“In hindsight, the new solutions are all going to look obvious” — Paul Lippe, circa 2010
Sometimes a technical innovation languishes on the innovator’s shelf despite working perfectly and doing everything the innovator hoped. What’s missing is a business model that can coordinate a fair exchange of value.
The graphic above is the “2.0” version of Richard Susskind’s evolution of legal service model as it appears in the second edition of Tomorrow’s Lawyers (2017). I call it 2.0 because it’s an update of a very familiar and influential graphic from The End of Lawyers? (2008) and the first edition of Tomorrow’s Lawyers (2013).
The 1.0 version moved from Bespoke to Standardized to Systematized to Packaged to Commoditized. Many lawyers who saw the 1.0 version reacted with disdain, resenting the suggestion that their lifetime of know-how could be reduced to a commodity dispensed over the Internet. Yet, for those who took the time to read Susskind’s analysis, they learned that the space between Systematized and Packaged legal services held out the possibility of “making money while you sleep.” The End of Lawyers? at 37; see also Tomorrow’s Lawyers (1st ed.) at 27. That line captured the attention of quite a few innovator and early adopter lawyers.
Nonetheless, there remains considerable uncertainty regarding how Systematized-Packaged offerings will impact the sale of lucrative legal services. Although the end users of legal services (i.e., individuals, businesses, society) stand to benefit enormously from commoditization, Susskind’s evolution cannot occur unless at least a subset of lawyers can reliably turn a profit by going first. Breaking the logjam requires lawyers to think through complex topics such as target markets, sales cycles, the cost of acquiring a customer, and sources of capital. In other writings, I’ve referred to this as the legal profession’s last mile problem — the sole constraint on better-faster-cheaper is the paucity of business models with proven results. See Henderson, “The Legal Profession’s ‘Last Mile Problem,'” Law.com, May 26, 2017; see also Mark Cohen, “New Business Models — Not Technology– Will Transform the Legal Industry,” Forbes, Nov. 8, 2018.
In Susskind’s 2.0 model, this difficult transition period occurs at the dotted “Externalization” line. Getting to the right side of this line requires lawyers and law firms to place some of their very best intellectual property in the public domain with no more protection than a simple paywall. What business model would embolden them to take this step?
This post is about a company called Partnervine. In Susskind’s 2.0 model, PartnerVine is in the “Charge Online” box. I’ve studied this model closely and think there is a very good chance that it’s solved the last mile problem for a subset of lawyers serving sophisticated organizational clients. Specifically, PartnerVine is an electronic marketplace that enables elite law firms to sell their Type 0 substantive law innovations in a way that:
- Burnishes their reputation in the market
- Generates and qualifies leads for premium legal services
- Creates a completely new revenue stream for online legal products
Although still in beta mode, PartnerVine’s first content “supplier” was PWC Legal in Switzerland (tagline: “We are building the law firm of the future. Every day.”). The second supplier was Meyerlustenberger Lachenal AG (mll), an elite 100-lawyer Swiss law firm highly ranked by Chambers and the Legal 500. PartnerVine is now in discussions with several AmLaw 200 firms who are weighing the risks of moving first versus moving second. This is remarkable progress. As such, I hereby induct PartnerVine and its CEO and Founder, Jordan Urstadt, into the Last Miler’s Club.
Below is a description of the PartnerVine model and some of the profound market insights that emboldened Jordan Urstadt to build the platform.
Other members of the Last Miler’s Club include Dwayne Hermes at Hermes Law (process-driven insurance defense model) and Jeff Sharer of Actuate Law (high-quality legal guidance platform that enables a rapid response to multi-jurisdictional data privacy and security breaches). These innovators were referenced in the original Law.com article. See Henderson, “The Legal Profession’s ‘Last Mile Problem,'” Law.com, May 26, 2017. The editor is open to additional nominations.
What is PartnerVine?
Completely new technical innovations tend to be very difficult to describe. The difficulty is amped up even more when it comes to new business models.
