For the legal industry, what followed the financial crisis almost a decade ago can be articulated in two words: finding stability. The idea that large incumbents in the legal practice space could be rattled to their dissolution or fragmentation probably seemed remote before 2008, yet the need to survive on the market has driven a rise in individual or small practices, with a good command of the technologies that have become key to the re-growth of the post-crisis economy.
Large law firms have found it at least challenging to, first, get to their previous financial stability and, second, restart a healthy and sustainable growth, when attempting to employ the same tactics that proved successful in the past. The ones that have managed to take this path did so after adapting to the new market status quo:
- Ever-lower workforce retention rates, as lawyers leave law firms either for their own practice or building another type of venture.
- The rise of AI as a much-acclaimed soon-to-be disruptor of the industry, which has left many wondering whether they should move to better understand the technology shifts, such as working as part of legaltech startups.
- The increase in importance in the workspace of millenials, who employ different tactics when approaching a legal problem and, more importantly, demand a more challenging environment and a steeper learning curve.
By far, the biggest enemy of established law firms today is their imperfect relationship with tech products. State-of-the-art technology cannot be implemented easily in the legal space—partly because of the profession’s constraints (such as the need to use systems and procedures that ensure client-attorney confidentiality), but also because of the lack of tech experts in law firms. Many law firm IT departments only do routine maintenance and optimisation work, and too many firms have the HR manager going through software procurement procedures at the request of the managing partner.
In this environment, a possible North Star for solving the stability problem while keeping a law firm focused on the future is allocating some funds for external investment in helpful technologies. From my perspective—as a lawyer working with tech companies, and as a professional running acceleration programs—a big law firm should consider these high-level steps.
1. Learn the ABCs of tech company metrics.
One or several partners in the practice should delve into the mechanics of running a product startup. This can prove challenging for someone with experience in building and selling services which mostly take place most offline, and where the sales process is strictly regulated by bar rules. However, one of the best ways to do so is becoming a mentor of an accelerator or incubator, or, better yet, leading your practice into a partnership with these entities. Scout for the initiative that can bring the most added value to your practice. Review startup programs you want to partner with from a business development perspective, and not a PR/marketing one. This kind of involvement can reward you with several one-on-one meetings with tech companies, which you can both service and learn from.
2. Decide on a budget for tech investments.
The sum very much depends on the development stage of the startups you want to support—investment in the R&D phase should expect a later-in-time return, but a higher stake in the final product. For a first-time investor, look at and get in touch with already-established venture funds that invest in different stages in a startup’s life cycle, and explore opportunities to invest—financially or in another way—to the success of the fund. Also, depending on your financial capabilities, look into co-investing with established angel or other investors, to get a clear dimension of what is needed by a startup to build its product.
3. Strengthen your IP/IT/Media departments.
In my work with tech companies, I noticed that that one of the largest communication gaps in the attorney-client relationships, industry-wide, takes places when an attorney engages with a tech entrepreneur. Having said that, some of the most technology-savvy and versatile lawyers you will find on the market are likely in your Intellectual Property or New Technologies Department. These lawyers tend to understand the legal implications and added value of a tech product . Bring in new faces or recruit young lawyers for this department—their learning curve will be steep, but you can reap benefits down the road.
4. Expand your IT department to include tech products people.
A big part of the success of an investment initiative is the array of tech skills and knowledge in your dedicated team. If your IT team doesn’t have them already, look for people with experience in analyzing legaltech solutions, who understand both product development part and sales and/or marketing. These experts will provide the input needed during the investment decision-making process.
5. Hire an investment manager—or, better yet, become one.
If done right, your venture arm will become an entity of its own, and you will need someone to dedicate his or her entire time to it. The main reason legaltech is still an emerging market is the lack of lawyers who start products in this area. Since IT departments in law firms do not usually handle product development and management, the initiative of starting a legaltech product or investment firm needs to come from the lawyers themselves.
The legal industry is still looking for an anchor on which to grow in the Industry 4.0 world—a closer look at tech companies and ways to contribute to and use their technologies can provide this stable point and, even more, lead to greater success in the coming decades.
About the Author
Tudor Stanciu is an attorney in Bucharest, Romania, and is the co-initiator of Digital 2 Law, a network of independent legal advisors for high-tech businesses and startups, and startups community manager for How to Web, which is one of the Central and Eastern Europe leading enablers in business and product support for tech startups. Follow Tudor on Twitter @TudStanciu.