The Jury Is Out On Legal Startups

Even though investment has declined slightly, i don’t believe this is a sign the industry is dead to VC/Angel. As many have pointed out, the industry is ripe for disruption and it seems like more success stories┬álike LegalZoom and Ravel Law are on the horizon. If anything, it will likely be a select few VC/Angel groups who see this and believe in it, even if the VC/Angel community as a whole looks for other opportunities. The biggest challenge at this point seems to be the hurdle of sales cycles – but if one comes out to target consumers rather than B2Firm, there may be a resurgence in investments.

2 thoughts on “The Jury Is Out On Legal Startups

  1. If you look at the composition of most VC firms, you will see a LOT of former entrepreneurs. They invest in what they know. Biotech guys won’t invest in software. Software experts won’t take on other consumer products, etc.

    So here’s a question: How many VCs are lawyers?

    I’m going to go out on a limb here, and say pretty damn few. I could be wrong of course, and I haven’t looked it up. But if I’m correct, then one of the reasons that legal startups haven’t received a lot of VC money is because VCs aren’t lawyers and thus they don’t understand the market. A VC will NEVER plunk millions of $$$ in a venture where he or she doesn’t understand the market intimately.

    There will have to be one or two who are – as Chris notes – willing to take the risk. (Or who have one or more lawyers in their group who DO understand the market.)

    And BTW, I think that the same can be said of startups pitching disruptive technologies in higher ed, as well.

    Fascinating stuff!

  2. I agree with Professor Hollis. After listening to the speaker last week, it became clear that VC’s are reluctant to invest in something they don’t know much about. A company’s business needs to be within their level of knowledge and expertise. That being said, the legal profession is plagued with inefficiencies that can be solved with digitization. This is especially true at the public interest level. Many government organizations have tech and filing systems that are extremely outdated. For instance, the PI organization I worked at last summer was still primarily using the paper filing system. As we discussed in class, if someone were to solve some of these inefficiencies and demonstrate success, i.e. cost savings, on a smaller scale (perhaps a small government agency) before approaching investors, that would likely help their chances of getting VC support. Regardless, anyone with a law degree can recognize the potential in this area.