The simplest analogy I can offer for PartnerVine is LegalZoom but with corporate counsel as end users. The analogy to LegalZoom is imperfect, however, because PartnerVine is an electronic marketplace rather than a producer of content. If you go into a Sherwin Williams store, you are shopping for Sherwin Williams paint (a vertically integrated model, which is LegalZoom). In contrast, if you go to Lowes, Ace Hardware, or Home Depot, you have your choice of a large number of companies who produce different grades and quality of paint (an open platform, which is PartnerVine), albeit there are compelling reasons why LegalZoom might use PartnerVine as an additional high-quality sales channel.
If you peruse the PartnerVine website, you will see detailed descriptions of legal documents and practice guides for a wide variety of fairly specific and specialized legal activities. Further, each product includes author notes written by a senior practitioner from a brand-name law firm. Here is small sampling:
- Merger between two sister companies (package with merger agreement under Swiss Law and associated documents (both German and English) needed to complete transaction), produced by mll, $549.37 USD
- Bulk transfer of assets (package of documents under Swiss Law), produced by mll, $507.83 USD
- Bilateral Confidentiality Agreement (under Swiss Law, including English, French and German versions), produced by mll, $276.99 USD
- Patent or Trade Mark Assignment (template and guidance under Swiss Law), produced by PWC Legal, $322.24 USD
- Cost Pooling Agreement (intra-group) (used for pooling and reallocation of costs incurred by multiple entities within a group of companies that are governed under Swiss Law), produced by PWC Legal, $295.46 USD
- Inter-Company Subordinated Loan Agreement (used to facilitate a loan under Swiss Law between two group companies in a way that achieves tax planning and/or financial stabilization goals), produced by PWC Legal, $202.20 USD
In most cases, companies that purchase these products are given access to a document-generation interview, usually for a period of 90 days, that enables them to generate an unlimited number of fully populated versions of purchased documents that are ready to execute. Hence PartnerVine’s tagline: “Where law firms sell their Legal Tech.”
This feature, which is offered in conjunction with Exari, an enterprise contract management company, helps in-house lawyers move very quickly on time-sensitive, low-stakes legal work. The speed and confidence of the in-house lawyer is no doubt a function of the brand-name firm that created the underlying form. The 1-minute video below does a great job of conveying the user experience.
Comparing PartnerVine to Practical Law
At least on the surface, PartnerVine appears very similar to Thomson Reuter’s Practical Law, which offers an immense array of forms and practice guides for lawyers serving organizational clients. Their products are typically bundled together with subscription plans designed for specific market segments. See Practical Law for Large Firms, Small Firms, Law Departments, and Government Agencies. Increasingly, Practical Law subscribers also get access to a document automation platform that auto-generates documents after the completion of an online questionnaire. See Practical Law Automated Documents.
However, one factor that distinguishes PartnerVine from Practical Law is that the PartnerVine documents are created by practicing lawyers for use by their clients. Although Practical Law’s research team is surely working hard to keep their products up to date, practitioners at major law firms are on the front line of changing social, political, economic and technological conditions. Indeed, its their job to create real-time solutions that fit the shifting landscape. If 10-15% of large firms externalized their Type 0 intellectual property on an open platform, this collective group would have a huge advantage over Practical Law, as their inventory is always created in response to actual and specific client need.
A second feature that distinguishes PartnerVine is its open ala carte platform. It takes only a few minutes to see if PartnerVine has exactly the precedent or guide you need; and if they do, the price point is likely to be trivial compared to the time savings. Cf. Post 008 (noting low-stakes trialability as a key driver of innovation adoption).
A third distinguishing feature is that the in-house counsel end user can hire the documents’ authors to provide legal advice and handle additional law-related issues. Obviously, Practical Law can’t do that because it’s not a law firm.
