Some of the NewLaw and LegalTech brands created by, and connected, to BigLaw

And they’re poised to do even better.

Over the past three years, law firm tech businesses, sometimes called law firm subsidiaries, “New Law” or captive ALSPs, have generated quite a bit of buzz.  See, e.g., Dan Packel, “Big Law Branches Out: Firm Subsidiaries Want a Piece of the $10B ALSP Market,”, June 25, 2020 (reviewing market entrants); Zach Warren, “The Future is Not Just About Innovation,” Dec. 3, 2020 (noting that integration of law and technology is why law firm-led ALSPs are growing); Vanessa Blum & Zack Needles, “Big Law Goes ‘Alternative’: Can Traditional Firms Disrupt the Disrupters?,”, Oct. 30, 2020 (podcast).

The attention is well deserved. For years now, panels of in-house thought leaders at industry conferences have lamented the lack of technology and innovation from their outside counsel to the agreeing nods of audience members. Mary O’Carroll’s 2019 CLOC keynote delved into what she described as the “disconnect” between the legal ops community and law firms. See “CLOC Institute 2019 – Opening Session with Mary O’Carroll,” YouTube, May 15, 2019. Tech startups can be often heard complaining, even finger-wagging, about long law firm sales cycles and tech-averse attorneys (aka dinosawyers). See, e.g., Post 051 (Jae Um discussing the pattern).

So, it is deservedly buzzworthy that a significant number of BigLaw firms have actually moved forward and become more intentional about technology, in some cases going so far as to dedicate a separate entity.

Is it time to be truly bullish about law firm tech businesses? I think the answer is yes, albeit we’re likely a few years away from the hockey-stick growth that will convince the skeptics. The purpose of this essay is to take readers on a tour of the surprisingly sturdy foundations upon which these businesses are being built.

Law firms venturing into adjacent businesses

A recent study by Baretz + Brunelle identified 35 firms in the AmLaw 100 and 57 firms in the Global 100 with their own captive ALSP. See “Home Court Advantage: The AmLaw 100’s Move into Alternative Legal Services,” Oct. 2020 (noting that “[d]ynasties protect their own turf. And not just in sports.”).

Because the Baretz + Brunelle study aims to highlight the competition between law firms and ALSPs, it uses a slightly different definition for captive ALSP than I do here for law firm tech business. To qualify for the Baretz + Brunelle study, the service offered must include technology and people. In addition, the focus is limited to the world’s very biggest law firms, the AmLaw 100 and Global 100. Several of these businesses report generating tens of millions in annual revenue and a client roster filled with Fortune 500 companies.

As further evidence of market maturation, two firms have already had micro-exits for technology they built: Chapman and Cutler sold Closing Rooms (now SetBuilder) to NetDocuments, see “Chapman and Cutler: Sale of Closing Room to NetDocuments could just be the start,” Legal IT Insider, Nov 12 2018, and Litera Microsystems acquired a digital disclosure tool from Gilbert + Tobin, a 500-lawyer law firm based in Australia. See “Role Reversal as Litera Buys Tech Product from Law Firm,” Artificial Lawyer, Nov 5, 2020. Hoping to give birth to similar initiatives, Mishcon de Reya’s MDR Labs and Denton’s Nextlaw Labs have each invested in full portfolios of startups, not to mention the cohort of firms that have invested in Reynen Court.

Law firm tech businesses come in all shapes and sizes. Some are structured as wholly-owned entities. Some sit within the firm but are independently branded. Some intend to take on external funding; some are embedded inside the firm. And some have been spun out completely or sold as was the case with Bryan Cave Leighton Paisner and Lawyers on Demand. See Thomas Alan, “New Law pioneer LOD primed for growth as BCLP sells to buyout house,” Legal Business, May 30, 2018.

The way in which firms are engaging with technology, and hence the offerings, are not always the same. SixFifty, which is a subsidiary of Wilson Sonsini, has built a pure subscription technology business, whereas MDR Labs, which is owned by UK-based Mishcon de Reya, has built a legal-focused investment arm. Other subsidiaries are establishing deep partnerships with tech companies. For example, Keesal Propulsion Labs (or KP Labs), the subsidiary of the California-based law firm Keesal Young & Logan, designs workflows for in-house departments through its partnership with Mitratech. Press Release, “Keesal, Young & Logan and Mitratech Announce TAP Workflow Automation Partnership with the Launch of Keesal Propulsion Labs,” Aug 14, 2018.

