Provocative ABA Journal article – and Comments also worth reading:
ABA Journal, May 2014: “These venture capitalists skip law firms for legal services startups”
This particular Comment resonates in my world, where legal shortcuts land clients in hot water – and their attorneys in the law library wondering why the client didn’t seek legal advice first and saved themselves big bucks and big headaches:
“Cookie cutter “one size fits all” solutions to complex and unique legal problems, managed by non-professionals who lack a modicum of legal training—what could possibly go wrong?”
All that said, there is a definite place for standardization of some legal processes, legal technicians, and limited scope legal assistance, but if non-lawyers don’t do their homework, can’t analyze and determine the legal implications of their actions and decisions, can’t determine causes of action and likelihood of prevailing, and then proceed without the opinion and guidance of a licensed attorney, well then, who’s really to blame? (Lawyer consultations don’t have to cost a lot of money, if you prepare well, and take advantage of the OSB Modest Means and other “affordable lawyer” programs.)
Remember the old cartoon: Storefront sign: $10 haircuts! Next-door storefront sign: We fix $10 haircuts!
“…. CASH FOR LAW, NOT FIRMS
It’s no secret that investment money is flowing into law….
But that money is not going to law firms. Venture capitalists are skeptical of the upheaval underway in BigLaw, with uncertainty around changes in pricing and ownership rules as well as concern about efficiency and access to justice. So instead, VCs are investing in the legal technology vendors that are filling in some of those holes.
Lex Machina, Modria, Ravel, Rocket Lawyer, LegalZoom, SIPX (the Stanford Intellectual Property Exchange) and more—all have been the beneficiaries of this new outreach from venture capital as they seek to compete with or complement major law firms….
“When you’re working on something like legal aid, that’s not likely to lead to for-profit startups,” Dolin says. “But in consumer law, there’s plenty of room for startups there. And when you start talking about consumer law, now you’re looking at interest among VC people. You’re going from Saks Fifth Avenue to something like Wal-Mart or Sears.”
The latent market for the legal needs of the middle class is tens of billions of dollars a year, Dolin says, as long as the right services and the right pricing structure are developed…..
“It’s like H&R Block—where’s the legal equivalent of that?” Dolin says. “When you start talking consumer law, you get that increase in scale and ramp-up of a startup. If they hit the market right, that’s what a VC is looking for,” he says. “The ones that don’t fail have to pay for the ones that do fail, so they’re looking for high-end growth.”
But returns aren’t all that drive VCs.
“Yes, there’s making money, but a lot of it is enabling dreams and pursuing causes,” says Dolin. “I’m wanting to invest in legal tech because I want legal technology to succeed. It’s incredibly important with consumer law. “The latent market is a signal of inefficiency—of people not getting the help they need because the infrastructure is broken. The fact that someone’s making money is indicative of an inefficiency being fixed. “It’s not selling Pet Rocks,” he says. “I don’t want to sell Pet Rocks. I want to have an impact in a field that is really important for humanity. And the fact there are such nefficiencies also means there’s a lot of money to be made.
But Silicon Valley isn’t the only hotbed for legal startups.
“Relatively speaking, there’s been quite a lot that has come out of Stanford, but if you go to these legal tech dinners, it’s not like the majority of them are from Stanford,” Dolin says. “Legal tech is coming from all over the place….” [Link to full ABAJ article.]