A fourth distinguishing feature is that PartnerVine is committed to the interoperability of its platform, enabling law firms and legal department systems to share information and build cross-platform workflows through open source APIs. In contrast, Practical Law is a closed universe designed to attract all-in subscribers. Thus, in many respects, PartnerVine is enabling law firms to compete with the big legal publishers on the turf of specialized (and expensive) practice-based content.
Will PartnerVine cannibalize lucrative legal services?
This is an empirical question that every law firm considering PartnerVine can and should ask itself. Jordan Urstadt, the Founder and CEO of PartnerVine, believes that the middle market is destined to consolidate around legal products sold at volume, with leading firms succeeding at both products and services. Further, he’s backed up his belief by bootstrapping the company with his own funds. If you tour the PartnerVine website and look at quality of the PartnerVine technical and sales team, you’ll realize that this is not a small bet.
Jordan Urstadt has a resume that ought to inspire confidence. After attending Dartmouth College, Jordan graduated NYU Law in 1999 and then joined White & Case with a practice that focused on cross-border transactional work. When Jordan’s Swiss fiancee (and later wife) expressed a desire to return to Europe, Jordan took an in-house position with LGT Capital, a large European investment house serving institutional investors. A few years later, he moved on to Capital Dynamics, a Swiss-based global asset management firm focused on private equity, private credit, clean energy infrastructure and energy infrastructure credit. In his role as General Counsel and Managing Director, Jordan had a large legal budget, routinely spending the bulk of it with the “Super Rich 24.” See Johnson, “Is Your Firm Super Rich?“, American Lawyer, May 1, 2017 (noting that only 24 firms meet the super-stringent profitability criteria). This is because the nature of the work was highly specialized and complex.
After meeting Jordan at the 2018 CLOC Institute, I invited him to lecture this summer in my “Innovation Diffusion in the Legal Industry” class at Bucerius Law School. See Legal Operations and Technology Program. To an audience that was 85% junior and mid-career practitioners from Europe, Asia, South America, Africa, and Australia, Jordan explained PartnerVine from the perspective of an in-house lawyer. Specifically, Jordan stated that there are four reasons why a corporate legal department would outsource legal work to a law firm. Below is a depiction of what Jordan drew on the whiteboard.
- Bucket 1 deals with resources — lack of time, lack of the right people who can do the work accurately and efficiently
- Bucket 2 deals with information — lack of access to a high-quality precedent for something new or complex (e.g., an up-to-date Brexit clause)
- Bucket 3 deals with legal expertise — lack of substantive knowledge where in-house freelancing creates unacceptable risk
- Bucket 4 deals with insurance — getting the right answer is so important that you’re willing to pay a premium for preventative medicine and the heightened standard of care that applies to legal specialists.
According to Jordan, PartnerVine is designed to deal with issues in Bucket 2. With high-quality forms and practice tips generated by a leading brand-name firm, Jordan would have, in many instances, been comfortable assuming the risk of doing the work in-house. Yet, how many of his legal spend decisions would be impacted by the PartnerVine offer? According to Jordan, 5-10% in any given year. As a general counsel, Jordan wasn’t dissatisfied with his Super Rich 24 law firms. Rather, he just wanted easier access to their intellectual property so his legal department could efficiently do its own low-stakes legal work. Further, Jordan was willing to pay a fair price for the privilege.
Although the cut point for outsourcing [10/90, 20/80, 70/30, 60/40, etc.] is going to vary by industry, department size and/or the temperment of individual general counsel, the bottomline is that practice aides sold as products can’t and won’t replace expert legal services. This is particularly true when the stakes (and fees) are high. On the other hand, selling your practice aides on PartnerVine could be a profoundly powerful way to signal your market-leading expertise. Obviously, that was the conclusion of first movers PWC Legal and mll when they joined the platform.