Similarly, in addition to its eDiscovery business and technology consulting, Gravity Stack, which is a subsidiary of Reed Smith, has built a deep partnership with contract-review startup Heretik to serve as the foundation for its contract intelligence and LIBOR repapering solutions.  Gravity Stack also recently partnered with translation behemoth Lionbridge to develop an application that streamlines the translation process for eDiscovery and contract review.  [Disclosure: Gravity Stack is a partner of my company Killer Whale Strategies.]

Tech businesses not just for BigLaw

To the extent that the trends described above are new (some of these entities are coming up on their three-year anniversary), it’s new only to BigLaw.

In fact, many of the most successful legal technology startups of the past ten years were launched inside of a law firm or legal service provider. One of the best examples is cloud-based eDiscovery provider CS Disco, which recently announced a $60 million financing round (bringing their total raised to $185 million) and appears to be the primary challenger to market leader Relativity. See Press Release, Oct 15, 2020. But CS Disco actually started out inside the Houston-based litigation boutique Camara & Sibley, with the “CS” serving as an homage to their beginnings. See Zach Abramowitz, “How A Law Firm Becomes A Software Company: Conversation With CS Disco’s Neil Etheridge,” Above the Law, June 9, 2016.

Catherine Casey, CS Disco

CS Disco does not shy away from this messaging, they embrace it. See, e.g., Cat Casey, “Everything I Thought I Knew About DISCO Was Wrong – And Why That is a Good Thing,” CS Disco Blog, Apr 9, 2020 (chief innovation officer, who formerly worked in BigLaw, sharing her many misconceptions about the company she joined).

Andy Wilson, Logikcull

Likewise, eDiscovery software competitor Logikcull started out as Logik Systems, Inc., a brick and mortar eDiscovery service provider. Ultimately, however,  they transformed into a SaaS company because they could see the opportunity of building better technology to heavily automate a labor-intensive process. Andy Wilson, “The 13-year-old startup: How we went from Logik Systems, Inc. to,” LinkedIn, July 12, 2017 (discussing how financial recession caused a major rethinking of business).

While both Camara & Sibley and Logik Systems were profitable as people businesses, the economic opportunity of converting their business to tech companies was exponential.

Erin Levine, Hello Divorce

It is also worth noting this pattern of origin story can be found in startups with a PeopleLaw focus. For example, Hello Divorce founder Erin Levine originally started her company as part of her law firm, the Levine Family Law Group, and only later spun it out as a separate company. See Bob Ambrogi, “Erin Levine Is Taking Her Innovative ‘Hello Divorce’ Platform To All 50 States,” LawSites, Aug 5, 2020.

And although I have focused on law firms, I would be remiss if I didn’t mention the 2019 Axiom reorganization which separated Axiom’s business into staffing company Axiom, managed service provider Factor, and contract review tech company Knowable. There are even examples of legal departments which have birthed technology companies, such as Ford’s and British Tobacco’s joint venture / spin out of IP Docketing company Anaqua.  See “The keys to successful IP asset management,” Science | Business, Feb 15, 2006 (discussing why and how Anaqua was formed).

The common origin story of these companies is no coincidence. Tech companies that start out as people businesses have (1) a better path to product/market fit, (2) a derisked go-to-market strategy, and (3) perhaps most importantly, engaging with them requires little to no change in habits from the buyer.  It’s worth diving into the specifics of each advantage.

1. Better path to product/market fit

Paul Graham, Y Combinator

In one of his much-ballyhooed essays, Y Combinator founder Paul Graham says that he looks to fund startups where the founder is solving a personal problem.  See “How to Get Start-up Ideas,”, Nov 2012 (“The way to get startup ideas is not to try to think of startup ideas. It’s to look for problems, preferably problems you have yourself.”)

It is almost cliche to say it at this point, but many startup founders tend to build technology in search of a problem. But, when the founder experiences the problem themselves, it is a strong indicator that the problem itself is real and probably applies to more than just the founder.

