chunky issues… you've got an innovative model and you have laws adapt to the services you are delivering. That's where the crux or the interesting and hard and skilled work comes in. I think that trend isn't going away. It's only going to accelerate, and therefore, the role of law and lawyers is only going to increase actually.
With growth comes additional business opportunities.
Growth opportunities for legal tech firms lie in externalizing their platforms and taking their core services and features and turning them into services that companies can plug into. For example, Charlie shared that the growth his company, Rocket Lawyer, has allowed the firm to grow their initial offering. The company’s positive and clean UI experience has fueled their growth to become one of the biggest demand generators for legal services in the world, now in the hands of hundreds of enterprise customers. Their APIs have opened up new opportunities for offerings in different languages and also by feature, and more growth is coming.
While all this technical innovation can feel daunting, these tools are not replacing and competing with lawyers. The technology that is out there is ultimately helping the legal community to provide better services and offerings for customers. The innovation that lies ahead should drive higher value services that the legal community provides, while also giving customers, and more of them, a better experience and more powerful information at their fingertips.
In our next post, we’ll explore the role that the customer plays in fostering innovation in legal tech.