Finally, it’s worth noting that the “externalization” strategy of “No-Charge Online” [in Susskind’s 2.0 model] has already been widely adopted by several AmLaw 200 firms. For example, in the venture capital space, several elite firms maintain web portals where entrepreneurs can, at no charge, generate their own formation and deal documents. See, e.g., Cooley Go, Goodwin’s Founders Workbench, WilmerHale Launch, and Wilson Sonsini’s Term Sheet Generator. The calculus is that these free online resources generate leads, build good will, and establish the firm as the go-to resource when the start-ups gain market traction and seeks out venture capital funding or related business opportunities. Similarly, PartnerVine is tapping into a market where law firms are anxious to project their national and international practice expertise. The only difference is that PartnerVine customers are willing to pay for more specialized software — i.e., cases where the no-charge model is not economically sustainable for the content producer.
Is the money in legal services or legal products?
This is another empirical question that the market will have to answer, albeit PartnerVine believes that the answer is both. What is key to that the price that an in-house end user is willing to pay for a legal product (i.e., its value) is a function of the market cachet of the firm that created it.
Arguably, the most compelling reason to join PartnerVine is for a firm to burnish its reputation in the areas where it’s already an established market player. Once on PartnerVine, in-house lawyers making an insourcing versus outsourcing decision are much more likely to come upon the firm’s work product. If the firm’s intellectual property is truly first-rate, one of three possible outcomes is possible:
- A product sale that results in additional marginal revenue for the firm
- An engagement for legal services, perhaps in conjunction with a product sale
- No sale (perhaps due to lack of user-product fit) but enhanced awareness of the firm and its core areas of expertise.
Indeed, it’s worth asking, what happens to the firms that come late this party?
On the pure products side, it is not hard to imagine a very big market. For example, in the labor & employment space, three AmLaw 200 law firms (Littler, Ogletree and Jackson Lewis) currently own a combined 10% of a $15B+ national market. See Henderson & Parker, “Your Firm’s Place in the Legal Market,” American Lawyer, Dec. 2015 at 102-04. In terms of market share for legal services among large firms, low single digits is currently as good as it gets. Further, to protect their market position with demanding, price-sensitive Fortune 100 clients, the three leading L&E firms are making substantial investments in “systematization” in the form of time-saving self-help tools for in-house lawyers and the business units they serve. If some of these tools were externalized to the market via PartnerVine, the firms could tap into the 90% of the market that lacked Fortune 100 market clout. In addition to creating a large revenue stream of high-margin legal products, the big L&E players could fortify their market position against all the weakling firms who are only able to offer services.
A similar play is possible for firms with very strong practices in immigration, intellectual property, and real estate, to name but a few examples. Cf. McLellen, “Fragomen to Launch Unique Tech Development Center in Pittsburgh,” Leg. Intelligencer, July 3, 2017 (discussing new tech center of immigration powerhouse Fragomen and quoting Marcie Borgal Shunk, founder of the Tilt Institute, “Every company is going to become a tech company in some capacity. That ultimately is going to be true of professional service firms and law firms as well.”).
Legal products ought to be very attractive to law firms that are best-in-class in specific practice areas. This is because it provides a pathway to revenue growth that is not constrained by client conflicts. As a result, “making money while you sleep” is finally within reach.
In summary, it’s not legal products or legal services. For law firms with superior market-leading position in services, the answer is both. Open platforms like PartnerVine make that possible.
That said, the nature of the electronic legal marketplace model is that there probably won’t be room for more than two or three alternative platforms. What distinguishes Partnervine from Practical Law (serving the organizational client market) and LegalZoom (serving PeopleLaw) is that the platform is open is to a wide range of content producers. This creates an excellent sales channel for the superior niche products that law firms are uniquely qualified to produce. Yet, we can take it one step further. Because of the how economics play out over the longer term for vertically integrated platforms like Practical Law and LegalZoom, making a fortune enabling the self-serve lower and middle markets, law firms need an open electronic marketplace like PartnerVine if they want compete in the most specialized (and thus lucrative) niche markets.
To Jordan Urstadt, welcome to the Last Miler’s Club. This is a Club that is destined to have only a few members.
What’s next? See Introducing guest contributor Evan Parker (073)