Bryon Bratcher, Gravity Stack

That does not necessarily mean that legal startups must be created in a law firm lab, but it is certainly a huge advantage to diagnosing real problems that need tech-driven solutions. As Bryon Bratcher, managing director of Gravity Stack (a subsidiary of Reed Smith), puts it, “Everything we build is demand-led based on our experience and our collaboration with subject matter experts.” Zach Warren, “The Future is Not Just About Innovation,” Dec. 3, 2020 (quoting Bratcher).

Indeed, I have followed this logic in my portfolio of LegalTech investing. The primary motivating factor behind my own decision to invest in LegalMation, an AI company focused on the automation of litigation tasks, was that the product started inside LTL Attorneys, an LA-based litigation firm.

James Lee and Thomas Suh, LegalMation

Originally, founders James Lee and Thomas Suh were trying to automate the ability to respond to complaints because it was tedious, low-margin work that no one in the firm wanted to do. Eventually, they realized that their technology solved a major problem, not just for the lawyers at their firm but for some of their clients like Walmart, who needed a better way to handle high-volume litigation. So, LTL launched a tech company, LegalMation, with Walmart as a customer.

From an investor perspective, it was also a significant signal to me that Lee and Suh thought there was a bigger economic opportunity in the software they were building than the already lucrative business they were running. To be fair, the success of a legal business does not depend upon a connection to a law firm or other legal service provider. There is a list of successful companies, including Casetext, Paladin, and Ironclad (just to name a few) whose founders were solving a personal problem, but doing it outside the confines of their law firm. I would have been wise to invest in all three.

2. Derisked go-to-market strategy

Another strength of starting as a people business is the go-to-market strategy. Some of the most successful investors specifically advise tech startups to layer in consulting services at the early stages. See, e.g., Mark Suster, “7 Tips For Layering Professional Services Revenue Into Your Startup,” TechCrunch, Mar 21, 2013.

Venture capitalists will often scoff at services revenue because it is not recurring (so no 10x multiples on revenue to determine the company’s valuation). The counterpoint, however, is that services revenue gives the founders more runway, which in turn gives them more time to achieve product/market fit without having to beg investors for more money. Law firms and service providers that morph into, or spin out technology companies, already have the consulting services in place; their challenge is to layer in technology.

This skepticism toward services revenue is even more pronounced in the legal industry, where top-flight venture capital firms already shy away from investing in legal startups.  Yet, this tends to overlook a second enormous advantage of a legal services business:  getting meaningful user adoption and feedback is incredibly difficult with lawyers who are often on time-sensitive assignments and do not have the patience to try new technology platforms. Sometimes, the better path is not to push a new user experience on lawyers, but instead for the law firm to use the technology themselves and sell the better result.

InCloudCounsel is a good example of a legal start-up company that has succeeded as a technology-powered people business. Their customers are benefitting from the technology that InCloudCounsel bakes into its offering without their customers ever actually having to use the technology themselves. There are tech startups that I believe would have significantly more traction if they were not hell-bent on selling their SaaS, and instead were focused on delivering a better customer outcome.

3. Minimal change to customer habits

The legal technology ecosystem has figured out that change management can be a real challenge. No one wants to learn how to use new technology. Not lawyers, not anybody, but especially not lawyers.  See Post 008 (presenting the basics of innovation diffusion, with simplicity and cultural compatibility being key to rapid adoption).

As a result, technology companies are building products that require very little change in user habits. More tools are built with Microsoft Word in mind, as that is where lawyers spend their days.  The goal is to embed AI into current lawyer behavior.  Thus, Blackboiler, an automated contract markup tool, has a feature that allows users to email a document to the Blackboiler AI engine which then sends back a first-pass review of the agreement. Obviously, this is designed to resemble how senior attorneys actually work when they send an agreement to a junior attorney.

But perhaps not enough attention has been paid to the purchasing habits of clients. If someone really likes donuts, why try and sell them a croissant? Legal departments are experts at engaging outside counsel services, but not necessarily buying technology. Therefore, it can actually be easier for a legal department to purchase technology through a letter of engagement with a law firm than it is to buy the technology itself.

