I was asked a while back to answer some questions for an article about venture capital in the legal industry. It now appears that the article might not happen.
As part of my #BlogFirst initiative, I’m posting my unedited and unupdated answers here for your reading pleasure and, maybe, to learn how others would answer these questions.
1. Which entities in the legal industry are the biggest winners of venture capital funding?
In the very short term, the biggest winners are the founders and employees of legal tech companies. In the three-to-five-year term, the winners will be venture capital funds with an excellent and diversified portfolio of legal tech investments. In the long term, the consumers of legal services and clients of law firms will be the big winners.
2. Over the next five years, where do you see the largest impact in the legal industry from venture capital funding?
I see three large impacts. The first is to drive the adoption of new technologies and approaches into a reluctant legal profession. The second is to start to sweep out inefficient, cumbersome, and expensive processes. The third, and most important in the long term, is to accelerate direct-to-consumer legal solutions that will meaningfully alleviate our access-to-justice crisis.
3. How does an entity seeking venture capital get into the game?
The venture capital world is largely a world of networking. Many founders who have gotten funding are happy to talk and share what they’ve learned. Reading the steady stream of funding announcements will give you a sense of who the VC and private equity players are. I recommend talking with funds already in the legal space or local funds. There are also unique and growing opportunities for women and people of color. There’s a structure and sequencing to fundraising that you need to show you are savvy about. I always suggest that people who are new to this read Scott Kupor’s great book, Secrets of Sand Hill Road, to get an overview.
4. What are the most important benefits to the legal industry of attracting venture capital funding?
Accelerating innovation, adoption, and scaling. The help in attracting and retaining talent also cannot be overestimated. There is so much innovation and energy in legal tech right now and funding is giving startups time and runway they need to make big things happen.
5. Are there significant challenges to the legal industry, as we know it, resulting from increasing the amount of capital funding in legal tech?
Funders are driven by very large returns. Funded legal tech companies will have to produce returns in a fairly short timeframe. Funders might force these companies to move into different markets than were originally imagined or even take over the management of these companies with people they select. There is a lot of volatility and we live in a time of a chaotic economy. There will be many more “losers” than “winners.” As some say, the curse might be that you get the money you ask for. The biggest question for me: is the addressable market for legal tech really as large as investors apparently think it is?
[Originally posted on DennisKennedy.Blog (https://www.denniskennedy.com/blog/)]
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