Co-Founder and CEO of the Copenhagen-based company Contractbook that is supported by Google via Gradient Ventures.
With 713% growth, 2018 was a record year for legal tech investments. 2019 surpassed it when investments reached $1.2 billion already in the third quarter. Without breaking any records, this summary shows that 2020 ended well after a Covid19-cased setback in the first half of the year. With the new vaccines, we can glimpse the light at the end of the tunnel and investments are expected to bounce back in 2021.
With a more stable economy, investments are set to hit an all-time high — especially for companies working within contract lifecycle management and contract automation. Legal tech is no longer fintech’s awkward younger sibling, but a flourishing and lucrative attraction of its own.
The pandemic has forced an acceleration of the digital transformation in all industries, and legal consumers are managing their legal work digitally like never before. Law firms have become less tech-averse, and leading businesses have spent the time wisely making their workflow more efficient. As with the previous global recession, the current economic hardship will force companies to reduce their costs on services, which will cause even more client-driven innovation. Clients will demand more for less, and tech is the key to delivering just that. The adoption-rate of tech products in the legal industry is on the rise on all fronts.
As a CEO in a legal tech company, this is all very tangible to me. Our data shows me that the company is growing. We can measure an increase in attention. And raising money among the VC’s in Silicon Valley is relatively straightforward if your unit economics are on point.
The conclusion is clear: Legal tech is on the rise. Now another billion-dollar question emerges: What trends within legal tech will shape and define the year of 2021?
Legal Tech Is Dead
Last year, my organization found that legal tech is over-hyped and might even have entered the terminal state. The point is brilliantly unfolded here by one of my colleagues, but the overall problem is that the legal industry tends to overestimate its own domain by demanding industry-specific tech solutions.
This pandemic has shown that broader and more holistic tech solutions are good to go and can add tremendous value when managing legal work. Instead of re-inventing the wheel and adopting a million different niche legal tech applications, the legal industry and their clients should adopt proven digital workflow tools like Slack and Zoom to manage their legal work.
Managing legal work smarter is just one part of a broader future of work trend, where all sorts of workflows are digitized and automated. The legal field’s digital transformation is too important to be wasted on narrow point solutions with bad UI, and so many processes can be improved with broader tools.
2021 will see increased adoption of broader non-industry-specific tech solutions in the legal industry. We will be talking less of the latest new legal tech tool and more about how to leverage existing future-of-work tools in the legal sphere.
Legal tech is dead, long live legal tech!
Back To Basics
As I wrote in a previous article, it’s time to get back to basics. For years, we have been talking about shiny AI, the end of billable hours, blockchain-enabled smart contracts and robot lawyers. None of this has materialized. My experience is that the discussion has been more realistic as of late. We have reached the slope of enlightenment on Gartner’s hype cycle.
In legal tech, we have spent the past years focusing on over-hyped AI and blockchain solutions. However, these technologies are still too expensive to leverage properly, and they are still far from solving core issues in the digital transformation. As a consequence, no-coding platforms and more basic automation-focused products based on deterministic logic will be the winners of 2021.
The pandemic has forced digitization in rapid speed. In this digitization by necessity, firms and companies have not bet on the latest new hype-product that might prove its worth in five years. They have chosen something that works here and now. I bet that software has proven their worth, demystified tech and showed a very tangible return of investment. All of that is going to accelerate the digital transformation even further.
People are tired of buzzwords and hype. They want something that works. In the past year, people working with legal matters have learned that there is still enormous potential in current technologies — and that you must go back to basics to lay the foundation for a smarter future.
Data, Data, Data
And while we are on the subject of laying a foundation of a smarter future: Harness and structure your data now, and you will have an enormous advantage in the future because AI will come, and it will dominate. While many of these applications are not going to show their full value yet, they are destined to do so in a few years.
I hope and believe that the smartest and most innovative players in the legal industry will focus more on choosing the right, future-proof data formats. PDF and email are not very machine-friendly and make it hard to leverage data in legal documents, so those formats will become outdated while more dynamic formats like JSON will win. This trend favours tools that can bridge old data formats into new ones. And it gives an edge to interoperable all-in-one solutions that replace multiple point solutions with a single unified dataflow.
Whether you are using more basic automation tools or are preparing yourself for the full potential of AI, well-structured data remains the key. I believe the more realistic view of the market makes the legal industry and their clients even more aware of this.