March 17, 2014
If you need further proof that big changes are in store for the legal industry, consider this: In 2013, investors contributed some $458 million to legal startups, according to Tech Cocktail. That is a significant increase from 2012, when companies in this field received $66 million in funding.
One conclusion to draw from this spike in funding is that investors are confident that companies like Axiom, LegalZoom and RocketLawyer can grab a meaty share of the legal market, even as the amount of legal work available dwindles or stagnates.
(It’s true that investors do not always bet on the right horse, of course, but then again, commentators once viewed startup success stories like Airbnb, Paypal and Tumblr with skepticism, and look how they are doing today.)
If these investors are right, it does not portend good things for law firms, especially Large Law firms.
At the risk of sounding pessimistic, three factors seem to be at play here:
- As we have written about previously, Midsized firms are moving in on Large Law territory. That clients are less responsive to Large Law firms’ traditional messages of blue-ribbon skill and superior service and are more responsive to Midsized firms’ messages about cost-effectiveness demonstrates just how committed they are to decreasing their legal spend.
- Alternative legal services firms (i.e. Axiom and its ilk) are on their way up, and it is doubtful that the bumps and scrapes that have occurred will deter clients in significant numbers.
- The way business is done in the legal industry is changing. If Large Law firms continue to refuse to adapt, the change is going to happen with or without them.