Investment climate for the legal tech industry: sporadic ?!

In an interesting article LegalTechNews denotes the current investment climate for the legal tech sector in the U.S. as sporadic. The article points out the following interesting facts and thoughts:

  • It’s (still) relatively difficult for legal startups to attract venture capital but easier to get angel or seed funding.
  • There is a growing number of angel investors who had successful legal tech exits themselves, or were law firm managers or senior execs at the large legal information companies and are willing to invest.
  • There is no general trend towards investment in legal tech because it is still a relatively unknown category.
  • VCs with no background in the legal space need to be educated about the significant size of the opportunities in the legal market.
  • In general, VCs don’t understand the legal tech market, but do understand the big opportunity for automation.
  • Entrepreneurs should the startups as a “disintermediation opportunity” to attract VC funding.
  • If legal tech start-up founders are lawyers with no technical background they should also have a technical co-founder to increase their chances of attracting VC funding.
  • IN general, legal tech companies should try to get to sales and revenue without VC funding and to scale with VC money later.
  • It’s still difficult for legal tech startups to find their niche because the market is still heavily fragmented.
  • Legal tech companies still need to educate buyers on the product which leads to a relatively complex sales process.

All this leads to the conclusion that legal tech companies should invest a great deal of their time to educate buyers (i.e. lawyers, law firms, legal departments etc.) about the benefits of legal tech and they should draw attention to this subject. This seems to especially true for Europe where the legal tech szene in a very early stage.