Please enjoy this blog post co-authored by John Graves, Training Support Specialist, Winstead PC and Josh Moore, Director of Solutions Engineering, Govlnvest.
Being a new associate can be stressful. But imagine it’s 1995. Hours upon hours are spent perusing the Law Library. Finally, Batson v. Kentucky, 476 U.S. 79 (1986) …just what the Partner wanted. At the time, this method was the best way to find cases. Thankfully, legal tech has provided a better way.
The legal industry is transforming at a blistering pace and legal tech startups are at the forefront of this disruption. Startups are newly established companies, typically less than 5 years old, that aim to bring innovative products or services to market in hopes of disrupting an industry. From AI-powered contract review to automated invoice reviews, these companies are revolutionizing how law firms operate. But should your firm dive into the startup waters? Let's navigate the potential upsides and downsides with commentary from Zach Posner, a thought-leader in the legal tech world and founder of The LegalTech Fund.
Startups are enticing. They make it so you spend seconds instead of hours looking for that case without the need to step foot in the library. Adopting solutions from legal tech startups can be a game-changer for any firm. Zach Posner put it well, " Legal Tech startups offer law firms transformative benefits, chiefly the acceleration of projects, and enhanced efficiency, which includes accessing and using newly formed data moats. These innovations, including streamlined workflows and faster discovery processes, are pivotal for the legal industry's evolution." History paints a pretty picture when we realize the impact of household innovations like the printing press, lightbulb, or airplane, all of which are solutions to problems that once needed to be solved.
Posner emphasized that his fund looks for startups with “founders who have a deep understanding of a specific pain point, which often leads to effective and innovative solutions.” It takes someone special to blaze a new trail. He continued, “We assess the uniqueness of their technology, the application of AI and data analytics, and how they address unmet needs in the market or solve a pain point. It's about identifying startups that not only bring new solutions, but also challenge and elevate the industry's standards, pushing the boundaries of what's possible in Legal Tech.”
These disruptive solutions have the potential to radically improve outdated industry norms. In the legal world, fax machines and filing cabinets are a thing of the past. Cloud-based document management systems and secure file sharing proved a better, more secure way. While both are simple examples of common technology now, both were innovative solutions by a legal tech startup at one point. By exploring software solution from startups, firms can find solutions and focus resources on high-value tasks, which ultimately provide better services for their clients.
However, the startup path is littered with risks to consider. Unlike established vendors, concerns around long-term viability and stability always loom. As Posner counsels, critically assess a startup's "adaptability and resilience" through traits like:
- “Iterate consistently based on end-user feedback: A startup's ability to listen, experiment, integrate feedback, and continuously and consistently refine its product is a strong indicator of its commitment to meeting market needs and its potential for long-term growth.
- Hire the right team: The strength and cohesion of the team are crucial. Look for startups with teams that are not only skilled but also demonstrate the tenacity to exceed expectations and tackle challenges head-on. The right team can navigate the startup through uncertainties and drive growth.
- Think like an immigrant: Startups that embody an immigrant mindset — a relentless pursuit of excellence and a proactive approach to obstacles — often stand out for their stability and reliability. This mindset fosters a culture of continuous improvement and innovation, ensuring the startup remains indispensable and ahead of potential competitors.”
Scalability is another crucial consideration. A solution fitting a small firm may buckle when extended to an AM100 Firm. Data privacy and compliance are also potential weaknesses if startups lack robust security resources. While some say there’s no such thing as bad publicity, one would be hard-pressed to find a firm wanting to grace the next headline of a massive data breach.
So how can you separate the winners from the losers? Posner advises focusing on "how well a startup's product aligns with their specific challenges and workflow needs." There’s no value in implementing a startup’s software if it doesn’t solve a firm’s pain point. Posner added, “It's essential to consider the startup's responsiveness to feedback and its commitment to continuous improvement. Assess the potential for scalability and integration with existing systems, ensuring the solution can adapt and grow alongside your firm.”
Thoroughly vet the:
- Founding team's domain expertise
- Differentiating innovations solving key pain points
- Company's track record, customer reviews, and reputation
Financial stability and long-term strategic vision
One common approach is to request a pilot program to test drive solutions in a real-world setting. This allows you to evaluate ease-of-use and integration with existing systems and identify any limitations firsthand before fully committing. It may come as a surprise, but the demo isn’t always the same as what gets delivered. Have the conversations and rely on references to ensure a complete picture when making decisions.
Don't overlook data privacy and compliance either. Assess security protocols and ensure the startup meets all relevant data regulations, such as GDPR and HIPAA. Obtain indemnification and clarify data ownership. Do the due diligence.
The legal tech revolution offers immense opportunities but also unique risks. By taking a diligent, discerning approach, your firm can capitalize on startups' innovative solutions while mitigating potential pitfalls. As Posner advises: “ensur[e] it's not just innovative but essential."
Want to scratch the itch now? Head over to ILTA’s Startup Hub and find the innovative solution to your firm’s problem today!
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