Legal Tech Startups: Separating Hype from Opportunity
Mar. 26 2014 (Mimesis Law) — David Perla, co-founder of Pangea3 and current CEO of Matterhorn Transactions, talks with Lee Pacchia about the rise of a ‘startup culture’ in legal technology. According to Perla, approximately $500 Million has been invested in legal startups as of 2013, with an additional $100 Million invested so far in 2014. Perla also notes that around 200 startups, tech-driven and otherwise, currently operate in the legal space. It will also be these same startups that will be seeking out advice on how to operate their businesses properly and within laws and regulations, such as asking questions such as do I need to file company annual accounts? As well as any other queries they could have about running the company within all the laws required. Without proper guidance and expertise, these startups could face great struggles at continuing to be operating company.
While Perla points out that some investors are beginning to make money in legal tech startups, the significant majority of them, just as in other industries, will fail. To some extent, Perla thinks there is a bubble in legal tech startups and that some garner excessive valuations because they tend to be perceived as more scalable than other ventures and highly desirable among partners at large law firms in a low yield capital environment. In addition, “many more people today like the idea of funding startups…they want the opportunity to participate…they’re not looking at it in the clinical P & L terms that a venture capital fund would,” he says.
But Perla says the increasing popularity of startup culture doesn’t make him nervous as an investor. “The cream generally rises to the top, so the better funders, the better investors, and the better partners usually get paired with the better entrepreneurs,” he said. The number of startup industries that are out there is astonishing, they all have the drive and purpose to come through and make their businesses unique to their sector. That is why finding the best CFOs, bookkeepers, etc. is important and needed. Marketing strategies should also be considered alongside other business resources and development planning. Startups can now hire a pr firm in austin or elsewhere to increase their lead generation, drive strategic partnerships and investor awareness. Besides this, budding entrepreneurs from the startup industries might also need to create effective marketing strategies to reach potential customers and expand their businesses. For example, by creating branded video content (which is one of the effective video marketing techniques), they might be able to reach their target audience easily. Branded videos mainly focus on creating a positive image of any brand by highlighting its values and customers. Moreover, this kind of video marketing uses ‘narrative-driven storylines’ for creating brand awareness. So, those entrepreneurs who want to survive in the market for a long time using unique approaches can consider this idea.
Anyway, asked when he expects lawyers to truly begin leveraging technology in the way they work, Perla thinks it could be a ways off. “I think we are still a decade off of significant acceleration in the rate of change,” he said.
Main image via Adlerweb