Indeed, the obstacles facing legal department are significant.  Foremost, though hugely valuable to the company, law departments are cost centers and thus often lack technology purchasing power within their organization. Second, many in-house teams do not have their own tech budget and must work through IT and procurement in order to buy new tech. Yes, the Fortune 500 are buying more and more new technology each year, but that does not necessarily trickle down to legal. Corporate innovation teams are looking for technology that is core to the business and offers them a competitive advantage—and document automation tools are unlikely to be high on the list, particularly if the general counsel is an ineffective champion.

This is not to say that it is impossible to sell legal technology directly to corporations—the success of matter management companies demonstrates that pretty clearly.

Yet, law firm engagements have enormous built-in advantages, as they do not typically require sign-off from IT and sensitive data is protected under attorney/client privilege. In short, an in-house team might have an easier time engaging a law firm that will use AI to improve their process rather than having their own people adopt the technology internally. Enter the AmLaw 100 and their shiny new tech subsidiaries.

The argument against law firm tech businesses

Dissenters to law firm-based legal tech will point to the failures of Atrium and Clearspire, both law firm technology hybrids. See Josh Constine, “$75M legal startup Atrium shuts down, lays off 100,” TechCrunch, Mar 3, 2020 (discussing failure of Atrium); Mark Cohen, “The Clearspire Story,” Legal Business World, Dec 12, 2017 (discussing failure of Clearspire).

A separate article could be written on the differences between Atrium and Clearspire, but they do share one thing in common: the tech portion of their business did not emerge organically from a preexisting legal people business—they launched as hybrids. That is not to say that this go-to-market approach is inherently flawed. But while there are many examples of firms spawning a successful tech business, far fewer examples come to mind of successful startups that launched as hybrids, presumably because the former has an existing client base and brand and the latter has to build one.  Still, if a startup approached me to invest and a hybrid model was part of their go-to-market, it would check a box for me. Nonetheless, the advantages of the law firm hybrid are even more compelling.

Richard Rosenbaum, Greenberg Traurig

Others argue that law firms that try to get too deep into the tech game may be going outside their lane. Last year, for example, Greenberg Traurig Chairman Richard Rosenbaum shared his skepticism on law firms venturing outside their core competencies.

For a U.S. law firm to say we are going to keep up with public companies, private equity-backed companies and other major technology players that have access to greater amounts of capital for technology and other major capital outlays is not realistic.

And by the way, nobody is doing it. Instead of law firms focusing on what they are best at— which is being great law firms— they are spending time trying to keep up with innovation. And that isn’t even the business they’re in.

Roy Strom, “Greenberg Traurig Chair: Law Firms Struggle to Compete with ALSPs,” Bloomberg Law, June 12, 2019 (quoting Rosenbaum).

This perspective definitely has some validity—essentially that law firm tech businesses will have difficulty scaling.  But I would point to another dictum of Paul Graham, who observes, “One of the most common types of advice we give at Y Combinator is to do things that don’t scale.”  Paul Graham essays, “Do Things That Do Not Scale,”, July 2013.

Graham’s core point is that startup founders have to do an enormous amount of legwork before scaling ever becomes an issue, such as (1) recruiting users, (2) navigating a period of fragility where testing ideas is more important the selling or garnering investment, (3) figure out how to delight your customers, and (4) making the user experience “insanely great,” and (5) conquering a niche market, which has the advantage of controlled growth, and (6) for B2B startup, consult in order to get closer to potential implementation issues. Id.

Three years from now, we may be well having a conversation over whether law firm tech businesses can scale. But at the moment we are still in the early stages.


Israeli Prime Minister Shimon Peres once said about Middle East Peace, “We should use our imagination more than our memory.”

This is a useful reminder when trying to avoid the usual eye rolls about law firm innovation. At least reputationally, law firm innovation has historically been perceived as a marketing ploy. Plus, the return on investment from law firm tech businesses, while impressive, is still a blip on the radar of law firm revenues. But we should use our imagination more than our memory.

The trend of law firm tech businesses, whether in Biglaw, boutiques, A2J, or service providers, is built on solid foundations, and there is every reason to be bullish about their future.